[Senate Hearing 107-586]
[From the U.S. Government Publishing Office]
S. Hrg. 107-586
REPORT OF THE TRADE
PROMOTION COORDINATING COMMITTEE--2001
=======================================================================
HEARING
before the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
ON
THE REPORT ON SECTION 201 OF THE EXPORT PROMOTION ENHANCEMENT ACT OF
1992, TO COORDINATE THE EXPORT PROMOTION AND FINANCING ACTIVITIES OF
THE FEDERAL GOVERNMENT AND TO DEVELOP A GOVERNMENTWIDE STRATEGIC PLAN
FOR CARRYING OUT FEDERAL EXPORT PROMOTION AND FINANCING PROGRAMS
__________
OCTOBER 2, 2001
__________
Printed for the use of the Committee on Banking, Housing, and Urban
Affairs
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80-952 WASHINGTON : 2002
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
PAUL S. SARBANES, Maryland, Chairman
CHRISTOPHER J. DODD, Connecticut PHIL GRAMM, Texas
TIM JOHNSON, South Dakota RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island ROBERT F. BENNETT, Utah
CHARLES E. SCHUMER, New York WAYNE ALLARD, Colorado
EVAN BAYH, Indiana MICHAEL B. ENZI, Wyoming
ZELL MILLER, Georgia CHUCK HAGEL, Nebraska
THOMAS R. CARPER, Delaware RICK SANTORUM, Pennsylvania
DEBBIE STABENOW, Michigan JIM BUNNING, Kentucky
JON S. CORZINE, New Jersey MIKE CRAPO, Idaho
DANIEL K. AKAKA, Hawaii JOHN ENSIGN, Nevada
Steven B. Harris, Staff Director and Chief Counsel
Wayne A. Abernathy, Republican Staff Director
Martin J. Gruenberg, Senior Counsel
Amy F. Dunathan, Republican Senior Professional Staff Member
Adrienne B. Vanek, Republican Economist
Joseph R. Kolinski, Chief Clerk and Computer Systems Administrator
George E. Whittle, Editor
(ii)
?
C O N T E N T S
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TUESDAY, OCTOBER 2, 2001
Page
Opening statement of Chairman Sarbanes........................... 1
Prepared statement........................................... 23
Opening statements, comments, or prepared statements of:
Senator Miller............................................... 3
Senator Stabenow............................................. 18
Senator Enzi................................................. 24
WITNESSES
Donald L. Evans, Secretary of Commerce, Chairman, Trade Promotion
Coordinating Committee......................................... 3
Prepared statement........................................... 24
John E. Robson, Chairman and President, Export-Import Bank of the
United States, Vice Chairman, Trade Promotion Coordinating
Committee...................................................... 5
Prepared statement........................................... 27
Response to written questions of Senator Reed................ 39
Hector V. Barreto, Administrator, U.S. Small Business
Administration................................................. 7
Prepared statement........................................... 29
Response to written questions of:............................
Senator Reed............................................. 41
Senator Miller........................................... 42
Peter S. Watson, President and CEO, Overseas Private Investment
Corporation.................................................... 8
Prepared statement........................................... 31
Response to written questions of Senator Reed................ 43
Thelma J. Askey, Director, U.S. Trade and Development Agency..... 10
Prepared statement........................................... 35
Response to written questions of Senator Reed................ 45
Additional Material Supplied for the Record
An Interim Report to Congress from the Trade Promotion
Coordinating Committee on the 2002 National Export Strategy.... 48
(iii)
REPORT OF THE TRADE PROMOTION COORDINATING COMMITTEE--2001
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TUESDAY, OCTOBER 2, 2001
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 10:25 a.m., in room SD-538 of the
Dirksen Senate Office Building, Senator Paul S. Sarbanes
(Chairman of the Committee) presiding.
OPENING STATEMENT OF CHAIRMAN PAUL S. SARBANES
Chairman Sarbanes. The Committee will come to order.
As our witnesses I think realize, there is a vote on. It
was scheduled for 10 a.m., but it never quite starts on time.
And in any event, I think other Members will be coming in
shortly. But I think we should get underway.
I am very pleased to welcome before the Banking Committee
this morning this panel of distinguished representatives of the
Trade Promotion Coordinating Committee, the TPCC: Don Evans,
Secretary of Commerce, who serves as the Chairman of the TPCC;
John Robson, Chairman and President of the Export-Import Bank,
serves as Vice Chairman of the Trade Promotion Coordinating
Committee; Peter Watson, President and CEO, Overseas Private
Investment Corporation, OPIC; Hector Barreto, Administrator of
the SBA, Small Business Administration; and Thelma Askey,
Director of the Trade and Development Agency.
The purpose of today's hearing is to review the preliminary
report of the Trade Promotion Coordinating Committee on its
National Export Strategy and the Coordinating Committee's plans
for the coming year.
The Trade Promotion Coordinating Committee was established
by the Export Enhancement Act of 1992. As stated in the
statute, its purpose is ``to provide a unifying framework to
coordinate the
export promotion and export financing activities of the U.S.
Gov-
ernment and to develop a Government-wide strategic plan for
carrying out Federal export promotion and export financing
programs.'' The statute designates the Secretary of Commerce as
the Chairman of the Coordinating Committee and designated as
members all of the Federal agencies involved in export
promotion.
And there is quite a long list of them. We have only some
of them, perhaps the lead, the more relevant ones, at the
table.
Well, some of the others are highly relevant, too, so I do
not want to divide us into categories here.
The effectiveness of the Trade Promotion Coordinating
Committee depends on the leadership it receives from its
Chairman and the other key members. The first Chairman,
Secretary of Commerce Ron Brown, working together with Ken
Brody, who was then the Chairman of the Export-Import Bank,
provided the initial leadership and energy to get the
Coordinating Committee off the ground and functioning. As a
result, the Trade Promotion Coordinating Committee has a
significant list of accomplishments it can point to during its
first 8 years. And let me just touch on some of those very
quickly.
First, the establishment of 18 U.S. Export Assistance
Centers in major metropolitan areas around our country, one-
stop shops to provide marketing and trade finance support to
local exporters.
Second, improved interagency coordinating of advocacy for
U.S. companies seeking to do business overseas.
Third, a joint Ex-Im Bank-SBA working capital guarantee
program for small exporters.
Fourth, a partnership with the National Governors
Association to increase coordination between State and Federal
export promotion efforts.
Fifth, the establishment of offices within the Commerce
Department and the U.S. Trade Representative to monitor and
enforce trade agreements.
The legislation which established the Coordinating
Committee required it to propose to the President an annual
unified Federal trade promotion budget that would support its
strategic plan. In 1999, the Congress amended the statute to
change the delivery date for the annual National Export
Strategy Report to the Congress from September 30 to March 30
in order to allow the TPCC's export promotion budget
recommendations to be better coordinated with the development
and release of the President's budget. The report that is being
submitted today, in fact, was delayed from earlier this year in
order to allow the new Administration time to focus on the
issue.
A report on March 30 with an incoming Administration would
not have given people--in fact, I am not even sure everyone was
in place in their positions, as I look at the witnesses at the
table.
Of course, we have a new Administration, a new set of
leaders for the Trade Promotion Coordinating Committee. I
simply want to say that I am very encouraged by the response of
Secretary Evans, the Chairman, and his Under Secretary for
International Trade, Grant Aldonas, by Ex-Im Bank Chairman
Robson, the Vice Chairman, and by the other members of the
Trade Promotion Coordinating Committee who will testify this
morning.
From my initial meetings with each of you earlier this
year, there seems to be an appreciation for the potential of
the coordinating committee to bring even greater coherence and
a sense of strategy to the Federal Government's export
promotion effort.
It is my perception that these witnesses and others in the
Executive Branch have made this a priority in planning the
agenda for their agencies and I very much look forward to
hearing their testimony this morning.
Finally, let me note that the attention of Congress has
been drawn away from its normal agenda because of the tragic
events of September 11. It is a measure of the importance that
we attach to the work of the Coordinating Committee that this
hearing is going forward today. In fact, all of the economic
reports, it seems to me, that we are now receiving only
emphasize the work of the Coordinating Committee.
The Los Angeles Times, in an article about 10 days ago,
said, and I quote: ``The world economy is in a fragile state,
according to U.S. trade figures, and is likely to flow further
as additional security measures triggered by last week's
terrorist attacks hinder the flow of goods and services.''
The Coordinating Committee may thus have an additional
challenge posed to it as it moves ahead with its work. It
perhaps may prove useful in assisting U.S. exporters to cope
with the new obstacles to trade that may result from the recent
events.
Gentlemen, and lady, we are pleased to have you before the
Committee this morning. We look forward to hearing your
testimony.
I am going to yield to Senator Miller before we turn to--
and then when we do, I think we will just move right across the
panel, from Secretary Evans, Mr. Robson, Mr. Barreto, Mr.
Watson, Ms. Askey--last, but not least, I hasten to add.
Senator Miller.
COMMENTS OF SENATOR ZELL MILLER
Senator Miller. Thank you, Mr. Chairman. These witnesses
have waited long enough. I do not have a statement to make at
this time. I may have some questions later on.
As always, I am interested in the level of cooperation
between your agencies and the States as they relate to export
promotion. But I have no statement.
Chairman Sarbanes. Thank you very much.
Secretary Evans, we would be happy to hear from you.
STATEMENT OF DONALD L. EVANS
SECRETARY OF COMMERCE
CHAIRMAN, TRADE PROMOTION COORDINATING COMMITTEE
Secretary Evans. Thank you very much, Mr. Chairman.
Let me begin by saying how much I appreciate our initial
meeting some 8 months ago when you called my attention to this
very important responsibility that was one of my important
responsibilities, this important initiative.
As I have learned more about it over the past 7 or 8
months, and worked with my colleagues, I have a great
appreciation for your leadership on the Trade Promotion
Coordinating Committee.
Like you said, I think there is great potential here. I
think I am enthusiastic about what this Committee will do in
the months and years ahead. I am delighted to have the chance
to be here to report to you on that.
Chairman Sarbanes--Senator Gramm is not here--but Members
of the Committee, as Chairman of the Trade Promotion
Coordinating Committee, TPCC, I am pleased to be here today
with my colleagues to discuss our proposals for increasing
exports by providing U.S. companies, especially small- and
medium-sized companies, with state-of-the-art export promotion
services.
My brief remarks will be accompanied by written testimony
which I will submit for the record.
The Trade Promotion Coordinating Committee was created to
help American companies get export information quickly and
easily, and we do thank you, Mr. Chairman, and the other
Members of the Committee, for making the TPCC permanent in the
Export Enhancement Act of 1992.
Significant progress has been made. A worldwide export
assistance network has been established. A U.S. advocacy center
has been created. And there is extensive trade information
available by the Internet.
We are now in a new century with intense competition.
Falling market shares where commercial opportunities are
greatest, and achieving the unmet export potential of our small
firms, compel us to take a new look at the needs of our
customers, as well as at the best practices of our competitors.
Many of these competitors, may be doing a better job when it
comes to getting their small- and medium-sized companies into
the markets with greatest potential.
Today, what we are proposing is to use the TPCC as a
management tool to reevaluate our export promotion programs
from the ground up through a comprehensive bench-marking
exercise. This study will give us information we need to
determine how to ensure our export promotion services are best
in class.
We have a three-part strategy, Mr. Chairman: First, we will
assess customer satisfaction. We have commissioned a survey of
the business community, including those who use our export
services and those who do not. And we will meet with ``focus
groups'' to hear firsthand experiences with our programs.
Second, we will review how the governments of our major
competitor countries go about promoting exports. We already
know that many of these governments focus their programs on
small businesses and that they target these initiatives to
developing and emerging countries. The French have a small
business initiative targeted to Eastern Europe. Spain has a
plan to get their companies into the Asia-Pacific region. And
Canada has targeted South America for its small business
exporters.
A number of countries have closely linked export-and-
investment promotion programs. Additionally, we will look at
how the private sector in the United States and abroad promotes
exports.
The final phase of our benchmarking study will be an
analysis and comparison of our programs with other best
practices, such as leveraging the Internet to promote exports.
We have a short list
of export promotion processes. Our ultimate goal is to
benchmark each with the best practices we identify so we can
target areas for improvement.
We anticipate providing this Committee with recommendations
next March that can fully be implemented by 2004. We expect
these recommendations will be both strategic and programmatic.
They will address duplications and gaps in our services. And
they will also attempt to leverage services provided by Federal
agencies with the private sector and others.
As this Committee knows, trade is a vital contributor to
the economic foundation of our Nation. Exports have fueled our
economic growth and support millions of American jobs.
Continued expansion of trade is essential to our Nation's long-
term prosperity.
Mr. Chairman, the Trade Promotion Coordinating Committee is
eager to work with you and the other Members to provide world-
class export promotion services so the American business com-
munity can take advantage of global opportunities. To do this,
we
believe it is critical that our trade promotion agencies know
the needs of our customers, as well as the practices of our
competitors, so we can respond with appropriate programs and
initiatives.
We welcome your thoughts and those of your colleagues on
the benchmarking proposals we are presenting today. Thank you,
and I will be happy to answer any questions that you might
have.
Thank you, Mr. Chairman.
Chairman Sarbanes. Well, thank you very much, Mr.
Secretary. The full statements of all of the witnesses will be
included in the record.
Mr. Robson, we will turn to you.
STATEMENT OF JOHN E. ROBSON
CHAIRMAN AND PRESIDENT
EXPORT-IMPORT BANK OF THE UNITED STATES
VICE CHAIRMAN
TRADE PROMOTION COORDINATING COMMITTEE
Mr. Robson. Thank you, Mr. Chairman. It is a pleasure to be
back before you and Senator Miller again.
I too will submit my formal statement for the record and
present orally a brief summary of points that I hope will be
relevant to today's hearing.
First, let me remind everyone, as you have already said,
that a central inspiration for TPCC's establishment by Congress
was the observation that trade and exports, while growing
spectacularly in importance to the U.S. economy, were not
getting cohesive and appropriate export and trade promotion
assistance from the Federal Government.
Under our economic system, of course, the roles of
Government and private-sector business are distinct. But all
America has a stake in seeing our businesses compete
effectively against their foreign commercial adversaries. And
those adversaries often receive considerable help from their
governments in many forms.
So it is a legitimate function of the U.S. Government to
find ways to keep the playing field level for our businesses
and the global marketplace. That, of course, is what Ex-Im Bank
does by providing credit guarantees, credit insurance and loans
for exports to often risky emerging markets in situations where
the private banking, insurance and finance firms won't
participate. We do not compete with them.
Ex-Im Bank has been doing this since 1934, and we are good
at it. But, by and large, Ex-Im Bank has done its mission as a
solitary player, with very little collaboration or outreach to
other U.S. Government agencies with which we might, with only
modest effort, find common enterprise which would create more
diverse and powerful support for American business.
And it is my experience that there has not been a strong
practice or tradition in the many agencies comprising the TPCC
to invest a great deal of time, thought, or effort in creating
opportunities for partnering with one or more sister agencies
for the purpose of promoting exports and trade for American
businesses.
That is why the revitalization of the TPCC and the efforts
we have underway described by Commerce Secretary Donald Evans
in his testimony are timely and important.
The goal, as I see it, is not to establish a seamless
phalanx among the TPCC agencies, with a one-size-fits-all
effort in export and trade promotion. This approach will not
work because the programs, constituencies and objectives of the
agencies are not identical. But what TPCC can do is help set
the stage and infuse some momentum to create shifting clusters
and alliances among its membership directed at export and trade
promotion which might be broad in scope or more narrowly
focused on a region, an industrial sector, or even a specific
transaction. The TPCC program now underway is a great
contribution to that outcome.
We should know and be sharing what other agencies in our
Government are doing and, more importantly, what the
competition is doing. How can we contend more effectively on
behalf of American business with the competition's best
programs and practices and, indeed, what of those programs and
practices we should adopt?
The TPCC, in my opinion, is an ideal vehicle for gathering
and analyzing a broad base of data from around the world and
within our country as we have set out to do. And the Ex-Im Bank
is very pleased to participate in these efforts and is looking
forward to some concrete data that we will undoubtedly find
useful going forward. Let me touch very briefly on the areas
that appear to me to offer the prospect for improving our
programs, as well as illuminating opportunities where we might
successfully collaborate with our TPCC colleagues.
One, many other nations have established counterpart
agencies to our Ex-Im Bank. They too have recognized the
importance of export and trade to their economies and have
stepped up very aggressively. For example, Canada and Germany
have created new official entities called ``market windows,''
which enjoy many benefits of being a public entity but may
operate as and really compete with private banks. They may be
having a competitive impact, and we are urgently attempting to
pull together sufficient data to get an accurate picture of
what they are really doing in the marketplace.
