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The Annual report of the Trade Promotion Coordinating Committee : hearing before the Subcommittee on International Economic Policy and Trade, Committee on International Relations, House of Representatives, One Hundred Fourth Congress, second session, September 24, 1996 online

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THE ANNUAL REPORT OF THE TRADE
PROMOTION COORDINATING COMMITTEE



Y 4. IN 8/16; T 67/8

The Annual Report of the Trade Pron. . .

xai:i/\xtING

BEFORE THE

SUBCOMMITTEE ON
INTERNATIONAL ECONOMIC POLICY AND TRADE

COMMITTEE ON

INTERNATIONAL RELATIONS

HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTH CONGRESS

SECOND SESSION



SEPTEMBER 24, 1996



Printed for the use of the Committee on International Relations




U.S. GOVERNMENT PRINTING OFFICE
44-836 CC WASHINGTON : 1997

For sale by the U.S. Government Printing Office

Superintendent of Documents, Congressional Sales Office, Washington, DC 20402

ISBN 0-16-055872-7




■niE ANNUAL REPORT OF THE TRADE
PROMOTION COORDINATING COMMITTEE



Y 4.1NB/16;T 67/8

The ftnnual Report of the Trade Pron. . .

BEFORE THE

SUBCOMMITTEE ON
INTERNATIONAL ECONOMIC POLICY AND TRADE

COMMITTEE ON

INTERNATIONAL RELATIONS

HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTH CONGRESS
SECOND SESSION



SEPTEMBER 24, 1996



Printed for the use of the Committee on International Relations




'■■ 1-3



U.S. GOVERNMENT PRINTING OFFICE
44-836 CC WASHINGTON : 1997

For sale by the U.S. Government Printing Office

Superintendent of Documents, Congressional Sales Office, Washington, DC 20402

ISBN 0-16-055872-7



COMMITTEE ON INTERNATIONAL RELATIONS



BENJAMIN A. OILMAN, New York, Chairman



WILLIAM F. GOODLING, Pennsylvania

JAMES A. LEACH, Iowa

TOBY ROTH, Wisconsin

HENRY J. HYDE, Illinois

DOUG BEREUTER, Nebraska

CHRISTOPHER H. SMITH, New Jersey

DAN BURTON, Indiana

JAN MEYERS, Kansas

ELTON GALLEGLY, California

ILEANA ROS-LEHTINEN, Florida

CASS BALLENGER, North Carolina

DANA ROHRABACHER, California

DONALD A. MANZULLO, Illinois

EDWARD R. ROYCE, California

PETER T. KING, New York

JAY KIM, California

SAM BROWNBACK, Kansas

DAVID FUNDERBURK, North Carolina

STEVEN J. CHABOT, Ohio

MARSHALL "MARK" SANFORD, South

Carolina
MATT SALMON, Arizona
AMO HOUGHTON, New York
TOM CAMPBELL, California

Richard J. Gabon, Chief of Staff

Michael H. Van DUSEN, Democratic Chief of Staff

John P. MackEY, Republican Investigative Counsel

Parker Brent, Sta/f Associate



LEE H. HAMILTON, Indiana

SAM GEJDENSON, Connecticut

TOM LANTOS, California

ROBERT G. TORRICELLI. New Jersey

HOWARD L. BERMAN, California

GARY L. ACKERMAN, New York

HARRY JOHNSTON, Florida

ENI F.H. FALEOMAVAEGA, American

Samoa
MATTHEW G. MARTINEZ, California
DONALD M. PAYNE, New Jersey
ROBERT E. ANDREWS, New Jersey
ROBERT MENENDEZ, New Jersey
SHERROD BROWN, Ohio
CYNTHIA A. McKINNEY, Georgia
ALCEE L. HASTINGS, Florida
ALBERT RUSSELL WYNN, Maryland
JAMES P. MORAN, Virginia
VICTOR O. FRAZER, Virgin Islands (Ind.)
CHARLIE ROSE, North Carolina
PAT DANNER, Missouri



Subcommittee on International Economic Poucy and Trade

TOBY ROTH, Wisconsin, Chairman



JAN MEYERS, Kansas
DONALD A. MANZULLO, Illinois
SAM BROWNBACK, Kansas
STEVEN J. CHABOT, Ohio
DANA ROHRABACHER, California
DOUG BEREUTER, Nebraska
CASS BALLENGER, North Carolina



SAM GEJDENSON, Connecticut
MATTHEW G. MARTINEZ, California
MICHAEL R. McNULTY, New York
ROBERT G. TORRICELLI, New Jersey
HARRY JOHNSTON, Florida
ELIOT L. ENGEL, New York



