i1^ (J\ FOURTH ANNUAL REPORT OF THE TRADE ^ PROMOTION COORDINATING COMMinEE-1996 104-741 Y 4. B 22/3: S, HRG. RING ' Fourth ftnnujl Report of the Trade P. . . BEFORE THE SUBCOMMITTEE ON INTERNATIONAL FINANCE OF THE COMMITTEE ON BANKING, HOUSING, AND URBANAFFAIRS UNITED STATES SENATE ONE HUNDRED FOURTH CONGRESS SECOND SESSION ON THE FOURTH ANNUAL REPORT ON SECTION 201 OF THE EXPORT PRO- MOTION ENHANCEMENT ACT OF 1992, TO COORDINATE THE EXPORT PROMOTION AND FINANCING ACTIVITIES OF THE FEDERAL GOVERN- MENT AND TO DEVELOP A GOVERNMENTWIDE STRATEGIC PLAN FOR CARRYING OUT FEDERAL EXPORT PROMOTION AND FINANCING PRO- GRAMS SEPTEMBER 25, 1996 Printed for the use of the Committee on Banking, Housing, and Urban Affairs 1iri U.S. GOVERNMENT PRINTING OFFICE . 36-983CC WASHINGTON : 1996 ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-054045-3 '^\;h \ S. Hrg. 104-741 FOURTH ANNUAL REPORT OF THE TRADE PROMOTION COORDINATING COMMinEE-1996 104-741 Y 4, B 22/3; S. HRG. RlNCj Fourth Annual Report of the Trade P. . . BEFORE THE SUBCOMMITTEE ON INTERNATIONAL FINANCE OF THE COMMITTEE ON BANKING, HOUSING, AND URBANAFFAIRS UNITED STATES SENATE ONE HUNDRED FOURTH CONGRESS SECOND SESSION ON THE FOURTH ANNUAL REPORT ON SECTION 201 OF THE EXPORT PRO- MOTION ENHANCEMENT ACT OF 1992, TO COORDINATE THE EXPORT PROMOTION AND FINANCING ACTIVITIES OF THE FEDERAL GOVERN- MENT AND TO DEVELOP A GOVERNMENTWIDE STRATEGIC PLAN FOR CARRYING OUT FEDERAL EXPORT PROMOTION AND FINANCING PRO- GRAMS SEPTEMBER 25, 1996 Printed for the use of the Committee on Banking, Housing, and Urban Affairs , ^^Hn^ 4.-'^\iT'^ U.S. GOVERNMENT PRINTING OFFICE . / fO 36-983CC WASHINGTON : 1996 ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-054045-3 COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS ALFONSE M. D'AMATO, New York, Chairman PHIL GRAMM, Texas PAUL S. SARBANES, Maryland RICHAPID C. SHELBY, Alabama CHRISTOPHER J. DODD, Connecticut CHRISTOPHER S. BOND, Missouri JOHN F. KERRY, Massachusetts CONNIE MACK, Florida RICHARD H. BRYAN, Nevada LAUCH FAIRCLOTH, North Carolina BARBARA BOXER, California ROBERT F. BENNETT, Utah CAROL MOSELEY-BRAUN, lUinois ROD GRAMS, Minnesota PATTY MURRAY, Washington SHEILA FRAHM, Kansas Howard A Menell, StaffDirector RobertJ. Giuffra, Jr., ChiefCounsel Phiup E. Bechtel,Deputy StaffDirector Steven B. Harris, Democratic StaffDirector and ChiefCounsel George E. Whittle, Editor Subcommittee on International Finance CHRISTOPHER S. BOND, Missouri, Chairman CONNIE MACK, Florida BARBARA BOXER, CaUfomia LAUCH FAIRCLOTH, North Carolina CAROL MOSELEY-BRAUN, IlUnois ROBERT F. BENNETT, Utah JOHN F. KERRY, Massachusetts SHEILA FRAHM, Kansas PATTY MURRAY, Washington MartAin J. Gruenberg, Democratic Senior Counsel Patrick Mulloy, Democratic ChiefInternational Counsel (II) CONTENTS WEDNESDAY, SEPTEMBER 25, 1996 Page OpeningstatementofSenatorBond 1 Openingstatements, comments, orprepared statementsof: SenatorBennett 3 SenatorSarbanes 16 SenatorMoseley-Braun 18 SenatorMurray 20 SenatorBoxer 25 WITNESS StuartE. Eizenstat, UnderSecretaryofCommerce forInternational Trade 3 Prepared statement 25 Introduction 25 Focusingonbriberyand on the needs ofsmallbusiness 27 Anew strategiccommercial policy 29 Conclusions 30 Additional Material Supplied for the Record The Fourth Annual Report to Congress ofthe Trade Promotion Coordinating Committee entitled, "The National ExportStrategy," October 1996 31 (III) FOURTH ANNUAL REPORT OF THE TRADE PROMOTION COORDINATING COMMITTEE— 1996 WEDNESDAY, SEPTEMBER 25, 1996 U.S. Senate, Committee on Banking, Housing, and Urban Affairs, Subcommittee on International Finance, Washington, DC. The Subcommittee met at 10:05 a.m., in room SD-538 of the Dirksen Senate Office Building, Senator Christopher S. Bond (Chairman ofthe Subcommittee) presiding. OPENING STATEMENT OF SENATOR CHRISTOPHER BOND S. Senator Bond. Welcome to the hearing of the International Fi- nance Subcommittee on the Fourth Annual Report of the Trade Promotion Coordinating Committee. We'll come to order. As I have indicated to the Ambassador, this is an extremely busy time ofyear. We have lots of people who are interested in tMs and they all have other places that they have to be. They have assured that they're going to be here as soon as they can. Our Minority Members have asked us to go ahead, probably realizing that I would begin with my opening statement, which is well worth missing. [Laughter.] They hope to be here in time to hear Ambassador Eizenstat's testimony. As I have indicated, this hearing is being held to receive the National Export Strategy Report from the Trade Promotion Coordi- nating Committee. It's an honor to have Ambassador Stuart Eizenstat, the Under Secretary of International Trade at the Department of Commerce, to present this year's report. In 1992, I introduced legislation for trade promotion and one part of that legislation was to set up a Trade Promotion Coordinating