Two, Tied aid use has seen a recent resurgence,
particularly by Japan. The United States has a so-called Tied
aid capital projects war chest, but it has seen relatively
sparing use.
Three, the potential for attracting more small- and medium-
sized businesses into the exporter universe appears promising.
And TPCC survey efforts of that market should be very
important.
Finally, let me just mention some collaborative efforts we
have recently made that I hope capture the spirit of the TPCC
vision.
One, OPIC, TDA and the Ex-Im Bank forged a joint
investment, export and technical assistance venture directed at
Indonesia's energy sector and other industries.
Two, the same three agencies have just established a task
force which will be sending representatives from each agency to
find
and help implement opportunities for United States business in
Pakistan.
And three, Ex-Im Bank, the Commerce Department and the
State Department have put in motion a program where Ex-Im Bank
will learn in advance about governors trade missions and will
undertake to play a role in such a mission.
Mr. Chairman, Members of the Committee, that concludes my
remarks and I too will be happy to answer any questions.
Chairman Sarbanes. Thank you very much.
Mr. Barreto.
STATEMENT OF HECTOR V. BARRETO, ADMINISTRATOR
U.S. SMALL BUSINESS ADMINISTRATION
Mr. Barreto. Mr. Chairman, Senator Miller, and to the other
distinguished Members, thank you for inviting me to testify
today about SBA's role in the Federal Government's export
promotion strategy.
The President recognizes the critical link between the U.S.
domestic economy and our foreign trade policy. Trade expands
markets, grows business, and creates jobs. Free and open
markets foster economic and political freedom, strengthen
democracy, and enhance our national security.
We need to do as much as possible to give businesses in
America every opportunity to succeed by enabling them to access
all markets. Trade Promotion Authority will remove barriers to
allow these businesses involved in trade to thrive in a global
economy through free, fair and open markets, thus allowing U.S.
small businesses to become more competitive in the global
marketplace.
Currently, 97 percent of U.S. exporters are small
businesses, numbering a little over 200,000. However, they
account for just under a third of the total value of U.S.
export sales. This is where SBA has a significant role to play.
Small businesses face barriers to exporting. Many simply
lack basic information on how to go about exporting and many
currently lack the financing necessary to sell their products
overseas.
Each of SBA's financial and technical assistance programs
can assist businesses interested in exporting and we have
specific programs in place to assist in creating markets
outside the United States. To date, our efforts and results
have been sporadic. I intend to more effectively focus our
efforts. Through expanded public/private partnerships we can
facilitate access to needed information and capital with the
goal of increasing revenue, employment and business longevity.
Firms engaged in trade are 20 percent more productive, pay
wages which are 15 percent higher than nontraders, and are 9
percent less likely to go bankrupt, and may experience 20
percent greater job growth.
SBA has several loan programs tailored to small businesses
in search of capital to either start or expand their business
in
exporting.
The International Trade Loan Program provides long-term
financing for fixed assets and working capital for companies
impacted by foreign competition or expanding exports.
The Export Working Capital Program is a short-term,
transaction-backed guaranty program. SBA has worked with Ex-Im
Bank to develop a seamless product to address a wide range of
small business financing needs. In fiscal year 2000, the
average SBA export working capital loan was $400,000. The
average size of an Ex-Im Bank loan was $1.6 million.
To help firms with very small export finance needs, the
SBA's Export Express program provides loan guarantees on export
loans up to $150,000. We believe it will provide much-needed
financial assistance to the fastest-growing segment of the
small business export community--the service sector. Let me
give you two examples of how this loan program is being used.
One of these loans went to a Jackson, Mississippi firm for
$11,000 to export produce to South America. Another loan for
$50,000 allowed a firm located in Los Angeles to obtain orders
worth $4.8 million for piping insulation and industrial
chemicals.
SBA also has public/private partnerships to satisfy the
needs of small businesses for information on exporting. SBA is
a partner with the Commerce Department and the Ex-Im Bank in
the U.S. Export Assistance Center, or the USEAC's, U-S-E-A-C's,
nationwide network.
To help firms become export-ready, SBA took the lead in
working with our public/private partners in creating the Export
Trade Assistance Partnership Program, known as E-TAP. E-TAP is
a customized process of taking a small group of export-ready
companies through all the stages of becoming an exporter. This
program relies on the support of SBA's Small Business
Development Centers and their Service Corp of Retired
Executives. It also relies on State and local trade offices,
individual freight-forwarders, customs brokers, insurance
brokers, and international attorneys to bring together
essential export information at little cost to the small
business owner.
E-TAP recently enabled a Dallas, Texas company to grow
their markets and use SBA's capital programs. The company
produces a medical product to repair oxygen sensors used by
hospitals for monitoring trauma victims. It now exports to over
30 countries.
I am excited about the prospects for U.S. small business in
the global marketplace. We need to reach more of the 25 million
small businesses in the United States today. We need to do a
better job of outreach and adapt and create products that meet
their changing needs. We are committed to expanding our
tradition of enrolling our public and private partners in these
efforts.
This is an exciting time to be involved in international
trade and we have a President who has made it a priority to
assist the American businesses in the global marketplace.
Thank you. I would be happy to answer any questions.
Chairman Sarbanes. Thank you very much for your statement.
Mr. Watson.
STATEMENT OF PETER S. WATSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
OVERSEAS PRIVATE INVESTMENT CORPORATION
Mr. Watson. Thank you very much, Mr. Chairman, and Senator
Miller, for holding this hearing today. Like my colleagues, I
will just have a few brief comments, so we may have a broader
conversation and discussion of my complete written statement.
Like the other members of the panel, Mr. Chairman, I also
want to thank you for your strong leadership and the support
that you have given toward establishing a coordinated United
States trade program. It is a privilege for me to join in this
panel today with my distinguished colleagues.
Even before the creation of the TPCC, OPIC and the other
trade agencies have had a long tradition of cooperating with
each other. However, I think it is clear that the mechanism of
the TPCC has allowed us, frankly, to do so in a more systemic
and coordinated way, and we will continue to do so.
As you have heard, the TPCC is reinvigorating a unified
trade program for the U.S. Government and as you stated, Mr.
Chairman, this is a particularly important responsibility given
the economic disruption and foreign policy challenge we face as
a result of the tragedy on September 11.
As a development agency, OPIC is well positioned to play an
important role in the U.S. response to those events and,
indeed, we can assist in helping stabilize financial markets in
the developing world.
We are also keenly aware that OPIC's mission is in many
ways distinct from that of the more traditional trade agencies.
As you are particularly knowledgeable, Mr. Chairman, OPIC, of
course, is an integral part of the foreign assistance and
development program of the United States, borne out of the
Marshall Plan and focused on the belief that concessional aid
alone cannot bring about the economic development so sorely
needed in much of the world.
Today, OPIC is prepared to provide similar U.S. support for
countries who are supporting and assisting broader U.S.
interests. This includes, but is not limited to, moderate
Islamic countries in the Middle East and Central Asia, and
others most in need of support and economic development at this
time.
In meeting today's challenges, OPIC will benefit from the
cooperation, support, and information flow from all of the
trade agencies represented on the TPCC. And as mentioned by
Chairman Robson, we have already seen the benefits of this
interagency cooperation.
During the recent visit of Indonesia President Megawati, as
Chairman Robson mentioned, we were pleased to be able to join
with Ex-Im and TDA in a joint trade and finance initiative
developed in support of Indonesia, which is not only an
important U.S. ally, but also a country that has a large Muslim
population.
Another area of cooperation is promotion of business
development in countries of specific U.S. interest. I am
pleased to be able to participate in the business development
delegation being led by Secretary of Commerce Evans to Russia
next week. That delegation will include senior executives from
approximately 15 U.S. companies representing a wide variety of
sizes and sectors. The mission will reaffirm United States
Government support of Russia's economic reforms and assess ways
to improve access by United States business to the Russian
market.
If I may, in closing, Mr. Chairman, mention briefly one
specific area of renewed focus--it is how OPIC pays attention
to the special needs of American small business.
OPIC, I believe, has yet to fulfill its potential in this
area and we are actively examining opportunities in order to be
able to assist small business.
One particular avenue that we have already identified and
are exploring is the extent to which OPIC can work with the
SBA. I am pleased to have had the opportunity earlier of
meeting with my colleague, Administrator Barreto, to discuss
our mutual interests in this area.
We have a working group between our two agencies who have
already met to pursue arrangements and we are hoping to
establish similar mechanisms that Ex-Im has in place with SBA.
Looking ahead, Mr. Chairman, in cooperation with our TPCC
colleagues, OPIC's activities will focus more closely on
development and on companies and countries that have difficulty
accessing private financing and assurance.
Working together, within the Administration and with the
Congress, OPIC can make an important difference to people in
the developing countries and in America during these
challenging times.
I will be happy to answer any questions you may have. Thank
you, Mr. Chairman.
Chairman Sarbanes. Thank you very much, Mr. Watson.
Ms. Askey.
STATEMENT OF THELMA J. ASKEY, DIRECTOR
U.S. TRADE AND DEVELOPMENT AGENCY
Ms. Askey. Thank you, Mr. Chairman and Senator Miller. I am
pleased to be the clean-up hitter.
A number of you have been friends of the U.S. Trade and
Development Agency for many years, and are well acquainted with
the agency. However, I recognize that TDA is a small agency
outside the jurisdiction of the Banking Committee, and I would
like to take this opportunity to outline briefly what TDA does
and how it works with the Trade Promotion Coordinating
Committee to promote U.S. exports and create American jobs.
I have been insistent on being an activist in the TPCC
because I see that our agency, although small, has a strong
reputation as a disciplined and responsive agency that reflects
best practices.
TDA promotes American private sector participation in
development projects in low- and middle-income countries, with
special emphasis on economic sectors that represent significant
U.S. export potential. This is no easy task in today's global
marketplace. U.S. firms face aggressive competition from
foreign producers who often receive substantial assistance from
their home governments in pursuing projects.
By now, you have already heard which governments are TDA's
biggest competitors and about their use of Tied Aid. TDA must
work harder and smarter than our competitors to level this
uneven playing field.
TDA's toolbox for fighting unfair foreign competition
contains a number of instruments. The most common methods are
funding feasibility studies, conducting orientation visits, and
hosting trade conferences. TDA also provides training and
technical assistance grants. TDA's technical assistance may be
project specific, or more broad-based--supporting capacity-
building institutions and trade agreement implementation.
TDA's goals are two-fold--helping American businesses
export their products and thereby creating jobs, while
simultaneously promoting commercially-viable economic growth in
developing and middle-income countries. Since 1981, TDA has
been associated with more than $17 billion in exports--or over
$35 in exports for every dollar invested in its program
activities.
TDA typically promotes U.S. exports by providing assistance
for specific infrastructure products around the world. However,
TDA is also effective in promoting U.S. exports at a more
fundamental level--by providing technical assistance to support
broader sectoral efforts and by increasing trade-related
capacity.
This strategy entails helping countries develop better
legal and regulatory regimes and promotes exports by creating a
more favorable commercial environment for U.S. firms.
Such an improved commercial environment serves the long-
term interests of the United States and its businesses, as well
as the foreign partners.
Technical assistance provided by TDA can also be a useful
tool to support trade policy objectives. Upon conclusion of a
trade agreement or multilateral or bilateral understanding, TDA
can provide the technical assistance some trading partners need
to implement the provisions. This assistance enhances our
trading partners' ability to meet their trade obligation and
ensures that U.S. firms will be able to fully realize the
benefits of these agreements--namely, a fair and open trade,
regulatory and legal environment.
TDA has worked hard to achieve its success, but it has not
done so alone. TDA takes great pride in the close relationships
it maintains with other U.S. Government entities in identifying
and pursuing U.S. export opportunities. The agency is
especially grateful to Secretary Evans for his leadership of
the Trade Promotion
Coordinating Committee. TDA believes that TPCC provides an
excellent framework to coordinate the Government's trade
promotion operations and we actively support TPCC's efforts to
identify and quantify the means that foreign governments use to
obtain advantageous benefits for their national companies at
the expense of U.S. firms.
Overall, the TPCC can be most useful by providing a
mechanism for focusing the resource of various agencies in
order to respond to particular immediate or longer-term
priorities, such as supporting the Administration's
environmental strategy, reinforcing regional efforts such as in
Africa or the Caspian region, supporting the negotiation and
implementation of new trade agreements, and coordinating the
development of efforts in the wake of September 11.
Additionally, the TPCC can focus efforts to work with
foreign governments, assuring the shift to democracy and
market-based economies.
The best long-term strategy for the United States is to
make its presence felt in such countries and to do so by
supporting commercial development. The TPCC is well suited and
well positioned for such a role.
Among TPCC agencies, TDA frequently partners with Ex-Im and
OPIC, to conduct trade promotion activities overseas and
identify promising project opportunities. These three agencies
also jointly operate two regional offices--the Caspian Finance
Center in Turkey and another jointly-supported office in
Croatia.
Maintaining these regional offices allows us to work hand-
in-glove to develop the regional economies, while promoting
U.S. exports. In the near-future, we will look to these field
offices to respond more quickly to the commercial and
development needs of countries in strategic locales during
difficult, uncertain times.
In the wake of the September 11 attacks, Peter Watson, John
Robson, and I met last week to develop joint strategies for
projects in Eurasia and Asia, as both gentlemen have already
mentioned.
We and our staffs are evaluating how we can best respond,
both as individual agencies in complementary ways, and
collectively, to changes in the business climate and increased
levels of risk in those regions and around the world.
We are currently exploring potential future joint
activities in
Africa and elsewhere and Peter and John have already mentioned
our efforts in Indonesia.
TDA looks forward to continuing its efforts with these two
agencies particularly, as well as with other TPCC members on
other important initiatives, such as the U.S.-Jordan Free Trade
Agreement, the focus on Africa through the AGOA conferences, et
cetera.
TDA believes that the role of trade promotion is even more
important today than it was before September 11. So your
decision, Chairman Sarbanes, to hold this hearing in the wake
of the attacks is particularly appropriate.
Supporting U.S. businesses as they pursue overseas
opportunities and connecting them with projects in developing
nations is critical to ensuring that the world economy
continues to grow and that the people around the globe enjoy
the benefits of economic development and free trade.
Accordingly, TDA will continue to carefully evaluate how it
can best continue to serve U.S. interests in the wake of recent
events.
Senator Miller, I would also say that we do look at State-
specific activities. Most recently, we have sent letters to the
USTR Zoellick and to the Finance and Ways and Means Committees
outlining environmental projects in each State within those
Committees. TDA is also available to analyze other States in
support of trade promotion authority renewal.
In closing, I would like to thank the Chairman and Members
of the Committee for the opportunity to appear today and to
discuss what TDA is doing to increase U.S. exports and create
American jobs, and how TDA works with other members of the
TPCC.
I look forward to answering your questions.
Chairman Sarbanes. Well, thank you, Ms. Askey, and thank
you all very much. I want to underscore how we appreciate how
much thought and effort went into the statements that have been
submitted and have been included in the record.
Mr. Secretary, let me start with you.
I really welcome this benchmarking exercise that you have
outlined that you are now going to go through to, one,
ascertain the needs of your customers and, two, the practices
of our competitors.
I think that is a very important exercise and I think,
actually, the whole process you have outlined in your statement
is very positive and ought to provide us with a real base off
of which to act.
Now as I understand your timetable, you intend to finish
that in time to encompass the lessons you draw from it in the
report that you will present at the end of March of next year.
Is that correct?
Secretary Evans. That is correct, Mr. Chairman.
Chairman Sarbanes. Well, let me just commit the Committee
to that, to the extent that your report contains
recommendations for legislative action, we will certainly
schedule hearings and try to move ahead on that because we are
very anxious to give you whatever weapons you judge to be
necessary after we have had an opportunity to review them.
Do you expect that you will be able to influence the budget
of the Administration that will be submitted for the next
fiscal year--in other words, the one that is submitted in late
January or February--in terms of how it deals with export
promotion, both affecting maybe the levels and the coordination
and the allocation of funds within the Executive Branch for
that purpose?
Secretary Evans. Mr. Chairman, certainly we expect we will
be able to influence the coordination; I certainly believe that
out of this, I think, important process and exercise that we
are going to go through with respect to benchmarking our own
programs against the rest of the world and understanding what
each of the respective agencies is engaged in.
It is likely we will find some duplication. And it is
likely that we will, as a result of that, be coming in and
recommending some redirection of some of the funding. Now
precisely what that is, I certainly do not know yet. I do not
want to prejudge the conclusions of the report.