Edmund B. Rice, Subcommittee Staff Director

John Scheibel, Democratic Professional Staff Member

Christopher Hankin, Professional Staff Member

Alexander Q. Schmitc, Staff Associate



(II)



CONTENTS



WITNESS



Hon. Stuart E. Eizenstat, Under Secretary for International Trade Adminis-
tration, Department of Commerce 4



(III)



THE ANNUAL REPORT OF THE TRADE
PROMOTION COORDE^ATING COMMITTEE



TUESDAY, SEPTEMBER 24, 1996

House of Representatives,
Subcommittee on International Economic Policy

AND Trade,
Committee on International Relations,

Washington, DC.

The Subcommittee met, pursuant to notice, at 2:01 p.m., in room
2200, Ravburn House Office Building, Hon. Toby Roth (chairman
of the Subcommittee) presiding,

Mr. Roth. We will have the Committee meeting come to order.
Today we are delighted to have with us the Honorable Stu
Eizenstat and we have some other of our Members on their wav
over, but we said we are going to start the meeting at two o'clock
and when we say we start at two o'clock, why that is what we want
to do.

Today the Subcommittee holds an oversight hearing on the an-
nual report of the Trade Promotion Coordinating Committee (the
TPCC).

This is the fourth annual report on the status of the U.S. export-
ing and what we must do as a nation to keep our exports growing.

Last year the United States exported some $787 billion in goods
and services. That is 11 percent of our total national economic out-
put. Even more important exports have generated one third of our
economic growth over the past 5 years.

Today 12,000,000 American workers owe their jobs to exports.
That is the situation today, but as we move into the 21st century,
the health of our economy and the prosperity of our people and our
national economic security all will depend on how much and how
we are able to sell to the rest of the world.

The battle for global markets will be just as important to the
next generations of Americans as the cold war was to the last gen-
eration.

But the same is true of every major economic power. The key is
to recognize the truth. Global trade is not free and fair. It is a bat-
tleground.

Foreign governments are assisting their companies, promoting
their products and services, financing and insuring their exports
and intervening with other governments to steer business to their
companies.

In today's markets, ideology about free trade is irrelevant and
pointless. What matters is that we keep American exporters and
we teach them and help them to beat the competition.

(1)



That is why in 1992 this subcommittee wrote the TPCC into law.
We charged the Trade Promotion Coordinating Committee with the
job of devising and carrying out a national strategy to keep our
economy and to keep our industries and our exports growing.

To present this year's report we have had a chance to look at it.
I think it is very important for this vear's report that we have Stu
Eizenstat, our Under Secretary oi Commerce for International
Trade be with us to give us, in his words, why this is so important
and allow us to ask a few questions.

But before we go to the Honorable Ambassador Eizenstat, let me
ask Mr. Manzullo if he has any opening remarks.

Mr. Manzullo. Thank you, Mr. Chairman.

First of all, I want to thank you, Toby, on behalf of the rest of
the Members of the U.S. House of Representatives for the tremen-
dous example that you have set by way of being a Congressman
and the fact that you are retiring at the peak of your career, at the
beginning of your middle ages and having said that, I simply want
to thank you for the leadership that you have given to us.

This I believe will be the last Subcommittee hearing that you
will chair and I want to again thank you for your leadership and
wish you Godspeed and God bless in your new career outside of
Congress.

Mr. Roth. Thank you very much.

Mr. Manzullo. You people can applaud for that.

Mr. Roth. Thank you very much. Thank you. You know some-
times when the Members give you too much praise it almost feels
like here is a shove, but anyhow it was great to have you in Apple-
ton where we had some 1,000 people in Appleton, Wisconsin show
up for our export conference and Mr. Manzullo was there.

Chairman Bereuter, do you have an opening statement?

Mr. Bereuter. Thank you, Mr. Chairman. I arrived just in time
to hear the last part of Mr. Manzullo's remarks and hearing
enough to know I wanted to join in seconding his comments and
commending you for the leadership you provided and for our serv-
ice together here in Congress.

Mr. Roth. Thank you.

Mr. Bereuter. Especially I am going to miss you, since we came
at the same time and have served on two committees together for
most of that time.

I did want to comment a bit about the report before we turn to
Secretary Eizenstat. Of course the annual report of the Trade Pro-
motion Coordinating Committee is welcomed by our subcommittee.