Committee, with the expectation that this would bring together all ofthe diverse elements in the Federal Government designed to pro- mote foreign trade, to promote exports. I have seen working in that field as a Grovemor, and then in my efforts as a Senator, how the activities were so diffuse, that some- times two or three or even more agencies were trying to do the same thing, obviously not taking advantage of the expertise they had elsewhere. (1) I was very fortunate that Senator Riegle, who was then Chair- man ofthe Committee, Senator Sarbanes, and Senator D'Amato, in passing the Export Enhancement Act of 1992, generally saw the need for a unified, aggressive Federal exix)rt strategy and included something called the TPCC. This is the fourth report that we've received and I have to say that I am most grateful for the amount of effort and resources the Administration has invested in the TPCC process, and in export promotion in general. I think we all need to recognize the tremendous contributions made in this area by the late Ron Brown. Secretary Brown was a driving force in the trade promotion efforts of the United States, as C—hairman of the Trade—Promotion Coordinating Committee. He was no question about it one of the finest advocates for Amer- ican business and American exports. We hope that the Administration will continue to advance U.S. exports with the same vigor and enthusiasm as shown by Secretary Brown. I have the greatest confidence in Ambassador Eizenstat. And when we can keep Mickey Kantor's eye on the ball, nobody can be more aggressive than my old friend, Mickey, with whom I used to play on the same softball team. I can tell you stories when we're not on the record about Mickey's aggressiveness. But I'm just delighted that he is available to apply that aggressiveness to the promotion ofAmerican exports. I had the opportunity to review the report that you're submitting today and I'm pleased that we continue to make advances on last year's initiatives to enhance our efforts in promoting exports to the Big Emerging Markets. I think this is where the action is going to be. I'm also pleased to see our progress in improving Federal serv- ices to exporters through, in part, the establishment of commercial centers to provide increased access to Government information. Having said that, there are still some obstacles to success in the export promotion area. The TPCC, I'm glad to see, is addressing one of those areas of great concern, and that is the availability of export financing, especially for America's small businesses. The problem of access to trade finance for small business export- ers is especially important to the success of our export promotion activities as a whole. I found in my experience that our larger com- panies are usually way out in front in their efforts abroad. But we have had the greatest difficulty with the medium- and small-sized exporters, trying to bring them in, provide them the expertise, give them the courage and the knowledge and financing. Wearing another hat, I serve as Chairman ofthe Small Business Committee and there I hear all too often of the problems faced by small businesses in getting loans to finance the exports of their products. The paperwork and bureaucracy is something they have remarked about, along with the reluctance of local and regional banks to undertake the risks involved in offering such financing. This all makes it difficult to find sources capable or willing to han- dle these kinds ofloans. The proposed SBA and Ex-Im Bank pilot program to increase the ability of small banks to extend loans for export financing is a wel- come step toward helping small businesses take advantage of the growing and increasingly competitive international marketplace. Also, I think it's very important that we continue our efforts to curb foreign bribery through unilateral and multilateral measures. That is oftremendous importance to this Committee and it's vitally important to the success ofU.S. exports. I think I can speak for all ofmy colleagues, not only on this Com- mittee, but in the Senate, when I say that we're going to continue to monitor these trading practices and see what we can do to assist in the efforts to stop the bribery. To continue to expand our Na- tion's export markets and potential, American firms need to know that their Gk)vemment is behind them in their efforts. I hope that, through the efforts of the TPCC, working in coordination with this Committee and Congress, we can eventually get to a point where all ofour companies are truly on a level international playing field. I might say that we are working right now on two measures to come out ofthis Subcommittee. The time is short, very short in this session. That's good news and bad news. The bad news is we don't have much time to get the reauthoriza- tion ofthe export programs, the ITA, essentially in Commerce, and the Export