In terms of amount of funding, again, I guess I would say
that I want to go through this exercise in a very thoughtful,
thorough kind of way, but being comfortable that when we
present the report to you in March, this is a program that we
think will get results, will deliver the kind of results that
you should expect, and the American people should expect.
I certainly call everybody's attention to the fact that
only 1 percent of the small businesses in America are exporting
outside the United States. I look at that and I understand the
tremendous economic engine small business is for our economy in
the United States. It ought to be a similar engine for the
global economy. And for only 1 percent of our small businesses
to be engaged in exporting around the world--I think that needs
our attention.
So, I do not want to prejudge what kind of levels we may
request. But I will commit that it is my intention to present
to this Committee, with the work of my colleagues, a report
that will be effective and will deliver results.
As you know, I am from the private sector and am a results-
oriented kind of person. If we have a program in place, I
expect
it to work.
Chairman Sarbanes. Well, as you go through the benchmarking
exercise, I think you should remain alert to what lessons may
leap out at you that could in fact be implemented within the
Executive Branch with respect to the budget that the President
is going to submit. Otherwise, we are going to have to go
through another cycle to get at that budget.
Secretary Evans. Certainly.
Chairman Sarbanes. Although we could try to alter or amend
it as it moves through the Congress.
Ms. Askey, I was very much taken by this exercise you say
you are doing with Ex-Im and Small Business on how to help our
exporters in light of what has happened in terms of the impact
of
the events of September 11. It seems to me that that is a
project
that the entire coordinating committee could be engaged in, the
problems for U.S. exporters involving delays in growing costs
may result as a consequence, including heightened security or
other measures.
And I would recommend that to the coordinating committee as
an immediate short-term agenda item to try to address.
Obviously, you are going to have some impact.
Have you perceived any impacts up to this point, any of you
at the table?
Ms. Askey. It is hard to assess this early. We certainly
have gotten some initial nervousness about traveling, et
cetera.
All of us, I believe, have been looking at this
individually at our own agencies. John Robson took the
initiative to bring the three development agencies together.
On the one hand, it may make it more difficult to operate
in some of these countries because of security issues and more
difficulty in moving goods and services.
But on the other hand, perhaps the demand and the pressure
for U.S. presence and activity will be even greater,
particularly in countries that are going to provide some
strategic assistance. So, we continue to work together on this
issue. And Secretary Evans has provided significant leadership
in this regard.
Mr. Watson. Mr. Chairman, of course, part of the fuel for
the economic growth, obviously, is availability and capacity in
both finance capital markets and, indeed, political risk
insurance. And what we have seen recently is troubling,
frankly.
There has been a very discernible withdrawal of capacity in
international markets and in developing countries, in
particular of availability of finance and capital.
A number of banks and groups that have previously been able
to provide financing, we have heard that they, in fact, are not
going to be able to do so in the same type of coverage or
amounts that have previously existed. And as you know, it is
always a challenge to get those participants to be involved in
transitional developing economies, even in the best of times.
We have had several meetings with clients and we will have
another meeting with AIG this week to try and identify ways
that we in fact can step into the breech that will assist in
responding to this effort to stabilize these financial and
insurance markets. But it is a very important role at this time
and one that we take very seriously.
Chairman Sarbanes. Senator Miller
Senator Miller. First, I want to say that you make a very
impressive team and I am glad that you are where you are and I
thank you for giving up what you did to work in that arena.
Because of my experience in that other life that I once had
in State government, and for a while I was a board member of
OPIC, Mr. Watson, I am very interested in the level of
cooperation that your agencies have with the States as it
relates to export promotion. I think that the States have a
very important role to play in improving that 1 percent, Mr.
Secretary, and I think that they are willing to do so. They
just need some help.
I know that one of the responsibilities of the Trade
Promotion Coordinating Committee is to review the efforts of
the States and to see how you can work with them to promote
exports.
And I think that there is an agreement or some kind of
working relationship with the National Governors Association. I
am not sure, but I believe there was at least plans to.
I hope it will go further than that. Maybe I am making a
statement now instead of asking a question, but I would like
for you to respond.
I hope that in your study and in your focus groups that you
will be conducting, that you will ask questions regarding the
role of the States in improving the export promotion process.
And I hope that you will include State trade promotion
officials in your focus groups and your studies.
I do not know of any recent review that has been done of
States. And if there has been one, I would be interested in
seeing it. But I think there is a very important role there for
your agencies to play. And I think that you will find that the
States themselves want to work with you on this, but in the
past decade, there has not been the coordination and
cooperation that I would like to have seen. Anyone that wants
to respond to that, fine.
Chairman Sarbanes. I think that is a very thoughtful
statement. Actually, I am taken by a sentence at the end of
Secretary Evans' prepared testimony. At the end of it, he said:
``I look forward to your reactions.'' So, I would say the same
thing now, having heard Senator Miller's statement.
Secretary Evans. Let me take a crack at that and say,
Senator, I think you are right on the mark. I know at the
Department of Commerce, we look at each individual State and
break it down by what exports contribute to the State economy,
and we will break it down by sectors, and we will break it down
by regions. We will break it down, even, I think, by district.
The small business owner is in a little town in south
Georgia and he needs to hear from his State legislator that
there is a way for him to access the international markets. And
he needs to hear from that State legislator that he can get
into those international markets and feel comfortable that he
has somebody to talk to as to what the rules are going to be.
Because any time that small business owner thinks about going
outside the United States, he is thinking, everybody's always
told me if I leave the United States, I do not know what the
rules are; they change them. And so, it is that small business
owner in south Georgia who needs to be talking to somebody he
knows and trusts is going to give him good advice as to how to
get into the international markets.
The one thing that I have really been moved by in the last
8 months in this whole area is traveling around the country and
talking to our foreign commercial service officers and offices,
and
talking to small business owners who have taken advantage of
the foreign commercial service program, which is simply a
program, as part of which we have export assistance centers.
The Chairman mentioned some of them. We have them all
across America. And they are simply centers where a business
person can go and knock on the door and say, I manufacture
valves. Is there some place in the world right now that wants
the kind of valve that I manufacture?
We have a program where we can go and look around the world
and see if there is a market for that kind of valve or not. And
so, the way to get the message to that small business owner is
down through the State governments and down to the local
representatives. I have talked to a number of the governors
about it. We do work with governors as they undertake trade
missions. We help them organize their trade missions. I know
Governor Taft went to South America, Governor Ridge is taking
some trade missions--all the good governors take some. So, we
will work with them.
But more than that, within the United States, I think you
are right on the mark of finding a way we can coordinate with
States in terms of trade development authorities and trade
development offices so we can educate the small business owners
across this country. So, I will be looking for more ways to do
that. And I think that is a very wise observation.
Mr. Robson. If I may, add to your comment, Senator Miller,
and the Secretary's comment, that the predicate for enlisting
small business in the exporter community is illuminating the
opportunity for them to go abroad.
When a small businessman wakes up in the morning, he is not
thinking about doing business in Central or Eastern Europe. He
is thinking about making a payroll that week.
And Ex-Im Bank and the other agencies have the mechanisms
in place to try to provide the illumination of those
opportunities, I am sure Hector has them, even if they are
probably imperfect.
One of the good things that will come out of the surveys
that we are doing here is perhaps some insights into ways in
which we can make those opportunities more effective and find
ways to work with State and local commercial development
agencies to enhance them. We have those relationships, as I
said in my testimony. We are doing something with Commerce and
State on State trade missions. But it needs to be much broader.
It is heavy-lifting, but do-able, I think.
Chairman Sarbanes. Does anyone else want to add anything?
Mr. Barreto. I also want to confirm some of the comments
that have been made.
We work very closely with the State of Georgia in our
Atlanta, Georgia operation that we have with the Department of
Commerce. It is really a model. They have done a lot of
outreach. I think it is a model for other States. Again, some
of the comments that are being made with regards to this
leadership really occurring at all levels.
I am originally from California and I know that oftentimes,
we were a little stymied why we were not doing as well as some
of the other States. And it really had a lot to do with that
leadership. It was not connected. We were doing, for example,
11 percent of exports to Mexico and States like Illinois were
doing 22 percent, and Texas was doing 75 percent of their
exports. But this is something that is on their radar screen.
They are working with it all the time.
There are other States--I am originally from Missouri. They
do an incredible job with their program in the State,
especially with regards to their agricultural products and
services that they offer. Florida does an incredible job.
So, I agree. I think there is a lot of opportunity for us
to continue to collaborate, the partners on this Committee. But
also to reach out to our partners in the States. I think we
have mechanisms that we can bring to bear where we can really
show some success for the small business community.
Secretary Evans. May I make one more comment, Mr. Chairman,
if you do not mind?
Chairman Sarbanes. Certainly.
Secretary Evans. I expect that the report we bring to you
in March is going to have one element that is going to be
focused hard on education--educating small businesses all
across the country of this resource that is available to them.
I was at the Paris Air Show back in June and I talked to
some 40 companies that were over there. They were small- and
medium-sized businesses.
I heard the question asked--I was listening, I really
wasn't talking to them--do you find this service important to
you? And every one of them said, listen, we wouldn't be over
here but for the Foreign Commercial Service Export Assistance
Centers that you have. We could not have done this without
them. I kind of stumbled into it. And so, our big challenge, I
think, in this country is educating small- and medium-sized
businesses all across America about this very valuable resource
that is available to them. Our phones should be ringing off the
wall. Yes, we are busy and we are active. But we ought to be a
lot more active than we are. And I think one of the keys to
that is what Senator Miller suggested, which is working back
down through the States and empowering States to deliver that
message and educate their businesses.
I went to Purefil, which is just outside of Atlanta, which
was one of these small businesses that accessed the world
market for their unique product through using foreign
commercial services.
And there are just so many of those stories out there. All
we need to do is just educate small businesses and tell them
about this terrific resource that is available.
Chairman Sarbanes. Your benchmark survey might include a
survey of the interaction that the agencies have with the State
governments as well, it seems to me.
Secretary Evans. Good idea.
Chairman Sarbanes. And a following up on Senator Miller's
suggestion.
Secretary Evans. Good idea.
Chairman Sarbanes. Did you want to add anything, Peter?
Mr. Watson. Just really two sentences. Senator Miller, from
your time serving on the OPIC Board of Directors, you may well
have become aware of some of the outreach that we do have to
State governments. But we are mindful of the fact that OPIC
does not have domestic offices outside Washington, DC, clearly,
and it is not part of our charter to have offices in States.
In fact, at the first meeting when Under Secretary Aldonas
came and visited with us to talk about the TPCC, we discussed
mechanisms for precisely more systematically working with the
domestic foreign commercial office services in each of the
States. And we are going ahead and doing that.
But I think of equal importance, if not more so,
particularly to small business, is to be able to have a
seamless cooperation with SBA, which does have these offices
and representation in each of these States, or a significant
number of them.
What we are developing is an approach whereby there would
be a seamless arrangement where small business, when they come
into SBA, do not get bogged down in bureaucracies. They can
effortlessly move from SBA product into OPIC-related programs,
much as with Ex-Im.
So this is one way that we are going to be building up our
ability to support small business in the States.
Senator Miller. That would be very important if you do
that.
Mr. Watson. Yes, sir.
Ms. Askey. I will just add quickly, not to take too much
time.
We primarily operate in the States through the Commerce
Department and through SBA directly with the State governments.
About 60 percent of our business is with small businesses and
we provide them a practical opportunity to experience
international markets, which can be quite difficult.
We are involved with projects quite early. We do
definitional missions and desk studies even before feasibility
studies. And those opportunities, desk studies and definitional
missions, are always done by small businesses. And it really
gives them the opportunity to grow into a role that will allow
them to see what it takes to operate in foreign markets.
Then they move on to the feasibility studies and to the
exports. Many of them come to the TDA and say, you saved us.
That one nice contract, even in a difficult market, held us and
helped us grow, too. So, we work quite a bit with small
business.
Chairman Sarbanes. Senator Stabenow.
STATEMENT OF SENATOR DEBBIE STABENOW
Senator Stabenow. Thank you, Mr. Chairman.
I would echo support for what Senator Miller has spoken
about. And while in Michigan, we had over $51 billion in
exports last year to 200 markets, we have a majority of that
coming from our larger businesses.
And there is a real need and I am approached all the time
by chambers of commerce in small- or medium-sized communities
wanting to know about the Ex-Im Bank or what else can be done
with SBA, or whatever.
I would encourage you to be really strengthening the U.S.
Export Assistance Centers that you have. We have four in
Michigan and I think they are doing an excellent job, in
Detroit, in Grand Rapids, in Pontiac, and in Ipsilanti.
But we need more coordination of what you were talking
about. SBA plays a critical role. Frankly, MEP, and I do not
know if you have talked about that today, but the Manufacturing
Extension Program in the Department of Commerce I think is one
venue that has not been fully utilized in terms of education.
They were set up to help provide assistance in education as to
new technologies for small- and medium-sized manufacturing
firms.
I do not know to what extent they are also focusing on
trade opportunities. But that has been very successful in
Michigan, the MEP. So, I would encourage you look at that as
well.
I had a couple of specific questions for Secretary Evans. I
want to first thank you for coming to Michigan a little over a
week ago for a very positive session with Secretary Chou and
business and labor leaders about manufacturing. Obviously, we
are very proud of Michigan. We do all kinds of things. But one
of the things we do is we engineer and make things. And we are
very proud of the manufacturing economy.
I have a specific question just to bring to your attention
and we are talking about trade at this point, and back and
forth, with our immediate neighbor, which is Canada.
In light of the current situation that has happened and the
current terrorist attacks, we ask for your vigilance and I
would welcome any thoughts or information you have about how
Commerce is focusing on the border. And I have asked the same
of Secretary O'Neill with the Customs divisions. They are
focusing I think in an excellent way to make sure that we have
the security in place, but also understanding that for the
manufacturing economy, it is just-in-time supply chain and
critical that the borders be able to flow as easily as possible
within safety and security measures.
I am very interested in knowing what steps from a Commerce
Department standpoint you have done or would see your
Department doing as it relates to trade with our immediate
northern neighbor of Canada, particularly in light of the
situation in terms of the borders and being able to move across
the border.
Secretary Evans. Senator, it is a very important question.
What we could do is call the just-in-time delivery problem
to Customs' attention, which is what we did. As you mentioned,
Customs really controls the border. And in the ensuing days
after the attack, there was the issue of border crossings being
delayed because of tighter customs, tighter security, and other
related factors. We called Customs' attention to the commercial
implications of that situation. They were already aware of it.
They took steps to address it.
It is my understanding after talking to Rick Wagner and
others, that goods are moving across the border pretty smoothly
right now.
Senator Stabenow. It is much better, yes.
Secretary Evans. So, I am not hearing the concerns that I
was hearing a couple of weeks ago. Now if that is not right, I
would like to know about it. But, really, what we can do is
just call it to the attention of Customs and say, listen, you
may slow down manufacturing operations and slow down commerce
if you get too restrictive here. But I think they took the
necessary steps and it is flowing smoothly now.
Senator Stabenow. It is much better than it was. I think if
we are all vigilant, and that is why I am bringing it to your
attention, we need to keep that in mind.
And as we are talking about exports and thinking about try-
ing China or Russia or Europe or long distances, I would just
ask
you to always keep focused as well on our immediate neighbors
and
the policies that come from other important departments and
areas, and as we are particularly dealing with the current
situation
and the challenges on security that we keep in mind that one of
our biggest exporting markets is right over the border in
Canada.
In the case of Michigan, it is right across the bridge or
the tunnel. And so, we are very conscious of how we balance the
competing and very important needs. I cannot go without,
Secretary Evans, asking you if you might comment on any--and
again, we are talking about trade, grave concerns regarding
steel that relate to Michigan.
And while we certainly are talking today about exporting, I
want to thank you again for the efforts of the Administration
to focus on what is happening in terms of a fair trading
atmosphere as it relates to steel and our grave concerns about
the domestic steel industry. I wondered if you had any update
as it relates to the 201 or 232 investigations.
Secretary Evans. No update other than the ITC is reviewing
it as we speak. And so, that is in process and there will be a
decision in the not too distant future from the ITC.
But I have, I think, a very positive comment to make
regarding our recent meeting at the OECD in Paris. The United
States has taken the lead in bringing all of the respective
countries together and focused on global over-capacity.
We were very pleased with not only the response and the
attendance, but also the attitude of, yes, the world is faced
with global over-capacity and we need to sit down and see if we
can resolve that. And countries have agreed to go back and look
at their own plants and try and determine what they can do
within their respective countries to help solve this over-
capacity problem.