I think it is especially important since many of our colleagues re-
cently voted to curtail the overseas private investment corporation
from committing more political risk insurance or finance guaran-
tees for American companies and the American workers.

Absent from that important debate over OPIC were references to
the export promotion activities of our competitors.

Members simply were not aware that Canada spends ten times
more than the United States per $1,000 of GNP than the United
States on export promotion, for example and that is just one of
many examples. If we would have turned to page 30 of this report,
they could have learned of that fact.



Moreover, Members perhaps were unaware that Japan spent
$461 billion in financial assistance to exporters in 1994. That is
compared to the U.S. expenditure of $15 bilHon. People would have
known if they had been able to turn to page 63 of the report about
that fact.

No. The vote over OPIC was a vote against corporate welfare, to
save the taxpayers a contingent liability that never yet material-
ized.

That is the way it was conveyed to the American public and it
is a very inaccurate perception that has only been accentuated by
what happened on the floor just recently.

Several years ago when this committee asked for these annual
reports from the TPCC, we knew that the corporate welfare debate
would be a problem. It is such an easy term to throw around so
loosely and so inaccurately.

We were afraid of that allegation that our export programs were
bureaucratic, unresponsive and unnecessarily duplicative so we or-
dered that an examination for export promotion programs be one
of the strategic objectives of the annual report.

More specifically, in 1988 Confess mandated that TPCC, among
other things, do the following: One, identify areas of overlap and
duplication among Federal export promotion activities and propose
means of eliminating them.

Two, review efforts by the States as defined in section 230 l(i) to
promote U.S. exports and propose means of developing cooperation
between the State and Federal efforts, including co-locating cost
sharing between Federal and State export promotion programs and
sharing of market research data.

In its first annual report, the TPCC stated, "There is duplication
of effort and a need for greater coordination of leveraging of re-
sources among public and private service providers.

"Domestic export service network is deficient in two primary re-
spects. One, domestic export services are not readily available to
clients in one centralized place and two, trade finance assistance
is not fully integrated with information, marketing and counselling
services".

Therefore, the TPCC concluded that Federal export promotion ef-
forts should "improve the coordination of export services among its
agencies and better coordinate with State and local governments in
the private sector".

In it second annual report, the TPCC identified steps it had
taken to achieve some of those goals including the opening of four
pilot sites for one-stop export assistance.

In its third annual report, the TPCC focused on meeting foreign
competition and provided a valuable report on that subject.

However, the TPCC did not sufficiently follow up on its work of
the previous 2 years and included a few very general recommenda-
tions at the end, to among other things, enhance the integration
between Federal and non-Federal trade promotion by eliminating
overlap with services in the private sector and the State and local
government are willing to provide.

Unfortunately, Mr. Chairman, the fourth annual report which we
have in our hands today seems to avoid the analysis that we had
envisioned on this subject when we asked TPCC to do its work.



Because of this important oversight, I am pleased that the Chair-
man has agreed to add language to his legislation, language I of-
fered, which should help to refocus the TPCC on one of its most
important tasks and primary objectives, figuring out how to effec-
tively promote U.S. exports in the most efficient manner.

I look forward to a serious approach on this subject in the
TPCC's fiflh annual report. Thank you, Mr. Chairman.

Mr. Roth. Well, thank you, Mr. Bereuter.

To present this year's report and to respond to questions, we
have Stuart Eizenstat, Under Secretary or Commerce for Inter-
national Trade.

Ambassador Eizenstat, welcome back to the Subcommittee. It is
good to have you with us today.

STATEMENT OF STUART E. EIZENSTAT, UNDER SECRETARY
FOR INTERNATIONAL TRADE ADMINISTRATION, DEPART-
MEP^ OF COMMERCE

Mr. Eizenstat. Thank you, Mr. Chairman. Congressman
Manzullo took the words out of my mouth. I would like to, on be-
half of my colleagues in the executive branch, thank you for the ex-
traordinaiy work that you have done over the years for U.S. busi-
ness and U.S. exporters in helping to eliminate foreign barriers to
U.S. trade.

You have been a great source of strength to our TPCC process
and I daresay without your leadership the whole TPCC structure
might not exist today. So please let me join by thanking you and
wishing you all the best as well.

Mr, Roth. Thank you very much.

Mr, Eizenstat. This year's report is by, I think any fair compari-
son, the most far reaching and substantive that the TPCC has pro-
duced bringing together the efforts of some 20 government agencies
into a truly comprehensive national export strategy and is really
evidence of Congress' wisdom in establishing in 1992 a cross-cut-
ting mechanism for all U.S. Government agencies to work together
to promote U.S. exports.