Administration Act, which is also of concern. That's the bad news. The good news is, with the short time, maybe people will focus their attention. I believe it was Samuel Johnson who said: There's nothing like the prospect of a hanging in the fortnight to con- centrate one's attentions. As far as some of these export programs go, there is a hanging in somewhat less than a fortnight. I hope we can bring everybody together and get something passed without extensive Floor debate. I commend the 20 agencies of the TPCC for their efforts in put- ting together this year's report and I look forward to turning to Ambassador Eizenstat. I would like to express my appreciation and welcome our col- league, a Member ofthis Committee, Senator Bennett. Senator Bennett, do you have any statements? OPENING COMMENT OF SENATORROBERT BENNETT F. Senator Bennett. I have no opening statement. Senator Bond. All right. Then we shall go directly to the Under Secretary. Mr. Ambassador. OPENING STATEMENT OF STUART E. EIZENSTAT UNDER SECRETARY OF COMMERCE FOR INTERNATIONAL TRADE Mr. Eizenstat. Thank you, Mr. Chairman, Senator Bennett. It's an honor to be with you. IfI may, just on a personal level, say to you, Mr. Chairman, that your support for the ITA, for our export programs in general, is greatly appreciated. You have been a real champion for America's exporters, particularly the small exporters who we need to encour- age to a much greater extent to export. You have also been a great personal friend and advisor to me, as I've assumed my post, and I've appreciated the accommodations you have made and the assistance you have provided. We believe that this Fourth Annual Report is the most far-reach- ing and substantive that the TPCC has produced. It is further evi- dence ofyour wisdom, Mr. Chairman, in taking the leadership and establishing the Export Enhancement Act of 1992, in creating, therefore, a cross-cutting, effective mechanism for all U.S. Govern- ment agencies to work together to promote American exports. The help that Senator Sarbanes and others have given is richly appre- ciated as well. This was indeed a bipartisan effort. It has been a team effort in putting this report together and I want to express my appreciation for the leadership and parti- cipation of Tino Kamarck of Ex-Im Bank, Phil Lader of the SBA, Ruth Harkin of OPIC, Joe Grandmaison of the TDA, and many of my colleagues who are here today from Treasury, Agriculture, the USTR, the 0MB, and many other agencies. In regard to OPIC, ifI may, I would like to take this opportunity briefly to urge Congress to pass a 1-year extension of OPIC, with flexibility to continue operating its programs as provided in various bills in Congress. OPIC plays a key role in our National Export Strategy. It finances programs that are unique and necessary for American business, without which we would be in even more dif- ficulty in our competitive race. I hope Congress will not let this es- sential program lapse. My written statement, Mr. Chairman, explains in some detail what we have considered to be our accomplishments over the year. I would, in the interest oftime, not dwell on those. Suffice it to say that through our advocacy center, we continue to advocate o—n be- halfofU.—S. business. We now have 15 one-stop export centers the USEAC's and we'll have four more by the end ofthis year. Senator Bond. Mr. Ambassador, I should make clear that the full statement and the report will be made part of the record. I will personally urge my colleagues on the Committee to review them carefully. I think it's very quick reading, but it's very important reading. We will accept those for the record. Thank you. Mr. EiZENSTAT. I appreciate it, and it may even be better than Sominex in putting somebody to sleep at night, if they^re having difficulty. [Laughter.] I would like to go immediately to our new initiatives. There are two in particular, our efforts at dealing with the scourge of trans- national bribery and the new efforts we are making to respond to the financing needs of small business, to which you referred, that I would like to concentrate on. I would also like to touch on three emerging commercial policy issues which have not been previously addressed in our reports and have received almost no public visi- bility; the problem with standards, with technical assistance, and with defense offsets as barriers to U.S. exports. First, if I may, let me concentrate on transnational bribery be- cause nothing is more important than dealing with this problem. It is costing us tens ofbillions ofdollars a year. Since it is by nature illicit and covert, the degree of its mag- nitude can't be defined with any great precision. However, since mid-1994, our best estimates are, from what we have learned, that allegations ofbribery by foreign firms have existed in 139 commer- cial contracts, valued at $64 billion. We estimate U.S. firms lost 36