Senator, what I can tell you is we are spending a lot of
time on it. We are very focused on it. We understand the
serious nature of it. The President has talked about it as a
national security issue. We need to have a strong steel
industry in this country. And so, we are with diligence
continuing to pursue it and take the steps that we think could
help find a global solution to this problem.
Senator Stabenow. I very much appreciate your efforts and
would just stress, as I always do, the critical nature of this
to domestic industry. And in light of what is occurring now,
and in terms of our own national security, I think it would be
devastating to America to lose a domestic steel industry. So, I
would just encourage whatever efforts you are to continue to be
able to make as quickly as possible and as effectively as
possible.
Secretary Evans. Thank you, Senator.
Chairman Sarbanes. Thank you very much, Senator Stabenow.
I have just two or three questions to ask and then we will
draw it to a conclusion.
Without asking you to point the finger specifically, the
Congress enumerated in the statute the agencies and departments
that should participate in the TPCC. And also provided that, at
the discretion of the President, other departments or agencies
could be added to the list. Are they all participating or do
you have some recalcitrant actors?
[Laughter.]
Secretary Evans. They are all participating, Mr. Chairman.
[Laughter.]
Chairman Sarbanes. I want to get the question out there so
that they know that we are interested in the subject. I
appreciate that.
Second, how are the Export Assistance Centers Working
nowadays? See, Commerce establishes them. But then I think Ex-
Im and SBA go at least into some of them. I do not know about
all of them.
Secretary Evans. Right, not all of them. With some of them,
we have joint offices, so we are there together, fielding
questions.
Chairman Sarbanes. I think the Department of Agriculture
plays a role in some of them.
Secretary Evans. I do not know if they are in there or not.
[Pause.]
Yes, they are there as well. But from my perspective, Mr.
Chairman, they are working very effectively. As I talk to
companies that have had real-life experience in dealing with
them, they have nothing but accolades for them and are very
supportive of them.
I just wish we had more people coming through the door. I
think they are all across America. There are a lot of them out
there.
Should we have more? Maybe so. We will take a hard look at
that. But, again, I think a lot of our focus, my focus, is
going to be just how do we make more small- and medium-sized
businesses aware that there are Export Assistance Centers
available?
If you took a survey of small- and medium-sized businesses
across America and asked them what an Export Assistance Center
was, they wouldn't have any idea what you were talking about.
That will change. Mr. Chairman, I would say that that
probably is true down through a lot of States. I think Senator
Miller had a very good idea. If I were a State legislator in a
district, it is something I would know about and I would want
to tell my constituents about.
And so, I think that that is our big challenge. I really
do. Just educating small- and medium-sized businesses of this
very important resource that is available to them.
Chairman Sabanes. I know the State of Maryland has offices
overseas, State offices that are designed for export promotion
and work closely with companies in our State in order to try to
accomplish that.
They obviously need to be folded in in a coordinated way,
they and comparable offices from other States, into your
efforts.
And actually, some of this education that you are talking
about, it could probably be funneled through the State offices
and certainly enlist their efforts.
Secretary Evans. You bet.
Chairman Sarbanes. Let me ask one final question. First of
all, let me say, I am very supportive of this benchmark
exercise that you are embarking on. I know some will say, well,
it is another study. Why don't they actually do something? But
you have it compressed, in a pretty tight time period.
Secretary Evans. Right.
Chairman Sarbanes. I think you need to get this base. I do
not think it has been done, as best I know. And of course, we
have a new set of actors with a fresh viewpoint. So, I think it
could be enormously helpful.
I think the analytical framework that you have set out in
your statement in terms of how you propose to do it, what you
propose to cover, really could be very helpful.
I just had this sort of question. You are going to look at
best practices of other countries, which I think is a very
important thing to do. Of course, a number of those countries
in the past have taken a page or two from our own playbook, so
to speak.
Secretary Evans. Right.
Chairman Sarbanes. In the course of looking at their best
practices, if you can find out, it might be helpful to see what
strategies they use in obtaining and implementing information
about our own export promotion efforts.
Some of them have been pretty clever in observing the
United States--this is in earlier times--and what we were doing
and how we were doing it, and have picked up on that.
Now, they have turned around and implemented it and all of
a sudden, we have a fierce competitor on our hands. So in
addition to looking at what their practices are, you might look
a little bit at the process they went through in order to pick
up on these best practices.
I do not know how opaque all of that is going to be. I do
not know how much cooperation you are going to get from
counter-part governments. I guess that is one of the challenges
you may confront. One of the things we have always pushed for,
of course, on the finance arrangements is more transparency.
Secretary Evans. Yes.
Chairman Sarbanes. And of course, they are not very anxious
to provide that. So, I wish you good luck in that regard.
Secretary Evans. Well, thank you, Mr. Chairman. I think we
will find ways to understand their best practices. We will
pursue it with great vigor.
Chairman Sarbanes. All right. Well, we look forward to
continuing to meet closely with the members of the TPCC. We
thank you very much for this preliminary report. And of course,
we all look forward to the report that is going to come in the
first part of next year. Thank you very much.
Secretary Evans. Thank you, Mr. Chairman.
Mr. Robson. Thank you, Mr. Chairman.
Secretary Evans. Thank you, Mr. Chairman, for your
leadership.
Chairman Sarbanes. The hearing is adjourned.
[Whereupon, at 11:40 a.m., the hearing was adjourned.]
[Prepared statements, response to written questions, and
additional material supplied for the record follow:]
PREPARED STATEMENT OF SENATOR PAUL S. SARBANES
I am pleased to welcome before the Banking Committee this morning
this panel of distinguished representatives of the Trade Promotion
Coordinating Committee (TPCC): Donald Evans, Secretary of Commerce, who
serves as the Chairman of the TPCC; John Robson, Chairman and
President, Export-Import Bank, who serves as the Vice Chairman of the
TPCC; Peter Watson, President and CEO, Overseas Private Investment
Corporation (OPIC); Thelma Askey, Director, Trade and Development
Agency (TDA); and Hector Barreto, Administrator, Small Business
Administration. The purpose of today's hearing is to review the
preliminary report of the TPCC on its National Export Strategy and the
TPCC's plans for the coming year.
The TPCC was established by the Export Enhancement Act of 1992. The
purpose of the TPCC as stated in the statute is ``to provide a unifying
framework to coordinate the export promotion and export financing
activities of the U.S. Government and to develop a Governmentwide
strategic plan for carrying out Federal export promotion and export
financing programs.'' The statute designates the Secretary of Commerce
as the Chairman of the TPCC and designated as members all of the
Federal agencies involved in export promotion.
The effectiveness of the TPCC depends on the leadership it receives
from the Chairman and the other key members. The first Chairman of the
TPCC was Secretary of Commerce Ron Brown. Together with Ken Brody, the
Chairman of the Ex-Im Bank who was designated Vice Chairman of the
TPCC, they provided the initial leadership and energy to get the TPCC
off the ground and functioning. As a result, the TPCC has a significant
list of accomplishments it can point to during its first 8 years:
Establishment of 18 U.S. Export Assistance Centers in major
metropolitan areas around the country--one-stop shops to provide
marketing and trade finance support to local exporters.
Improved interagency coordination of advocacy for U.S.
companies seeking to do business overseas.
A joint Ex-Im Bank-SBA working capital guarantee program for
small exporters.
A partnership with the National Governor's Association to
increase coordination between State and Federal export promotion
efforts.
The establishment of offices within the Commerce Department
and the U.S. Trade Representative to monitor and enforce trade
agreements.
The legislation establishing the TPCC required it to propose to the
President an annual unified Federal trade promotion budget that
supports its strategic plan. In 1999, Congress amended the statute to
change the delivery date for the TPCC's annual National Export Strategy
Report to Congress from September 30 to March 30 in order to allow the
TPCC's export promotion budget recommendations to be better coordinated
with the development and release of the President's budget. The report
that is being submitted today, in fact, was delayed from earlier this
year in order to allow the new Administration time to focus on this
issue.
We now have a new Administration and a new set of leaders for the
TPCC. Let me say that I am very encouraged by the response of Secretary
Evans, the Chairman of the TPCC, and his Under Secretary for
International Trade Grant Aldonas; Ex-Im Bank Chairman Robson, the Vice
Chairman of the TPCC; and the other TPCC leaders who will testify
before the Banking Committee this morning.
From my initial meetings with them earlier this year they seemed to
grasp the potential of the TPCC to bring greater coherence and a sense
of strategy to the Federal Government's export promotion efforts. It is
my perception that they have made it a priority in planning the agenda
for their agencies and I very much look forward to hearing their
testimony this morning.
I should mention that the attention of Congress has been drawn away
from its normal agenda because of the tragic events of September 11. It
is a measure of the importance in which I hold this issue that this
hearing is going forward today. In addition, as the Los Angeles Times
mentioned in an article on September 20:
The world economy is in a fragile state, according to U.S.
trade figures, and is likely to slow further as additional
security measures triggered by last week's terrorist attacks
hinder the flow of goods and services.
The TPCC may thus have an additional challenge posed to it and
perhaps may prove useful in assisting U.S. exporters to cope with the
new obstacles to trade that may result from those events. I look
forward to hearing the testimony of our distinguished witnesses this
morning.
PREPARED STATEMENT OF SENATOR MICHAEL B. ENZI
I would like to thank the witnesses of the panel for coming before
the Committee to discuss the Trade Promotion Coordinating Committee. As
a former member of the President's Export Council, I strongly support
the work of this Committee and stress its importance as we reevaluate
the effectiveness of our current export laws and look to reauthorize
key export control provisions. As you all know, the Banking Committee
has been particularly active in export promotion with the recent
passage by the Senate of the Export Administration Act.
The TPCC plays a critical role in improving and expanding our
current trade promotion policy. It is now more important than ever that
we approach export
promotion and control from a unified standpoint. As such, we must
continue to foster interagency coordination, which I believe is
essential in creating effective programs that will improve the
competitiveness of American businesses in the global marketplace.
Continued and improved interagency cooperation will also enable us
to develop a trade promotion policy that will protect our national
security, stimulate the economy, and encourage small business growth.
Interagency cooperation must mean more than putting glossy reports
together. It must mean implementing integrated strategies and
overlooking the firewalls and turf battles that often are associated
with funding for individual programs. Agencies must remember that they
are all there to serve the American people and promote exports, not to
compete to feather their own nests.
As small business is the backbone of our economy, we must not
overlook its importance in our troubled economy. Despite the growing
number of small businesses, less than 1 percent are taking advantage of
today's globalization through international exports. As a Senator from
a State whose economy thrives predominantly on the success of small
businesses, this is unacceptable.
In closing, I appreciate the panelists willingness to discuss the
future of the TPCC and encourage the Committee to continue its efforts
in promoting access to export information and financing for businesses
of all sizes.
Thank you, Mr. Chairman.
----------
PREPARED STATEMENT OF DONALD L. EVANS
Secretary of Commerce
Chairman, Trade Promotion Coordinating Committee
October 2, 2001
Mr. Chairman, and other Members of the Committee, my colleagues and
I appreciate this opportunity to share with you our vision for the
Trade Promotion Coordinating Committee (TPCC) and the work we will be
doing over the next several months.
Let me say at the outset that it is my belief and that of the
President that
the events of September 11 make it even more imperative that we move
our trade
agenda forward and encourage U.S. firms to enter international markets.
We have seen the impact of recent events on a number of industries--and
the truth is that no one will escape from this tragedy unaffected.
Small companies are no exception, and our trade promotion agencies need
a coordinated response to the new environment U.S. exporters now face.
Whether it is a higher perceived risk in international markets,
slower growth abroad or less available financing from the private
sector, it is now even more critical that our trade promotion agencies
are aware of the needs of our customers and can quickly respond to them
with appropriate programs and initiatives. While all of us are making
adjustments after last month's events, we cannot let the scourge of
terrorism become an obstacle to America's and the world's economic
growth and progress.
The Administration has made Trade Promotion Authority (TPA) a
priority for this legislative session. We believe TPA will speed the
negotiation of trade agreements that are fundamental to our country's
and the world's economic future.
The agreements that TPA will let us conclude over the next 5 years
could contribute as much as $1.9 trillion to world economic growth. The
question is, what slice of this growing pie of commercial opportunities
will belong to U.S. companies?
Of course the answer to that question will primarily depend on the
innovation and ingenuity of our companies. But it will also be affected
by our ability to deliver necessary state-of-the-art export promotion
programs to help our exporters realize the benefits from the agreements
we negotiate.
From the perspective of a small U.S. company wanting to export,
negotiating new trade agreements is really only part of the battle. New
agreements are meaningless to a company if it does not have the
information, expertise, and financing it needs to do the deals.
As a former businessman, I am well aware of two things: that U.S.
companies are the most competitive in the world, and that they have to
slug it out everyday in the global market to keep ahead of the curve.
On everything ranging from major project competitions to small product
sales, our exporters are competing not only on the basis of price and
quality of their products, but also against the quality and government
support behind their foreign competition.
We know today that our major competitors have made export promotion
a priority, both in terms of the resources they put behind it and the
strategic approach they take. Many of their programs are customer-
driven and focused on satisfying their customer's needs. And we know
that despite gains in many markets, we are losing market share in the
world's fastest-growing markets. Over the last 10 years, our overall
share of total exports to developing countries dropped from about 14 to
12 percent. This is a significant change.
These high-growth markets are also the markets where trade barriers
are highest, especially for small companies. And many of our trading
partners have an edge in these markets, because they have already
negotiated trade agreements to help their companies get in on the
ground floor.
But while some of our small exporters have discovered these markets
and see their potential, many more could. We still face an export gap
for small- and medium-sized companies. Only 1 percent of U.S. Small and
Medium-Sized Business Enterprises (SME's) export, compared to 5 percent
of French SME's.
For all of these reasons, the strategic approach of our
competitors, falling market share where our commercial opportunities
are greatest, and the unmet export potential of our small firms, I
believe our export promotion programs should be reevaluated from the
ground up.
I would like your support over the next several months as we
undertake a benchmarking exercise to help us learn more about what our
customers really want from their export promotion programs and to
examine best practices of export promotion services. This study will
give us more information to answer the question of why more U.S.
companies do not export and how best to take advantage of fast growing
markets.
Our vision, in short, is to use the TPCC as a management tool to
improve our programs so that they respond to customer needs and the
competitive environment. Our goal is to make sure our companies can
take full advantage of the new commercial opportunities we expect to
see in the next decade resulting from new trade agreements negotiated
with TPA. At the outset, we want to make sure that we have the right
programs, and that these programs are effective, strategically focused
and coordinated. At the end of the day, we want to deliver the world's
best export promotion services.
March 2002 National Export Strategy
Our goal is to deliver to you in March a set of recommendations we
believe will get us to world-class standards in export promotion
service by 2004. Between now and March, we will develop information on
three fronts.
First, we will spend the next several weeks assessing customer
satisfaction with our programs. We will do this in two ways.
We have commissioned a survey of the business community--
respondents will include exporters, some who use our services and some
who do not, and businesses who are not exporters. The goal is to get a
handle on a number of issues related to the question of why more small
businesses do not export. For example, among other things, the survey
will try to discover what else Government programs could be doing to
encourage exporting, and what does Government do best? What is
Government's comparative advantage vis-a-vis private sector providers
of similar
services?
We will also meet with numerous ``focus groups''--made up of users
of all of our agencies' services--to try to understand what aspects of
our programs work and what aspects do not. We will meet with small,
medium and large exporters, trade associations and banks. We plan to
talk to companies in Los Angeles, Baltimore, New York, Atlanta,
Chicago, Boston and Philadelphia. We will ask questions that will help
us get to broader issues holding back our export potential, such as
finance risk and underutilization of our trade finance programs. We
will ask all of these exporters about the competitive environment they
face and what they think the world's best export promotion services
should look like.
The second part of this exercise will be a search for best
practices, looking at how the governments of our major competitor
countries go about promoting exports. We already know they dedicate
more resources--that is not the only issue. We want to learn more about
their most effective programs, and apply any lessons that are
appropriate to our own programs. We will be looking for best practices
in the private sector as well, and applying any lessons we learn.
We have already gathered initial data from embassy posts on the
export promotion services of our G-7 trading partners, plus South
Korea, the Netherlands, Spain and Sweden. This information will help us
send out a more specific request for State economic officers and our
commercial service officers to provide a more detailed analysis of some
of the most intriguing best practices.
One of the first things we already know is that many of our
competitors have benchmarked their programs and are copying as best
practices some of our own programs. South Korea's trade promotion
agencies have adopted the products and nomenclature of U.S. business
matchmaking services such as our Gold Key, International Company
Profile, Customized Market Analysis and International Partner Search
services. Italy has established a network of regional ``one stop
shops'' similar to the U.S. Government's Export Assistance Center
strategy. And nearly all the competitor governments we are looking at
have established centralized call centers and Internet portals similar
to our own.