It was a team effort and I would like to express my deep appre-
ciation to the leadership and tremendous participation of Tino
Kamarck of Eximbank, Phil Lader of SB A, Ruth Harkin of OPIC,
Joe Grandmaison of TDA and my colleagues at Treasury and Agri-
culture and Transportation and many other agencies.

In regard to OPIC, I very much appreciate the remarks that
were made by Congressman Bereuter, because I would like to
strongly urge the Congress to pass a 1-year OPIC extension, on be-
half of the TPCC we urge that, with flexibility to continue operat-
ing its programs as provided in your bill, Mr. Chairman, H.R. 4109
and the Foreign Operations Appropriations Conference.

OPIC plays a key role in our national export strategy. Its financ-
ing and insurance programs offer unique opportunities to American
business and Congress must not let this program lapse.

Mr. Chairman and Members of the Committee, my written state-
ment emphasizes the progress we have made over the past several
years in many of the areas that Mr. Bereuter just mentioned.

Expanding our one-stop shopping centers for coordination now to
15 locations and by the end of the year to 19, developing a hub and



spoke relationship so that we now will have over 80 regional offices
feeding into these 19, developing close State/Federal relations so
that in many of the, as we call them, USEAC's that I have visited,
we have State and indeed even local export agencies in our same
location and Eximbank actually uses States as delegated institu-
tions for much of their work.

But rather than focus on our past, including what we have done
to reduce tide aid efforts, I would like to focus in my brief opening
statement on what we have to do for the next phase, because we
cannot take our progress for g^ranted.

I would like to highlight two new initiatives and three emerging
policy issues. The two initiatives are the efforts we are making to
stop transnational bribery and a cutting aid effort to respond to the
dire needs of small business and finance and then I would like to
touch very briefly on three emerging issues, standards, technical
assistance and onsets, which we believe are new barriers to U.S.
exports.

First with respect to transnational bribery, last year's report re-
counted in some detail the fact that bribery and otner forms of cor-
ruption have kept U.S. firms from winning contracts that might
otherwise have been won, to the tune of billions of dollars.

Since transnational bribery is, by its nature, elicit and covert, it
is impossible to determine its magnitude with any absolute preci-
sion.

However, since 1994 with the OECD's adoption of its first anti-
bribery recommendations, we have learned of significant allega-
tions of bribery by forei^ firms in 139 international commercial
contracts valued at $64 billion.

We estimate that U.S. firms lost 36 of these contracts, valued at
$11 billion, although it is unclear if bribery was the ultimate deci-
sive factor.

Since these figures represent only those cases which have come
to our attention, we believe that the magnitude of the problem is
much greater than those estimates suggest. In our report we men-
tion that in some 80 percent of the cases bribery seems to have
been successful in winning the contract, that is for both foreign and
U.S. firms.

To address these problems, the Clinton Administration has
worked together over the past year to develop a comprehensive gov-
ernment-wide response to reduce foreign corrupt practices.

This is important, because the playing field is not now level. Our
companies are covered by the Foreign Corrupt Practices Act, but
we are the only country which criminalizes foreign bribery and we
believe that our companies are studiously complying with it, but
that is not the case with our competitors, who are under no such
compunction.

Our report lays out the key efforts we have made over the last
year, both multilaterally and domestically. I would like to focus on
those specifically.

Our multilateral strategy has had four prongs, the OECD, the
OAS, International Financial Institutions and the WTO. We have
had important successes over the last year in each of these areas.

In the May, 1996 OECD ministerial meeting we were successful
in getting other countries to adopt a recommendation calling on all



member countries to deny the tax deductibility of bribes and that
is, by the way, permitted in many of the countries of the OECD as
a business expense and to agree in principle to the criminalization
of bribery.

Over tne next year we will work to ensure that the OECD mem-
bers follow through on the tax changes and that we complete our
agenda on criminalization of bribery by the 1997 OECD ministe-
rial.

We also had an important breakthrough in Latin America with
the adoption of the first anti-corruption treaty in the world, the
OES convention on bribery and corruption.

We will be working this coming year to seek to have signatories
ratify and implement this as soon as possible, because none have
at this point actually been ratified.

The Administration plans to build on the recent success we have
had in the World Bank, which has just adopted stringent anti-brib-
ery procurement practices, by seeking to replicate this in other
international financial institutions.