We have developed some excellent programs, and validation of some
of these efforts is important. But the main purpose of looking at
programs in other countries is to learn how we might improve our
programs. Governments in these countries have many of the same goals
and face many of the same challenges as the United States. To the
extent they have developed innovative solutions, we should be open to
learning and to change.
We have discovered some interesting themes. A core mission of all
of these countries is to promote the exports of small business. For
example, despite recent budget cuts, the French have modernized their
export promotion services and focused them on SME's. The South Korean
government is now committed to moving away from the dominance of
``chaebols'' (conglomerates) as its foundation of export strength and
is focusing its programs on small business. They have a number of
innovative programs, including a Small Business Corporation--with a
budget of $4 billion funded through lottery tickets--to provide SME's
with financial and technical assistance to improve their
competitiveness.
Not only do these governments focus their programs on small
business, but also in many cases they target these initiatives to
developing countries. In 2000, the French targeted Eastern Europe and
other emerging markets for the export of high-tech services. Canada has
packaged services to help exporters enter emerging markets, and
recently focused on South America. Spain has a ``Master Plan'' for
increasing access to the Asia Pacific region, coordinated through a
number of ministries.
A second theme is that a number of countries' export and investment
promotion programs are more integrally linked. For example, Japan's new
``region to region investment promotion program'' links complementary
regions rather than working with individual firms. Recently they
matched a Japanese region known for making eyeglasses with an Italian
city known for high fashion.
Third, there is an enormous emphasis on leveraging the Internet to
promote exports. In Sweden, the Trade Council's websites have become
the most important source of information to exporters. The free-to-user
advice service has become increasingly sophisticated since it was
initiated in 1996, with over 80 percent of users responding that they
always find what they are looking for. The British also have a
comprehensive e-business strategy, including e-business services, e-
business infrastructure, Market Access Online and Trade Partners UK.
It will be very interesting to see how our recently launched
``Buyusa.com'' on-line matchmaking operation stacks up. By applying
U.S. leadership in Internet utilization to export promotion, this
unique partnership with IBM puts the full network of the United States
and Foreign Commercial Service's 1,800 experienced professional trade
specialists around the world and throughout the United States behind
each business relationship and transaction.
Fourth, a number of competitors place a heavy emphasis on technical
assistance to promote exports. In the United Kingdom, the government
helps toward the cost of bringing decisionmakers in key countries to
the United Kingdom for training by British companies. It is designed to
help new business contacts in export markets familiarize themselves
with British technology, production methods and management skills.
Japan's International Cooperation Agency--with a budget of $1.9
billion--administers grants that fund technical training of potential
foreign buyers in Japan and dispatches technical experts abroad.
The final phase of our benchmarking study will be our analysis and
comparisons of our programs with other best practices. We have broken
down all of our programs into a short list of export promotion
``processes,'' such as providing information, marketing, small business
trade finance, investment insurance, linking policy and promotion, and
evaluation of our services and coordination. Our goal is to benchmark
each of these processes with the best practices we identify, and
develop recommendations that will put us on a course toward world class
export promotion services. We expect these recommendations will be both
strategic and programmatic and identify what we do best while
responding effectively to our competition. They will address both
duplication and gaps in our services and attempt to leverage
opportunities between agencies, the private sector and other export
service providers. We intend for this to be an ongoing program of
review that will provide us with continuous feedback on the scope and
quality of our programs, so that they reflect the changes our exporters
face everyday in the global marketplace.
Mr. Chairman, we hope this vision is consistent with what you
intended the TPCC to be when you created it in 1992. I am sure I speak
for my colleagues when I say that we appreciate the fact that there is
such a vehicle available to help us improve and better coordinate our
programs at this important juncture.
----------
PREPARED STATEMENT OF JOHN E. ROBSON
Chairman and President
Export-Import Bank of the United States
Vice Chairman Trade Promotion Coordinating Committee
October 2, 2001
Thank you for inviting me to testify as the Vice Chairman of the
Trade Promotion Coordinating Committee (TPCC) and as Chairman of the
Export-Import Bank of the United States (Ex-Im Bank). While other
agencies unite American exporters and foreign buyers, the Export-Import
Bank provides the financing to generate successful transactions in
emerging markets. Other agencies provide aid to needy countries. We
attempt to level the playing field for U.S. businesses by ensuring that
buying decisions are made on the basis of normal market forces and not
on the basis of market imperfections such as financial support from
official foreign credit agencies. We consider this institution a
valuable part of the overall U.S. economic arsenal.
As directed by our Charter, Ex-Im Bank only approves transactions
for which we can conclude that there is a ``reasonable assurance of
repayment.'' The word is in our name, but let me reiterate that we are
the Export-Import Bank of the United States. We work to preserve the
competitiveness of U.S. exporters against foreign competition, but we
also watch over the taxpayer dollars. We do not compete with commercial
banks. We help them go where they are unable to go without the backing
of the U.S. Government.
Because this Bank works in partnership with business and labor,
because it
keeps exporters competitive, and because it helps create good jobs for
U.S. workers,
Congress and the Executive Branch have recognized the continuing need
for a
vigorous Ex-Im Bank. Ex-Im, and the other agencies represented here
today, are
working hard to align institutional goals and processes with the new
global economic environment. While the trade promotion coordination
effort is not new, it should be renewed. Thus, Secretary Evans and I,
and the other distinguished members of this panel, are committed to a
plan of cooperative action that will deliver tangible results.
Now let me talk about Ex-Im's role in this new effort. My vision,
like all of those officials represented here, is to use the TPCC as a
management vehicle to ensure that the appropriate resources of the U.S.
Government can be in the right place, at one time, and coordinated to
meet the needs of consumers and customers. Ex-Im Bank is working with
all the members of the TPCC on the benchmarking survey and strongly
supports this effort. Secretary Evans explained what we plan to achieve
with the benchmarking survey. Let me outline what Ex-Im Bank, and U.S.
companies, are up against in terms of foreign competition, and why we
believe we need this survey as part of the National Export Strategy.
In general, wages for jobs supported by exports pay 13 to 16
percent more than the national average. This applies to both skilled
and unskilled labor, and to both small and large firms. Employment in
exporting firms grows 15 to 40 percent faster than in nonexporting
firms. And exporting firms are 9 percent less likely to fail in any
year than comparable firms that do not export. This is something of the
global reality we are now facing.
Most of our G-7 competitors have fundamentally changed their
approach to providing ``a competitive edge'' and reoriented their
organizations to focus on that edge. While in the 1970's and 1980's the
key competitive tool was cost--interest rates, fees, etc.--by the late
1990's the key was to find that one aspect of financing in which a
country or a company has a comparative advantage and magnify its role--
more of a quality differential. A core mission of all our major
competitors is to not just to promote exports, but also to promote
exports from small companies.
As Secretary Evans' mentioned, the TPCC is reaching out to small-
and medium-sized companies in the United States through a survey that
seeks to identify obstacles to exporting. Ex-Im Bank is an active
participant in this survey process. We have provided specific survey
questions related to trade finance issues, and we have identified
survey participants whose experiences will add value to the body of
knowledge in this area. The information gathered by this survey will
equip TPCC agencies to better handle the specific challenges exporting
presents to this largely untapped pool of potential exporters. Our task
is to turn that information into
programs and policies that address the needs our customers have
identified. This
exercise is a prime example of how a coordinated interagency process
can leverage resources and tackle several issues with a single tool.
That said, I must urge everyone here today not to lose sight of the
increasingly coordinated efforts other countries have made in terms of
their trade promotion. Foreign export credit agencies have been more
aggressive in developing programs to assist their exporters. U.S. trade
agencies must be aware of these efforts so that they do not lag behind
others in an increasingly competitive global landscape.
As part of fulfilling a TPCC initiative to identify the ``best
practices'' of trade promotion exhibited by competitor governments and
the private sector, Ex-Im Bank has reviewed the activities of other
ECA's around the world. Of all the countries we face, Ex-Im Bank's
stiffest competition is from Canada, Germany, Japan and the United
Kingdom.
Canada has become more proactive and aggressive regarding its trade
promotion and exports. They have changed their focus from the creation
of domestic jobs
to assisting the exporting company itself. Canada has structured its
export credit
agency (EDC) to become an active banker in a transaction, encouraging
more
foreign buyers to purchase Canadian products. They have developed an
essentially
commercial, market-oriented agency, called a market window, regarding
fees and
foreign content in which the Canadian government pushes aside its own
banks and
directly competes with our commercial banks, as well as with Ex-Im
Bank. But this
is a government agency, and obtains money at sovereign cost and pays no
taxes
or dividends.
Germany is another country that has changed its approach to export
promotion. The key to the German approach is their export credit agency
Kreditanstalt fur Wiederaufbau (known as KfW). Up until the mid-1990's,
KfW acted solely as Germany's aid agency. The German government then
decided to assign an export objective to KfW, and to make those export
financing activities self-supporting, although KfW does benefit from
tax and cost-of-funds similar to those of the Canadian export credit
agency. In the last 5 years, KfW has become perhaps the largest medium/
long-term export credit provider in the world, with most of this
business conducted outside of OECD controls. Using KfW, Germany can
give special support to targeted sectors such as aircraft, and operate
in areas where export agencies are constrained. Germany's current
strategy is to find ways to expand the utility of KfW while protecting
it from OECD control.
In addition to the Market Windows of Canada and Germany, Ex-Im Bank
must face competition from Japan through its tied aid transactions. The
Japanese export credit system is the least like Ex-Im Bank in terms of
mission, legislative oversight, transparency, and sensitivity to
external concerns such as the environment, human rights, and so on. In
response to the Japanese recession and the Asian economic crisis, Japan
has adopted an aggressive strategy of increasing its disbursement of
tied aid. In 1992, Japan provided $190 million in tied aid support. By
the year 2000, this support had increased to $4 billion. These numbers,
and continued concern that Japan operates its ``untied'' aid program so
that much of it is de facto tied, push the envelope on international
rules governing government aid programs.
Finally, in the United Kingdom, Ex-Im faces competition from the
Export Credit Guarantee Department (ECGD). The ECGD is the export
credit agency most like Ex-Im Bank in terms of its basic mission,
legislative oversight, transparency, and sensitivity to current
political events. However, the ECGD has recently remodeled itself to be
a customer-driven ECA, aggressively responding to the changing export
environment by positioning itself to be a ``one stop shop'' and is
entering cofinancing arrangements with other ECA's. Lately, other
credit agencies such as Hermes of Germany and COFACE of France, have
entered into similar reinsurance agreements based on the ECGD model.
Ex-Im Bank will continue to watch the practices of other ECA's and
the trade promotion activities of other nations. We will continue to
engage intermediaries involved in international trade and improve our
export promotion programs to better compete with other exporting
nations. In addition, we will continue to think and act creatively to
respond to the rapidly changing patterns of global trade and to provide
U.S. exporters with the support they need to succeed in this dynamic
environment. TPCC coordination will be at the center of these efforts.
Thank you.
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PREPARED STATEMENT OF HECTOR V. BARRETO
Administrator, U.S. Small Business Administration
October 2, 2001
Mr. Chairman, Ranking Member and distinguished Members, thank you
for inviting me to testify today about the Trade Promotion Coordinating
Committee's preliminary report and the role that the U.S. Small
Business Administration (SBA) plays in the Federal Government's export
promotion strategy.
The Bush Administration recognizes the critical link between the
U.S. domestic economy and our foreign trade policy. Expanding trade has
shown to have many benefits in the United States and around the world.
Trade expands markets, grows business and creates jobs. This translates
to more choices and better prices for American consumers.
Free and open markets foster economic and political freedom,
strengthen democracy and enhance our national security. The Bush
Administration is focused on achieving these goals, and it is essential
for the Congress and the Administration to work together to increase
opportunities for U.S. businesses in international trade.
While the United States is certainly open for business, passage of
Trade Promotion Authority will demonstrate to the world that the
President and the U.S. Congress are united in their desire to further
open trade globally. We need to do as much as possible to give
businesses in America every opportunity to succeed by enabling them
access to all markets. TPA will remove barriers to allow these
businesses involved in international trade to thrive in a global
economy through free, fair and open markets, thus allowing U.S. small
businesses to become more competitive in the global marketplace.
Currently 97 percent of U.S. exporters are small businesses,
numbering a little over 200,000. However, they account for just under a
third of the total value of U.S. export sales. This is why SBA's role
in fostering U.S. small businesses is so im-
portant. Each of SBA's financial and technical assistance programs can
assist
businesses interested in exporting and we have specific programs in
place to assist
in creating markets outside the United States. However, to date, our
efforts and
results have been sporadic.
I intend to more effectively focus our efforts. Through expanded
public/private partnerships we can facilitate access to needed
information and capital with the goal of increasing revenue, employment
and business longevity. Firms engaged in trade are 20 percent more
productive, pay wages which are 15 percent higher than nontraders, are
9 percent less likely to go bankrupt and they experience 20 percent
greater job growth. The following represents a discussion of SBA's
programs and services which we will be examining as part of the TPCC
process and as we listen to our customers.
Access to Capital
SBA has several loan programs tailored to small businesses in
search of capital to either start or expand their business in
exporting. They are the International Trade Loan Program, the Export
Working Capital Program, and SBA's Export Express. For fiscal year
2001, we approved 419 export loans with a value of $167 million. The
International Trade Loan Program provides long-term financing for fixed
assets and working capital up to a maximum of $1.25 million for
companies impacted by foreign competition or expanding exports.
The Export Working Capital Program is a short-term (less than a
year), transaction-backed guaranty program. The program was established
by working closely with the Export-Import Bank of the United States
(Ex-Im Bank) to develop a seamless product for all of our customers,
including the use of the same application for both programs. SBA's
program has a maximum of $1 million. The Ex-Im Bank program addresses
the needs of companies in excess of that amount. In fiscal year 2000,
the average SBA EWCP borrower had 9 employees and the average size of
the loan was $400,000. The average size Ex-Im Bank loan was $1.6
million.
One example of a firm that has prospered with SBA's EWCP assistance
is American Microwave Incorporated of Frederick, Maryland. American
Microwave manufactures electronic components for defense systems. In
the early 1990's, a cash flow problem brought them to the SBA's Export
Working Capital Program. The EWCP program enabled them to expand their
export efforts from $40,000 in initial revenues to $2.4 million today.
To help firms with small export finance needs, on October 1, 2000,
the Agency rolled out its pilot export loan guaranty product, called
SBA Export Express (Export Express). Export Express provides loan
guarantees on export loans of up to $150,000. This product can be used
to finance export development costs such as participation in a foreign
trade show or translation of product catalogs, as well as finance
actual orders. We have nearly 300 lenders around the country eligible
to participate in Export Express lending. We believe it will provide
much-needed financial assistance to the fastest growing sector of the
small business export community--the service sector.
Let me give you two examples of how this loan program is being
used:
One of the first loans SBA approved under Export Express was
to a firm in Jackson, Mississippi for $11,000. This company exports
produce to South America.
In May 2001, SBA provided an Export Express loan guaranty for
$50,000 to a Los Angeles small business distributor of piping
insulation and industrial chemicals. They used the proceeds of the
loan to support their participation in a trade show in Seoul,
Korea. The firm returned from the trade show with orders totaling
$4.8 million.
Providing Technical Assistance and Access to Information
Technical assistance and access to information are some of the
greatest needs of U.S. small businesses according to the TPCC's
National Export Strategy report. As with our access to capital
programs, SBA has public/private partnerships in this area to satisfy
these needs.
SBA is a partner with the Department of Commerce (DOC) and Ex-Im
Bank in the U.S. Export Assistance Center (USEAC) network, colocated at
19 different sites nationwide. SBA/USEAC personnel serve as the primary
delivery mechanism for the Agency's export assistance programs,
including marketing, counseling and processing of loan applications.
USEAC's also provide a critical link between small business clients and
a vast array of export promotion services offered by the Federal
Government.
To help firms become export-ready, SBA took the lead in working
with our public/private partners in creating the Export Trade
Assistance Partnership (E-TAP) initiative. E-TAP is a customized
process of taking a small group of export-ready companies through all
the stages of becoming an exporter. These stages include market
research, financing, insuring shipments, and dealing with freight
forwarders. Many E-TAP courses incorporate foreign trade events as part
of the program. Because
of the scope of customized assistance, this program would not be
possible without
the dedicated support of SBA's private and public sector partners.
Partners who pro-
vide coordinated assistance include SBA's Small Business Development
Centers (SBDC's), particularly their International Trade Centers,
Service Corp of Retired Executives (SCORE), DOC's Commercial Service,
Ex-Im Bank, State and local trade offices, individual freight
forwarders, customs brokers, insurance brokers and international
attorneys. All bring together essential export information, at little
cost to the small business.
In fiscal year 2000, SBA delivered E-TAP training to 328 small
business participants, resulting in export sales of $138 million. This
initiative made it possible for an E-TAP-trained company in Dallas,
Texas to grow their export markets and use SBA's capital programs. They
produce a niche medical product, which essentially allows for the
repair rather than the replacement of oxygen sensors used by hospitals
for monitoring trauma victims. The company now exports to over 30
countries.
Conclusion
I am excited about prospects for U.S. small business in the global
marketplace. We realize the need to reach more of the 25 million small
businesses in the United States today. We need to do a better job of
outreach, and listen to them in order to adapt and create products that
meet their changing needs. We are committed to expanding our tradition
of enrolling our public and private partners in these efforts and will
continue to work toward these goals with our TPCC partners.
It is an exiting time to be involved in international trade, and we
have a President who has made it a priority to assist the American
businesses in the global marketplace. I look forward to working with
our President, other TPCC members and the Congress to assist our small
business exporters.
Thank you. I would be happy to answer any questions you may have.
----------
PREPARED STATEMENT OF PETER S. WATSON
President and Chief Executive Officer
Overseas Private Investment Corporation
October 2, 2001
Mr. Chairman and Members of the Committee, thank you for the strong
leadership and support you have given toward establishing a coordinated
United States trade program. It is a privilege for me to join in this
panel today with my distinguished colleagues from the Commerce
Department, Small Business Administration, Export-Import Bank (Ex-Im
Bank) and Trade and Development Agency (TDA).
As you have heard today, the Trade Promotion Coordination Committee
(TPCC) is poised to assess and reinvigorate a unified trade program for
the U.S. Government, a particularly important responsibility given the
economic disruption which we have experienced since the tragedy of
September 11.
Our success will be driven considerably by the guidance and vision
which Secretary of Commerce Don Evans has given the TPCC, in part based
on his long years of private business experience, and by the strong
leadership of Under Secretary of International Trade Grant Aldonas, who
has helped develop the blueprint before you today.
Even before the creation of the TPCC, the Overseas Private
Investment Corporation (OPIC) has had a long tradition of cooperation
with its sister agencies. Today, I pledge to build and strengthen that
relationship.
OPIC plays a vital role in the economic and social development of
less developed countries and areas, as well as countries in transition
from nonmarket economies. These countries look to U.S. investment to
help create jobs, improve infrastructure, generate goods and services,
and thereby contribute to economic growth and the creation of free-
market systems. As a developmental agency, OPIC can help stabilize
financial markets in the developing world by facilitating U.S. private
investment in countries most in need of support and economic
development.
As the primary U.S. Government agency focused on private sector
investment in exclusively the developing world and emerging economies,
OPIC builds on the premise that trade is the initial step in the
international expansion of a company. Only after a manufacturing
company is comfortable with the establishment of export relationships
and is confident of an overseas market for its products will it
seriously contemplate the next step of making an overseas investment.
For this reason, we have valued and benefited from the cooperation,
support and information flow from all of the trade agencies represented
on the TPCC.
At the same time, we are keenly aware that OPIC's mission is in
many ways distinct from that of the more traditional trade agencies.
OPIC is an integral part of the foreign assistance program of the
United States, born out of the Marshall Plan, and focused on the belief
that concessional aid alone cannot bring about the economic development
so sorely needed in much of the world.
Private investment has been viewed as a highly effective method of
achieving the goal of teaching nations ``how to fish'' rather than
giving them fish. And years of experience have amply demonstrated that
U.S. overseas private investment continues to be a magnet for U.S.
exports as overseas affiliates of U.S. companies source their goods and
services from here. And so, OPIC has the enviable job of supporting
investments that not only serve our Nation's foreign/development
assist-
ance objectives, but also have beneficial impacts in the U.S. through
the creation of export-related jobs.
Our focus is increasingly on those countries where the needs are
greatest and on the U.S. small and medium businesses that otherwise
would hesitate to expand overseas without OPIC financing or insurance.
Fortuitously, these are the same markets where our Nation's trade
assistance programs as implemented by fellow members of the TPCC can
also have significant impact. It is the developing country markets that
will continue to grow the fastest and it is those same markets where
our exports are in demand.
We have already seen the benefits of interagency cooperation in the
recent White House visit of Indonesia President Megawati. During that
visit President Bush announced a joint trade and finance initiative
developed by OPIC, the Ex-Im Bank and TDA. This cooperative undertaking
will provide up to $400 million in financing to promote trade and
investment opportunities in Indonesia, with OPIC and Ex-Im Bank
focusing on projects in the oil and gas sector. Financing will be
subject to the normal terms and conditions established by each agency's
programs. OPIC is pleased to join with our sister agencies to support
the President's policy of assisting economic development in Indonesia,
an important U.S. ally and a country with the world's second largest
Muslim population, and I can report today that discussions are already
underway with private sector companies that could fulfill this
important commitment to Indonesia.
Another area of cooperation is promotion of business development in
countries
of specific U.S. interest. I am pleased to be a participant in the
business devel-
opment delegation being led by Secretary of Commerce Evans to Russia on
Octo-
ber 14-16, 2001. The mission, undertaken at the direction of President
Bush, will
include senior executives from approximately 15 U.S. companies
representing a
variety of sizes and sectors. The mission will affirm U.S. Government
support of
Russia's economic reforms and assess ways to improve access by U.S.
businesses to the Russian market.
OPIC continues to play a key role in the TPCC's interagency
Advocacy Network, which provides systematic U.S. Government advocacy
support to small, medium, and large U.S. exporters to help level the
playing field against foreign competition and win foreign government
contracts. Through the Commerce Department's Advocacy Center, OPIC has
worked closely with advocacy counterparts from the trade agencies,
providing financing and insurance support for U.S. exporters involved
in various industry sectors in emerging markets and developing
economies worldwide. The ``team approach'' employed by OPIC, the
Departments of Commerce and State, and the United States Embassy in
Bulgaria in providing continuous and aggressive advocacy support,
including $200 million in political risk insurance, for a $450 million
United States power plant project in Bulgaria epitomizes the importance
of TPCC interagency cooperation.
OPIC Will Refocus Its Activities Toward Development
At its core, OPIC remains committed to return to its overarching
developmental mandate. OPIC's principal mission is ``to mobilize and
facilitate the participation of United States private capital and
skills in the economic and social development of less developed
countries and areas, and countries in transition from nonmarket to
market economies, thereby complementing the development assistance
objectives of the United States.''
Since 1971, OPIC has accomplished this mission by supporting more
than 3,000 projects throughout the developing world. Cumulatively,
these projects have supported host country jobs and have contributed to
the host country tax base and infrastructure. As of March 31, 2001,
OPIC is managing a portfolio of 316 active projects in locations that
range from Algeria to Zimbabwe. The activities of these projects are
diverse and include manufacturing plants, communications operations,
gas pipelines, power plants, financial services institutions, mining
operations, tourism/hotel projects, and agricultural operations.
Equally true is the proposition that U.S. small and medium
businesses are increasingly important drivers for our economy and have
the most to gain from increasing their share of the export market. All
of this gives me great confidence that despite differences in our
mandates, OPIC and the other members of the TPCC will continue to have
great synergy in our work and in achieving results that are critical
for long-term economic development abroad at the same time that they
create jobs and exports here in the United States.
We at OPIC look forward to the benchmarking exercise that the TPCC
has launched and applaud the outreach to customers of our services. We
are committed to serving them as effectively and efficiently as
possible and tailoring our products and services to meet their changing
needs. Indeed the work of the TPCC will complement quite well the work
that OPIC itself has embarked upon in assessing its programs,
refocusing our efforts toward the countries in greatest need and
streamlining our operations.
OPIC Will Make Small Business A Top Priority
OPIC's authorizing legislation directs the agency to pay special
attention to the needs of American small businesses. However, OPIC has
yet to fulfill its potential in this area. In the coming months, OPIC
will reexamine its opportunities to assist small business.
One particular avenue that we have already identified and are
exploring is the extent to which OPIC can complement or even leverage
the work of other agencies. For example, the U.S. Small Business
Administration (SBA) is a great resource for U.S. small businesses that
are seeking to establish themselves or expand in and from the United
States, which may be significantly enhanced with OPIC support. We are
engaging for OPIC to partner with the SBA in a mutually beneficial
manner that would advance the achievement of both agencies' missions.
OPIC is also working closely with the U.S. and Foreign Commercial
Service at the Department of Commerce to provide small companies with
the most up-to-date information on international markets and the
appropriate financing tools they need.
Most importantly, such cooperation would greatly assist American
small businesses seeking to establish a presence in developing regions.
Small businesses often do not meet the profile that private sector
financial institutions and insurers are looking for in their overseas
clients. This is where the development goals of the U.S. Government,
the needs of small business, and OPIC's programs intersect. With OPIC's
assistance, the proven dynamism of U.S. small businesses can be
leveraged to produce viable projects in the developing world.
OPIC Will Streamline And Improve Business Procedures
In addition to the TPCC review, OPIC's management and staff are
committed to increasing responsiveness to stakeholders and streamlining
business processes. By streamlining OPIC's application process and
publicizing OPIC's political risk insurance and finance products, OPIC
will continue to improve its efficiency and effectiveness. Minimizing
red tape and providing responsive service to all who have an interest
in the agency's operations is one of the critical links in OPIC's
efforts to leverage its funding into viable projects. Toward this end,
OPIC will:
Be Responsive to the Needs of Clients and Stakeholders.
Through customer surveys and hosting annual client conferences,
OPIC will explore new ways to improve communications with its
clients and stakeholders, both in formal and informal contexts.
Streamline Application Processes. One of the most effective
ways that OPIC can improve its ability to leverage investment is by
eliminating bureaucratic procedures. By streamlining its paperwork
requirements and adopting electronic processes, OPIC will be better
able to serve American businesses--both large and small--that
cannot afford a long and expensive application process that is not
geared to the faster pace of decisionmaking that is required today.
Delay the Decisionmaking and Approval Process. In keeping with
Presidential guidance to make Government more citizen-centered,
OPIC is reducing the distance between the line staff who deal with
the public on a day-to-day basis and program leadership.
OPIC's Programs And Benefits
For those less familiar with OPIC's responsibilities of supporting
development and stability in strategic regions around the world, let me
describe our programs and their results.
Because of its core development and foreign policy mission, OPIC
operates under the Foreign Assistance Act, under the direct oversight
of the Senate Foreign Relations Committee, and the Subcommittee
currently chaired by Chairman Sarbanes, and formerly chaired by Senator
Hagel. Working together, they have given OPIC a strong vision for
promoting international economic development which also provides
significant benefits to the United States at no cost to the taxpayers.
OPIC provides financing and political risk insurance to mitigate
the risks faced by U.S. investors in emerging markets and developing
economies where private support is generally not available. Insurance
is available for up to 20 years for new investments in new projects or
expansions of existing projects. OPIC protects against the risks of
inconvertibility, expropriation, and political violence.
OPIC provides financing to U.S. companies, or companies with
significant U.S. management involvement, in the form of direct loans
and loan guaranties with medium- to long-term repayment terms. OPIC
also supports the creation and capitalization of long-term, private
direct equity funds that invest in new, expanding, or privatizing
companies in emerging and developing market economies.
All OPIC-supported projects must be financially sound, promise
significant benefits to the social and economic development of the host
country, and cause no harm to the U.S. economy. Projects must also
avoid major or unreasonable environmental, health and safety impacts,
and comply with OPIC's statutory requirements with respect to
internationally recognized worker rights.
I am pleased that OPIC projects are having a positive impact in
developing countries. OPIC projects have helped developing countries to
generate host-government revenues and create host-country jobs. At the
same time, OPIC-supported investments are helping create American jobs
and U.S. exports. Over the agency's 30-year history, OPIC has supported
$138 billion worth of investments that will generate $64 billion in
U.S. exports and support nearly 250,000 American jobs.
In fiscal year 2000, OPIC assisted 40 projects in 27 countries or
regions, involving a wide range of industries. These projects will have
a significant developmental impact in the host country. Thirty-seven of
the 40 OPIC-supported projects in fiscal year 2000 were located in the
low- and middle-income developing countries. The projects are also
expected to generate $2.3 billion in U.S. exports, support over 6,000
U.S. jobs and have a positive impact on the U.S. balance of payments.
Forty percent of all projects OPIC supported in fiscal year 2000
involved U.S. small businesses. Data on the specific U.S. companies
that will provide goods and services to OPIC-assisted projects for the
7 fiscal years 1994 through 2000 show the specific U.S. suppliers for
$11.4 billion in expected procurement for OPIC-assisted projects. These
U.S. companies are located in 46 States. It is estimated that
approximately 62 percent of these identified suppliers to OPIC-backed
projects are U.S. small businesses.
Finally, it is very important to note that at the same time OPIC is
reaching out to serve the needs of small business in challenging
regions, OPIC remains financially strong. In fiscal year 2000, OPIC
generated net income of $185 million and received an unqualified audit
opinion from the independent accounting firm of PricewaterhouseCoopers
LLP. At the close of fiscal year 2000, OPIC's combined finance and
insurance portfolio maximum exposure was $16.8 billion while
accumulated reserves reached a record $4 billion. This balance provides
strong financial protection against future claims or defaults.
OPIC projects are having a broad impact across the globe. In South
America, OPIC is helping build the foundation for economic growth in
the region by supporting various infrastructure projects in the
telecommunications, energy, and banking sectors. In Trinidad and
Tobago, OPIC is providing financial support for the
development of a seawater desalination plant that will help alleviate
chronic drinking water shortages in the country.
In Africa, recent projects involve a wide variety of sectors, such
as gas field development and production, a tourist hotel, a
microlending facility for microenterprises, and a toothpaste
manufacturing facility. In Equatorial Guinea, OPIC provided a $173
million guaranty for the construction, ownership and operation of a
methanol plant. This is the largest single investment OPIC has ever
supported in sub-
Saharan Africa. The project will contribute simultaneously to private
sector development in Equatorial Guinea and to the improvement of local
air quality by processing gas that would otherwise be flared.
Elsewhere, OPIC recently approved a $2.5 million direct loan to
support home improvements in Mexico--OPIC's largest project in Mexico
since establishing a new small business initiative there. The OPIC
direct loan, to Maryland-based CHF International (Cooperative Housing
Foundation), will help establish a new on-lending
facility to provide loans for home improvements in Mexico, including
the provision of safe and adequate housing for workers along the United
States-Mexico border. Proceeds of the loan will go to Mexican nonprofit
organizations, which in turn will lend money to individual Mexicans to
finance home improvements. CHF will also offer educational programs for
potential lenders and borrowers.
CHF, which celebrates its 50th anniversary next year, has since
1962 provided international shelter-related technical and capital
assistance and training, and currently supports programs in Mexico,
Gaza, Honduras, Jordan, Lebanon, Philippines, Romania and El Salvador.
Adequate housing is the most basic unit of a country's infrastructure,
and a necessary foundation for its economic development. OPIC is
pleased to work with a respected organization such as CHF to enable
Mexico to improve its housing stock, to the economic benefit of both
our countries.
In the Philippines, OPIC has supported Counterpart International
and its affiliate EnviroVentures for the first two projects to be
financed by a $1 million initiative to assist environmentally friendly
small- and medium-sized enterprises. OPIC released $200,000 in loans
for construction of environmentally sustainable low-cost housing, as
well as for a project expanding the marketing program for a seaweed-
based fertilizer product. For the housing project, construction
materials that require less energy to produce than do standard
materials will be purchased from small local producers, thereby
benefiting both the environment and the small business community. The
seaweed-based fertilizer project, will benefit the environment in two
ways: First, the fertilizer product is manufactured by recycling waste
from local seaweed processing plants. Second, increasing the use of
organic versus chemical fertilizers is environmentally beneficial,
particularly in areas of the Philippines where overuse of chemical
fertilizers is a concern.
As part of its continuing effort to promote private investment in
the Newly Independent States, OPIC supported a project to restore an
historic hotel in Armenia, one of the largest private foreign direct
investments of its kind in Armenia. OPIC is providing an $18 million
loan to a small business group comprised largely of
Armenian-Americans to privatize the Hotel Armenia--the agency's first
finance deal in the Caucasus nation. Opening of the Hotel Armenia
project is expected to spur economic development in Armenia and to
foster tourism. The project is expected to generate $25 million in U.S.
exports during the first 5 years of operation. In addition,
approximately $14 million will be spent in Armenia on renovating the
hotel, plus annual operating procurement of $6 million from the host
country. The project will also bring much-needed private sector career
training in the hospitality sector to Armenia, as Marriott
International, Inc. will manage the hotel and train the staff in the
hospitality practices and procedures developed for its hotels
worldwide.