Our colleagues at the Treasury Department, who have been such
a critically important part of the TPCC will work closely with the
international financial institutions to assure strong anti-bribery re-
quirements in their multi-billion dollar contracts. Jeff Shaffer, the
Under Secretary there, is very, very helpful.

Finally we are seeking agreement at the WTO ministerial to
begin negotiations on an interim government procurement agree-
ment, which will focus on the principles of transparency and due
process. Adopting these principles will help deter bribery, since
elicit activity does not thrive in the light of day.

We also have a complementary domestic strategy, which we an-
nounce in this report. On the domestic front we are amending our
advocacy guidelines to condition U.S. Government advocacy assist-
ance on a commitment that any firm seeking support from us
would have to ensure that its foreign parent or affiliate is not pay-
ing bribes to win that contract on which they are requesting advo-
cacy, but also that they maintain and enforce a policy prohibiting
the bribery of foreign officials.

I want to urge on you, Mr. Chairman and the Members of your
committee, that this is the first time we will reach the foreign par-
ent or foreign affiliate, a major step forward in leveling the playing
field for U.S. companies.

We will also be amending the Eximbank's supplier's certificate to
minimize any possibility of bribery and also amending OPIC's in-
surance application to strength its anti-bribery provisions.

We at Commerce will begin a new hot line for reporting possible
instances of bribery of foreign officials by non-U.S. companies.

Obviously this is not going to be solved overnight. We are encour-
aged by the recent progress and the growing public support in
many countries for our approach and it reflects the growing real-
ization that transnational bribery sets back economic growth and
undermines the democratic system.

A second major initiative in this year's TPCC report is on the
small business front, where I would like to report to you some very
exciting proposals particularly involving Eximbank and SBA.



We have had a series of small business seminars, Denver,
Charleston, West Virginia. We will be having some in Ohio and in
Kentucky in the next couple of weeks.

I have met with small business exporters and those who want to
export and with bankers large and small and we clearly identified
that one of the key barriers to small- and medium-sized companies
exporting is the lack of access to export financing and to working
capital export financing activity.

Now this is very critical. Our small- and medium-sized busi-
nesses contribute about 25 percent to our total manufacturing out-
put, but only 12 percent to our exports and we believe a significant
reason for that gap is the financing problem.

Some of our competitors provide a stronger export financing net-
work for their small businesses, but for a variety of reasons, includ-
ing lower profitability and higher costs for small transactions, U.S.
banks have been less attracted to trade finance for small- and me-
dium-sized new-to-export firms.

Indeed, only about 75 to 100 of over 9,000 banks in the United
States do any substantial amount of export financing at all and
most small businesses have no relationship to those 75 to 100 who
in any event only want to deal with larger transactions.

To address these needs under the umbrella of the TPCC this
year, Eximbank and SBA are developing exciting new programs to
help these small- and medium-sized firms gain better access to crit-
ical trade financing.

For SBA, they are developing a new tool to assess international
risks associated with export financing loans. SBA is going to refine
its export working capital program to enable its lender some 7,000
largely community banks who do not have an in-house inter-
national financing expertise to expand their short-term credit avail-
able to a small business exporter in loans up to $250,000.

It would use a new decisional guidance feature so that if banks
answer yes on five to six key questions, they will have assurance
that SBA will guarantee the working capital loan foreign export.
Once a completed application is received by SBA, there will be a
3-day turnaround approval.

Second, Eximbank is developing a program modeled after the
home mortgage market, which will address the availability of rea-
sonably priced buyer financing.

This program will deal with loans up to a million dollars and it
will encourage key domestic banks to institute a financing program
that will essentially for the first time, Mr. Chairman and Members
of the Committee, create a secondary market by bundling loans to-
gether of small community banks who can then sell those loans to
large participating banks, the money market banks.

This will give the large banks a new market for their business.
It will give the smaller banks the knowledge that they will be able
to sell those loans. They will not have to keep them as assets on
their books and we will assess these as packages rather than on
a transaction-by-transaction basis.

The SBA plans to implement its program by early next year and
Eximbank hopes that it will be able to further this proposal during
fiscal 1997 on an experimental basis.



8

Both agencies will consult closely with Congpress, the banking
community and related U.S. Government agencies to refine these
proposals before they are actually implemented.

Even with these improvements in our activities on anti-bribery


1 3 4

Online LibraryUnited States. Congress. House. Committee on InterThe Annual report of the Trade Promotion Coordinating Committee : hearing before the Subcommittee on International Economic Policy and Trade, Committee on International Relations, House of Representatives, One Hundred Fourth Congress, second session, September 24, 1996 → online text (page 1 of 4)