Conclusion
Looking ahead, in cooperation with our TPCC colleagues, OPIC's
activities will focus closely on development and companies and
countries that have difficulty accessing private financing or
insurance. OPIC will also increase its efforts to ensure that its
programs complement the private market rather than compete with it.
Working together we can develop OPIC as a foreign policy program
focused on development that is making an important difference to people
in developing countries and in America, as well.
I will be pleased to respond to your questions.
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PREPARED STATEMENT OF THELMA J. ASKEY
Director, U.S. Trade and Development Agency
October 2, 2001
Introduction
Good morning, Chairman Sarbanes, Senator Gramm and Members of the
Committee. A number of you have been friends of the U.S. Trade and
Development Agency (TDA) for many years, and are well acquainted with
the agency. However, I recognize that TDA is a small agency outside the
jurisdiction of the Banking Committee, and I would like to take this
opportunity to outline briefly what the agency does and how it works
with the Trade Promotion Coordinating Committee (TPCC) to promote U.S.
exports and create American jobs.
What TDA Does
TDA promotes American private sector participation in development
projects in low- and middle-income countries, with special emphasis on
economic sectors that represent significant U.S. export potential. As
you all know quite well, this is no easy task in today's global
marketplace. In addition to the substantial economic challenges facing
U.S. exports in many markets, U.S. firms face aggressive competition
from foreign producers for contracts associated with projects in the
countries where TDA operates. TDA's biggest competitors for overseas
projects are Japan, Canada, and the European Union and its member
states.
Overseas competitors often receive substantial assistance from
their home governments in pursuing projects. Many, if not most, of the
countries I named earlier use foreign aid programs to secure contracts
for their companies. They also concentrate their foreign aid on
influencing spending by the World Bank and other multilateral
development banks (MDB's) through trust funds. While TDA also maintains
trust funds at these institutions, the contributions made by other
countries dwarf TDA's in size. Because of the manner in which MDB's
look for financing, these larger trust funds give TDA's competitors an
edge in identifying project opportunities for their national companies.
TDA works hard to level this uneven playing field. Because foreign
governments provide higher assistance levels to their businesses, TDA
must work harder and smarter to produce results for U.S. firms. In
particular, most of TDA's work focuses on the initial planning stages
of development projects. By supporting U.S. company involvement at the
ground level, TDA enhances the chances that project specifications will
be compatible with U.S. standards and that U.S. firms will be well
positioned for follow-on project work.
TDA's ``toolbox'' for fighting unfair foreign competition contains
a number of
instruments. The most common tools are funding feasibility studies,
conducting
orientation visits, and hosting trade conferences. TDA also provides
training and technical assistance grants, and performs preliminary
internal due diligence efforts to evaluate potential development
projects and ensure that potential projects warrant the use of taxpayer
funds. TDA's technical assistance may be project specific, or more
broadbased, supporting capacity building institutions and trade
agreement implementation. These tools assist TDA in building mutually
beneficial partnerships between American companies and overseas project
sponsors, which result in increased U.S. exports and jobs and the
completion of high quality, successful projects in host countries. All
TDA-provided assistance such as feasibility study grants or technical
assistance must be used to hire U.S. firms to conduct the work.
For funding consideration, all TDA-affiliated projects must meet
four criteria. The project must:
Be likely to receive implementation financing and have a
procurement process that provides ``equal access'' to U.S. firms.
Represent an opportunity for sales of U.S. goods and services
that is many times greater than the initial investment of TDA
assistance.
Be a development priority of the country where the project is
located and have the endorsement of the U.S. Embassy in that
nation.
Face strong competition from foreign companies that may
receive subsidies and other support from their governments.
TDA's goals are two-fold: helping American businesses export their
products, thereby creating jobs, while simultaneously promoting
commercially viable economic growth in developing and middle-income
countries. Since 1981, TDA has been associated with more than $17
billion in exports--or over $35 in exports for every dollar invested in
its program activities.
I mentioned above that TDA provides technical assistance in areas
such as telecommunications and the environment. These programs are
among the U.S. Government's tools for supporting capacity building
initiatives and the implementation of trade agreements. TDA can provide
funding for technical assistance to countries as they establish or
revise laws and regulations, either in order to comply with existing or
anticipated international agreements, or as a part of an overall
strategy to expand trade and economic capacity. TDA aims to provide
resources to governments seeking to create or modify their legal and
regulatory structures in particular sectors that are compatible with
competitive U.S. exports. Such assistance is intended to support TDA's
dual trade and development mission by both fostering development in the
host country and assisting U.S. businesses develop relationships, which
lead to an increase of U.S. exports.
TDA has funded such broadbased technical assistance projects around
the world. For example, TDA has placed a technical advisor in the
Venezuelan telecommunications agency, advisors in Bosnia and
Herzegovina for developing infrastructure programs related to energy
and utilities, and a privatization advisor with the Romanian Ministry
of Transportation to provide policy, technical and executive support to
privatization efforts. TDA is currently in the process of placing an
advisor in Azerbaijan to assist with that country's World Trade
Organization accession efforts.
TDA Work With Other Agencies
TDA has worked hard to achieve this level of success, but it has
not done it alone. TDA takes great pride in the close relationships it
maintains with other U.S. Government entities in identifying and in
pursuing U.S. export opportunities while advancing development
priorities in low- and middle-income countries. The agency is
especially grateful to Secretary Evans for his leadership of the Trade
Promotion Coordinating Committee. TDA believes that TPCC provides an
excellent framework to coordinate the U.S. Government's trade promotion
operations.
Most prominently, TDA works with TPCC policy agencies, such as the
Departments of Commerce and State. Additionally, TDA frequently
partners with the U.S. Export-Import Bank (Ex-Im) and the Overseas
Private Investment Corporation (OPIC) to conduct trade promotion
activities overseas and identify promising project opportunities.
Notably, the three agencies work together in joint centers in Croatia
and Turkey. In the near future, we will look to these field offices to
respond more quickly to the commercial and developmental needs of
countries in strategic locales and during difficult, uncertain times.
TDA also supports initiatives of the Office of the U.S. Trade
Representative.
TDA is extremely proud of its ability to increase U.S. exports by
working with agencies that do not have a traditional trade promotion
focus. For example, both the Federal Aviation Administration (FAA) and
the Federal Emergency Management Agency (FEMA) have worked with TDA to
promote U.S. exports in recent years. In support of TDA trade promotion
efforts, the FAA has trained foreign air traffic controllers in U.S.
technology and FEMA has promoted U.S. emergency management technology
by cohosting emergency management conferences with TDA. TDA's
coordination with these and other agencies allows TDA to promote U.S.
exports and helps project sponsors meet their development objectives by
utilizing the specific expertise of a wide range of U.S. Government
agencies. Moreover, TDA's export and development oriented mission helps
other agencies to achieve their own international policy objectives.
FAA Projects
An example of where TDA has coordinated with the FAA is aviation
technology in India. Over the next decade, India's air passenger
traffic is projected to grow at an annual rate of 12.5 percent for
domestic travel and 7 percent for international travel. TDA and the FAA
are working to ensure that India can meet this demand through the
implementation of a modern and efficient integrated communications,
navigation, surveillance, air traffic, and maintenance (CNS/ATM)
systems. To help India develop this system, last year TDA provided a
$450,600 grant to Airports
Authority of India (AAI) to hire an American firm to conduct a
feasibility study on
implementing such a system. Subsequently, TDA funded a workshop for the
FAA
to train AAI and Indian Ministry of Civil Aviation officials on the new
technology.
As the leading manufacturer of CNS/ATM systems, TDA expects U.S.
companies
to export over $180 million in procurements related to this project
when it is
implemented.
FEMA Projects
TDA also has worked with FEMA on several events in recent years. In
2000, TDA cosponsored an Asian regional conference with FEMA and the
Department of Commerce on emergency management in Honolulu, Hawaii. The
conference highlighted 40 projects in 10 Asian countries that hold
significant United States export potential in a variety of sectors,
including flood plain management, disaster management information and
communications systems, and interagency disaster training. The National
Oceanic and Atmospheric Administration, the Data and Information
Service, the Centers for Disease Control and Prevention, the Department
of Defense's Center for Excellence, the U.S. Agency for International
Development, and the U.S. Export-Import Bank also participated in the
Honolulu conference.
TPCC
As mentioned previously, TDA is an active member of the TPCC in its
efforts to coordinate trade promotion activities and develop trade-
related data to evaluate U.S. export promotion policy. TDA is actively
supporting the TPCC's efforts to identify and quantify the means that
foreign governments use to obtain advantageous benefits for their
national companies at the expense of U.S. firms.
TDA and the other members of the TPCC are ready to meet the
challenges before us in preserving and promoting commercial
environments around the globe, even in these difficult times. We are
particularly focused on those countries in which the United States has
particular trade, economic or strategic interest.
In fact, this is exactly how the TPCC can be most useful, by
providing focus to the various agencies in order to respond to
particular priorities, such as coordinating trade development efforts
in the wake of the September 11 attacks, supporting the
Administration's environmental strategy, and supporting the negotiation
and implementation of new trade agreements. Additionally, the TPCC can
focus
efforts to work with foreign governments making the shift to democracy
and to
market-based economies. The best long-term strategy for the United
States to make its presence felt in such countries is by supporting
commercial development, and the TPCC is well-suited, and well-
positioned, for such a role.
TDA Supports U.S. Trade Expansion Efforts
TDA typically promotes U.S. exports by providing assistance for
specific infrastructure projects around the world. TDA's record shows
that the agency excels at using this approach to assist U.S. companies
competing for development projects. However, TDA is also effective in
promoting U.S. exports at a more fundamental level. For example, TDA
looks at supporting broader sectoral efforts that can result in
increased U.S. exports and prevent other countries from imposing
standards that exclude U.S. firms. This strategy of helping countries
develop better legal and regulatory regimes promotes exports by
creating a more favorable commercial environment for U.S. firms. For
example, TDA recently provided technical assistance to aid the
Venezuelan government's deregulation of its telecommunications industry
and to develop new specifications for modernizing that industry. TDA
estimates the potential value of exports to Venezuela in the
telecommunications sector will top $10 billion over the next few years.
Because of TDA's work with the Venezuelan government, U.S. firms are
well positioned to provide the bulk of these goods.
TDA-provided technical assistance also can be a useful tool for
USTR. Once USTR negotiates a trade agreement, TDA can provide the
technical assistance some trading partners may need to implement their
commitments. Most U.S. trading partners want to comply with the
standards in international agreements, but some of them may not possess
the technical expertise to bring their international trade regimes in
line with their obligations. By providing such technical assistance to
our trading partners, TDA enhances their capability to meet their
commitments and ensures that U.S. firms will be able to realize the
benefits of these agreements, namely a fair and open regulatory and
legal environment. TDA is committed to working with USTR in this manner
to create favorable export climates for U.S. firms.
TDA also is committed to improving the physical climate and
environment of the nations in which we operate. Water and environment
projects constitute TDA's third largest economic investment sector and
typically involve such projects as clean potable water and wastewater
treatment. Additionally, TDA examines environmental issues in virtually
all TDA activities and identifies possible solutions to minimize or
alleviate these concerns. By promoting environmentally friendly
projects, TDA is a valuable part of the U.S. Government's toolkit for
promoting trade.
As an agency dedicated to promoting U.S. exports overseas, TDA
supports the
Administration's efforts to obtain Presidential Trade Promotion
Authority (TPA). As you know, prior to this Administration, every
President since President Nixon has had the authority to negotiate
trade agreements with foreign nations. TPA is necessary because other
nations are unwilling to negotiate with the United States and make
trade concessions if the U.S. Congress is likely to overturn elements
of the final package. Currently, there are over 150 free trade
agreements among world nations. The United States is a party to fewer
than half a dozen of these. Every free trade agreement negotiated
without U.S. involvement puts American firms at a further competitive
disadvantage in exporting goods to the nations involved in
the agreement.
Currently, free trade agreements give our competitors an advantage
and make U.S. goods comparatively more expensive in the affected
markets. These tariff differentials hinder TDA's ability to do its job
because cost considerations make project sponsors less likely to select
U.S. suppliers if American goods are significantly more expensive. The
United States must level the playing field for U.S. firms by securing
equal tariff treatment for them in foreign markets.
Closing
In closing, I would like to the thank the Members of this Committee
for the opportunity to appear today and discuss what TDA is doing to
increase U.S. exports and create American jobs and how TDA works with
the other members of the TPCC. I look forward to answering your
questions.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED
FROM JOHN E. ROBSON
Q.1. Can you discuss, in detail, some of the specific programs
or strategies which will reach out to small- or medium-sized
businesses in order to encourage greater export promotion?
A.1. Ex-Im Bank's Small & New Business Group was established in
the early 1990's to dedicate resources to small businesses and
to develop programs and products that address their exporting
needs. The group works along cross-divisional lines within the
Bank to promote its services to small business. Initiatives
geared toward small business include direct rural campaigns,
local seminars, strategic partnerships with both private and
Government agencies, effective website design and selective
advertising. Bank products also provide special enhancements to
small business exporters thereby creating a more attractive
financial package for the small business. In addition, an
Emerging Exporter Group has been established to support the
Bank's effort and statutory mandate to support specific
underserved markets such as minority- and woman-owned
businesses.
In fiscal year 2001, Ex-Im Bank authorized more than $1.6
billion in support of U.S. small businesses, which is nearly 18
percent of total authorizations. The Bank approved 2,124 small
business transactions that represented 90 percent of the total
number of transactions. Fiscal year 2001 was also a record year
for Ex-Im Bank's working capital guarantee program with $660
million in authorizations of which $518 million benefited small
businesses.
Q.2. How will these strategies compete with other nations'
programs, especially with the comparatively less funding that
we provide to our trade promotion agencies?
A.2. With a limited budget Ex-Im Bank has effectively promoted
its efforts through effective technology innovations and the
development of an exporter database, which serves as the
cornerstone of small business product delivery. In fact, Ex-Im
Bank's strategies have been emulated by other export credit
agencies worldwide.
Q.3. How can you work more effectively with organizations,
agencies, or the private sector on a regional or local level to
carry out this goal of greater export promotion?
A.3. Ex-Im Bank has joined forces with many entities to create
greater awareness of small business. The establishment of U.S.
Export Assistance Centers throughout the country has created a
``one stop shop'' that provides valuable information to small
business exporters. The Bank also works with city/State
partners, commercial banks, asset-based lenders, brokers and
other Government agencies to provide financial assistance to
small business. We are constantly striving to improve these
relationships and our service. In addition, the Bank has
delegated lending authority to some of these delivery
mechanisms to improve the application and decision efficiency.
Q.4. How will you ensure that these programs are effectively
reaching and assisting these businesses?
A.4. Ex-Im Bank constantly monitors its outreach efforts and
products to insure program effectiveness. Response rates to
direct mail and critiques to regional and local seminars are
analyzed to improve our delivery mechanisms to the marketplace.
Our exporter database now numbering over 200,000 is constantly
evaluated and ``scrubbed'' for completeness and accuracy to
insure that we are reaching the proper clientele.
Q.5. How can you target these programs to emerging markets,
where our country is rapidly losing the most market share?
A.5. Attaining emerging market share becomes a self-policing
mechanism for Ex-Im Bank inasmuch as it is these markets
that demand the Bank's support more so than developed
countries.
Ex-Im Bank accomplishes emerging market objectives through
partnerships with commercial banks and other partners, who en-
tertain this business only with the Bank's support. Ex-Im Bank
is
also marketing its products to all exporters dealing in
emerging
markets.
Q.6. How do you envision recent heightened security concerns
to affect exporting industries? What measures are being taken
to
both assist current U.S. exporters and ease the concerns of
potential exporters?
A.6. The events of September 11 have had a negative impact on
U.S. export industries. Export sales have been hurt by
declining demand in overseas markets that have been affected by
the economic downturn in the United States. In addition,
terrorist activities in the West and military hostilities in
South Asia have raised concerns about country risk and have
made financial institutions more risk averse, which has reduced
the availability of private sector finance for sales to
emerging markets.
Ex-Im Bank fills a valuable role by assisting exporters
during these difficult times. One of the Bank's main missions
is to fill financing gaps created by the unwillingness of
private lenders to accept certain risks. As a result, while
maintaining its mandate for a reasonable assurance of
repayment, the Bank remains open for business in many emerging
markets where private sector financing is now limited or
unavailable. To fill a specific financing gap arising from the
September 11 events, Ex-Im Bank, along with many other
governments, agreed to provide for a limited time, ``gap''
third party war risk insurance coverage for air carriers that
had lost or could no longer afford the insurance. The Bank
continues to monitor developments in the private market to fill
other gaps in private market financing, as appropriate.
Q.7. Can you discuss any ongoing coordination with agencies
such as the Department of State, Department of Defense, and the
Department of Agriculture to address these ongoing security
concerns?
A.7. Ex-Im Bank works closely with the Department of Treasury,
the Department of Commerce and other U.S. Government agencies
as well as the National Security Council to monitor economic
and political developments in emerging markets and to stay
abreast of business opportunities for U.S. exporters. The Bank
is also working closely with its sister agencies, OPIC and the
Trade Development Agency, on a number of projects in emerging
markets. Finally, the Trade Promotion Coordinating Committee
continues to be an avenue of coordination and consultation with
individual agencies on trade issues as they arise.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED
FROM HECTOR V. BARRETO
Q.1. Can you discuss, in detail, some of the specific programs
or strategies which will reach out to small- or medium-sized
businesses in order to encourage greater export promotion? How
will these strategies compete with other nations' programs,
especially with the comparatively less funding that we provide
to our trade promotion agencies? How can you work more
effectively with organizations, agencies, or the private sector
on a regional or local level to carry out this goal of greater
export promotion? How will you ensure that these programs are
effectively reaching and assisting these businesses? How can
you target these programs to emerging markets, where our
country is rapidly losing the most market share?
A.1. Recent trade statistics from the Census Bureau show that
two-thirds of all U.S. exporters have less than 20 employees
and
one-third of these firms had just one employee. To support and
en-
courage the growth of this segment of the exporter population,
the SBA developed a new loan guaranty program called Export
Express. Export Express combines lending and technical
assistance
to help small businesses that have difficulty in obtaining
adequate
export financing. Export Express lenders use streamlined and
expedited loan review and approval procedures and receive SBA's
guaranty on loans of up to $150,000. Completed loan
applications are faxed to the Agency's Sacramento Processing
Office for review; the SBA typically provides lenders with a
response within 36 hours.
Technical assistance is provided to borrowers under this
program by the U.S. Export Assistance Center personnel, in
cooperation with the SBA's network of resource partners. Export
Express can finance the start-up costs associated with
developing a new export market, including translating product
brochures into foreign languages and participating in foreign
trade shows. In addition, the program can be used to provide
general export lines of credit.
The SBA works extensively with other Federal agencies such
as the Department of Commerce and the Export-Import Bank to
coordinate the delivery of services to small firms. To ensure
that these programs are effectively reaching and assisting
small businesses, the SBA is actively participating in the
Trade Promotion and Coordinating Committee's (TPCC) current
review of Federal export assistance programs. The SBA is
providing both financial and technical support of the TPCC/
Keenan Institute survey of U.S. small business exporters that
will be completed this coming January and we are providing
technical support for TPCC-run focus groups which are being
held around the country to solicit the input of the small
business community.
To facilitate access to emerging markets for small
business, SBA is involved in strategic partnerships with other
countries' small business support agencies to match business
participants. For example, to take advantage of the
opportunities we see for U.S. small businesses in Mexico, the
SBA signed an External Cooperative Agreement with Nacional
Financiera (NAFIN), Mexico's development bank, and the Ministry
of the Economy in March of 2001. The agreement allows the SBA
to have a working relationship with Federal agency counterparts
in the facilitation of trade promotion and finance in Mexico.
As part of the agreement, the SBA and the Commercial Service
(CS) Mexico City worked with the Mexican Government in
organizing a conference on Business Opportunities for United
States and Mexican small- and medium-size companies, March 27-
28, 2001. Seventy U.S. small businesses participated in this
event which allowed U.S. firms to meet one-on-one with pre-
screened Mexican businesses.
More recently, SBA led a delegation of United States small
companies to Guadalajara attending a conference on ``Doing
Business in Mexico.'' SBA recruited new-to-export and new-to-
market small businesses to participate in this event. It
provided participating small businesses with a chance to not
only attend a unique trade conference on doing business in
Mexico but also with the opportunity to meet with Mexican small
and medium firms in selected industry sectors.
Q.2. How do you envision recent heightened security concerns to
affect exporting industries? What measures are being taken to
both assist current exports and ease the concerns of potential
exporters? Can you discuss any ongoing coordination with
agencies such as the Department of State, Department of
Defense, and the Department of Agriculture to address these
ongoing security concerns?
A.2. While SBA does not have initiatives underway to address
ongoing security concerns that may effect exporting industries
as
a result of September 11, we are an active partner in the Trade
Promotion and Coordinating Committee's (TPCC) network of 19
agencies. The TPCC--which includes the Department of Defense,
Department of State, and Department of Agriculture--meets
regularly to discuss challenges, propose program initiatives,
work on developing new products, and avoid duplication of
efforts in relation to meeting small business needs. As the
TPCC addresses these issues, SBA expects to play a role in
representing the interests of U.S. small business.
The SBA is working specifically with DOD to develop and
expand contract opportunities available in the areas of
international trade with a special emphasis on Federal
procurement.
RESPONSE TO A WRITTEN QUESTION OF SENATOR MILLER
FROM HECTOR V. BARRETO
Q.1. Will the SBA be providing ``Disaster Relief '' type loans
to those aviation businesses directly affected by the FAA's
``No Fly Rule'' after the WTC Disaster, and if so, in what
aspects?
A.1. The U.S. Small Business Administration is currently
providing working capital loans to small businesses, including
aviation businesses, that were directly impacted by the
destruction of the World Trade Center or damage to the Pentagon
on September 11, 2001, or Federal actions taken in response to
those actions between
September 11 and October 22, 2001. The FAA's ``No Fly Rule'' is
a
Federal Action. An aviation small business may be eligible for
con-
sideration of a loan under SBA's Economic Injury Disaster Loan
program where there is a direct causal relationship between the
business and the Federal Action.
Under the Economic Injury Disaster Loan program, the SBA
can make direct low interest and long-term working capital
loans to help eligible businesses meet their obligations and
pay ordinary and necessary operating expenses that they are now
unable to pay as a direct result of the disaster.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED
FROM PETER S. WATSON
Q.1. Can you discuss, in detail, some of the specific programs
or strategies that will reach out to small- or medium-sized
businesses in order to encourage greater export promotion? How
will these strategies compete with other nations' programs,
especially with the comparatively less funding that we provide
to our trade promotion agencies? How can you work more
effectively with organizations, agencies, or the private sector
on a regional or local level to carry out this goal of greater
export promotion? How will you ensure that these programs are
effectively reaching and assisting these businesses? How can
you target these programs to emerging markets, where our
country is rapidly losing the most market share?
A.1. OPIC is responding in several ways to the needs of U.S.
small businesses seeking to make an investment in a developing
country. We have reduced our loan size from $2 million to $
100,000 to better address the needs of small business. We have
also created new loan structures that are more useful and
friendly to the needs of small- and medium-sized businesses and
streamlined the application process for small businesses and
reduced red tape. For example, our insurance application went
from 20 pages down to 5 pages for small businesses, OPIC has a
small business hotline and a small business outreach
coordinator to respond to the unique needs of the small
business community.
To be more effective, OPIC is also reaching out to small
businesses in two additional ways. OPIC works very closely with
the U.S. Export Assistance Centers (USEAC's) and their
satellite offices, which are coordinated by the U.S. Department
of Commerce and include officials from the Export-Import Bank
and the Small Business Administration. They serve as
coordinated centers for trade information and are listed in
most telephone directories under U.S. Government agencies. The
19 USEAC's are located in the major population areas throughout
the United States and the U.S. Commerce Department also
operates smaller satellite offices. They provide walk-in and
one stop service for small businesses interested in trade,
exports or overseas investment. Frequently, they are the first
and most accessible points of contact for a small
businessperson. OPIC works very closely with USEAC's officials
to be sure that they have the latest information about OPIC's
services and can provide referral advice when a small business
is interested in overseas investment. The USEAC's are also
repositories of the latest OPIC educational and marketing
materials and a listing of OPIC's small business services. This
includes an information booklet targeted for small businesses,
the small business hotline that provides specific small
business information, a small business electronic mailbox, a
public information officer for general information, and the
small business outreach coordinator to provide more detailed
information.
OPIC is also utilizing the Internet to reach out to small
businesses. This is an efficient and cost-effective means to
carry out our mission and it can be done without matching
expenditures by competitor programs. Most small businesspersons
interested in trade, exports or overseas investment are
familiar with the web and have Internet access. The central
U.S. Government website includes a link to the OPIC website. In
addition, the SBA, the Ex-Im Bank, and the DOC websites include
links to OPIC's website. OPIC has also proactively ensured that
search engines using generic key words--that is small business,
loans, investment--will bring the small business person to
OPIC's website. Once in the website the small businessperson
will find a specially designated small business section. This
section includes an interactive small business training on
OPIC's products to help a small businessperson determine how
they can best utilize OPIC's products and an investor's gateway
that provides country and sector information and links, and
personnel contact information.
Of the services that OPIC can provide, one serious obstacle
for a small business investing overseas is preparing for the
political uncertainty in the host country and securing adequate
financing. OPIC, through its political risk insurance and
financing products, helps small business to overcome these
obstacles. We also solicit client feedback to make certain we
are effectively meeting client
requirements.
For a small business looking for growth opportunities,
doing business in today's global economy can be challenging.
This is particularly true in emerging markets. But OPIC fills
an important role in helping small businesses meet this
challenge in these key markets. OPIC's political risk insurance
can protect small businesses from political uncertainty. As a
U.S. Government agency, OPIC also serves as an effective
advocate for its small business clients who are confronted with
the arbitrary actions of a host country's government. Finally,
OPIC helps small businesses respond to the challenges of
investing in emerging markets by providing financing when
private sector financing is not available.
Q.2. How do you envision recent heightened security concerns
to affect exporting industries? What measures are being taken
to
both assist current U.S. exporters and ease the concerns of
potential exporters? Can you discuss any ongoing coordination
with agencies such as the Department of State, Department of
Defense, and the Department of Agriculture to address these
ongoing security concerns?
A.2. The Department of Commerce is the Agency more directly
involved in remedying security concerns encountered by U.S. ex-
porters. OPIC, as a developmental agency which promotes private
sector investment in third world countries and countries in
transition to a free market economy, is prepared to assist
projects that it supports with advocacy as necessary.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED
FROM THELMA J. ASKEY
Q.1.a. Can you discuss, in detail, some of the specific
programs or strategies that will reach out to small- or medium-
sized businesses in order to encourage greater export
promotion? How will these strategies compete with other
nations' programs, especially with the comparatively less
funding that we provide to our trade promotion agencies?
A.1.a. The majority of companies with which TDA works are small
businesses. Small companies conduct more than one-third of TDA-
funded feasibility studies, and over 60 percent of the firms
with which TDA works are small. Absent TDA involvement, many of
these firms would not have the opportunity to become involved
in international development projects.
The small businesses that produce one in three of TDA's
feasibility studies gain valuable experience in analyzing
foreign projects, and then having a foot in the door to obtain
even more of the work associated with those projects. However,
the real impact for small business lies in the implementation
phase of major projects, where small companies stand to export
millions of dollars in goods and services as suppliers and
subcontractors to major projects.
Additionally, all of TDA's due diligence projects--
Definitional Missions and Desk Studies--are undertaken by small
businesses. This provides interested small businesses with an
opportunity to gain experience in working with TDA and in
international markets, and allows them to progress to
performing feasibility studies. Feasibility studies are
considerably larger and provide an opportunity to compete to
participate in the implementation phase of a development
project. Accordingly, TDA provides small businesses with many
opportunities to expand their international work.
TDA actively is participating in the Trade Promotion
Coordinating Committee's current analysis of foreign government
programs and looks forward to using that information to
establish benchmarks against which to measure our performance.
Because, as you rightly point out, other governments provide
higher levels of export promotion assistance, TDA must work
much harder and smarter to produce results for U.S. firms.
Q.1.b. How can you work more effectively with organizations,
agencies, or the private sector on a regional or local level to
carry out this goal of greater export promotion?
A.1.b. TDA works extensively with members of the Trade
Promotion Coordinating Committee, including the Small Business
Administration, the U.S. Export-Import Bank (Ex-Im) and the
Overseas Private Investment Corporation (OPIC). Among TPCC
agencies, TDA most frequently partners with Ex-Im and OPIC to
conduct trade promotion activities overseas and identify
promising project opportunities. The three agencies also
jointly operate two regional offices, one in Turkey and one in
Croatia. Maintaining these overseas regional offices allows the
agencies to work hand in glove to develop the regional
economies while promoting U.S. exports. In the near future, we
will look to these field offices to respond more quickly to the
commercial and developmental needs of countries in strategic
locales and during difficult, uncertain times.
In addition, TDA works extensively with the Departments of
Commerce and State to promote U.S. exports. The Commerce
Department's U.S. Foreign and Commercial Service (FCS) is a
primary intelligence source in identifying many projects that
TDA funds. Because FCS officers are stationed overseas, they
have established local business and government contacts that
help them target potential business opportunities for U.S.
firms in foreign markets. TDA's coordination with FCS allows
the agency to use its own resources more efficiently and to
accomplish more than it could alone by utilizing FCS expertise
in identifying projects for possible TDA support and funding.
TDA also works closely with American Embassies to design
and market the agency's overseas trade conferences to maximize
our
effectiveness. Additionally, State Department staff often
provide
another good intelligence source for projects with significant
U.S.
export opportunities.
This interaction is a two-way street. By working with TDA
to provide development assistance to host countries, FCS
officials gain access to higher-level foreign officials than
those with whom they typically work. This partnership, in turn,
helps FCS to raise its profile in host countries and enhances
its ability to gather information for the benefit of U.S.
companies. At the same time, TDA involvement with U.S.
Embassies supports U.S. Ambassadors and their Foreign Service
staff as they strive to assist U.S. businesses competing
overseas and to help foreign project sponsors meet important
development needs.
Finally, TDA coordinates with the multilateral development
banks and the International Finance Corporation to ensure
financing is available for projects to which TDA provides
funding.
Q.1.c. How will you ensure that these programs are effectively
reaching and assisting these businesses?
A.1.c. In TDA's experience, limited resources tops the list of
challenges facing small businesses in exporting their goods and
services. TDA conducts numerous outreach efforts, including
such
activities as business briefings, trade conferences and reverse
trade missions, to directly respond to this challenge. These
outreach efforts benefit small businesses in particular because
they reduce the need for such companies to travel the world to
identify opportunities, and they provide ready access to key
decisionmakers on significant projects.
Q.1.d. How can you target these programs to emerging markets,
where our country is rapidly losing the most market share?
A.1.d. By law, TDA only operates in developing and middle-
income nations, which are the very nations that comprise the
so-called emerging markets. All TDA activities serve the dual
purpose of promoting U.S. exports and fostering development in
those markets, thereby creating jobs and developing
commercially viable economic growth in the host nation.
Q.2.a. How do you envision recent heightened security concerns
to affect exporting industries? What measures are being taken
to
both assist current U.S. exporters and ease the concerns of
potential exporters?
A.2.a. As we already have seen in news reports, heightened
security is slowing the shipment of some goods across borders
as customs services become more vigilant. TDA will continue to
work with our contractors and with exporters as they navigate
the new economic and political environment, and will work
creatively to resolve difficulties they may encounter. You may
be interested to know that TDA already is active in an area
that will provide direct
relief for this problem, namely supporting customs
modernization projects in developing countries. In addition to
producing more export opportunities for U.S. firms, these
projects help host nations improve their inspection processes
while reducing the time these processes consume.
Q.2.b. Can you discuss any ongoing coordination with agencies
such as the Department of State, the Department of Defense, and
the Department of Agriculture to address these ongoing security
concerns?
A.2.b. As mentioned above, TDA's staff regularly works with the
Departments of Commerce and State, as well as other TPCC
members to assess conditions affecting U.S. exporters and
develop suitable responses to these challenges. In fact, in the
wake of the September 11 attacks, Peter Watson, John Robson and
I met to develop joint strategies for projects in Eurasia and
Asia. We and our staffs are evaluating how we can best respond,
both as individual agencies and collectively, to changes in the
business climate and increased levels of risk in those regions,
and around the world. Our agencies want to be ready to meet the
significant challenges ahead. We will, of course, continue to
work together, and with the other members of the TPCC, to
assist U.S. businesses in weathering the current situation.