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S. HRG. 103-193 DEPARTMENT OF COMMERCE FIRST ANNUAL REPORT ON THE INTERNATIONAL ECONOMIC POSITION OF THE UNITED STATES-1993 Y4.B 22/3: S. HRG. 103-193 Departnent of Connerce First Annual.. :ing BEFORE THE COMMITTEE ON BANKING, HOUSING, AND URBANAFFAIRS UNITED STATES SENATE ONE HUNDRED THIRD CONGRESS FIRST SESSION ON REPORT ON THE CURRENT EFFORTS TO IMPROVE AMERICA'S INTER- NATIONAL TRADE POSITION AS REQUIRED UNDER THE EXPORT EN- HANCEMENT ACT OF 1992 JUNE 23, 1993 Printed for the use of the Committee on Banking, Housing, and Urban Affairs U.S. GOVERNMENT PRINTING OFFICE ^ttflOs 72-259CC WASHINGTON : 1993 '*'CJ||>>>^ ^DT^f ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-041590-X 72-259 0-93-1 S. HRG. 10&-193 DEPARTMENT OF COMMERCE FIRST ANNUAL REPORT ON THE INTERNATIONAL ECONOMIC POSITION OF THE UNITED STATES-1993 y 4. B 22/3: S. HRG. 103-193 Department of Cortnerce First Annual. . JNG BEFORE THE COMMITTEE ON AND URBANAFFAIRS BANKING, HOUSING, UNITED STATES SENATE ONE HUNDRED THIRD CONGRESS FIRST SESSION ON REPORT ON THE CURRENT EFFORTS TO IMPROVE AMERICA'S INTER- NATIONAL TRADE POSITION AS REQUIRED UNDER THE EXPORT EN- HANCEMENT ACT OF 1992 JUNE 23, 1993 Printed for the use of the Committee on Banking, Housing, and Urban Affairs SSSLo,^. U.S. GOVERNMENT PRINTING OFFICE ''''^l»V> *^6faftl/ 72-259CC WASHINGTON : 1993 " *^D7>fj- ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-041590-X COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS DONALD W. RIEGLE, JR., Michigan, Chairman PAUL S. SARBANES, Maryland ALFONSE M. D'AMATO, New York CHRISTOPHER J. DODD, Connecticut PHIL GRAMM, Texas JIM SASSER, Tennessee CHRISTOPHER S. BOND, Missouri RICHARD C. SHELBY, Alabama CONNIE MACK, Florida JOHN F. KERRY, Massachusetts LAUCH FAIRCLOTH, North Carolina RICHARD H. BRYAN, Nevada ROBERT F. BENNETT, Utah BARBARA BOXER, California WILLIAM V. ROTH, JR., Delaware BEN NIGHTHORSE CAMPBELL, Colorado PETE V. DOMENICI, New Mexico CAROL MOSELEY-BRAUN, Illinois PATTY MURRAY, Washington STEVEN B. Harris, StaffDirector and ChiefCounsel HOWARD A. MENELL, Republican StaffDirector PATRICK A. MULLOY, Senior CounselIInternational Affairs Adviser GILLIAN G. GARCIA, Financial Institutions Specialist PATRICK J. Lawler, ChiefEconomist PAMELA Ray Strunk, Republican Professional StaffMember CHERYL WASHINGTON, Republican Professional StaffMember Edward M. Malan, Editor (ID CONTENTS WEDNESDAY, JUNE 23, 1993 Page Opening statement ofChairman Riegle 1 Opening statements, comments, or prepared statements of: Senator D'Amato 7 Prepared statement 43 SenatorFaircloth 9 Senator Bennett 11 Senator Dodd 13 Senator Bond 25 SenatorSarbanes 29 WITNESS Ronald H. Brown, Secretary, U.S. Department of Commerce, Washington, DC 3 Prepared statement 41 Report on U.S. export competitiveness 44 I. Assessment ofU.S. competitiveness 47 II. Promoting technological innovation and commercialization of new technologies to improve U.S. international competitiveness 58 III. Increasing U.S. exports through market access initiatives, pro- motional assistance, trade law enforcement, and a strong public- private partnership in trade 66 Response to written questions of: SenatorRiegle 92 Senator Bond 96 Senator DAmato 99 (III) DEPARTMENT OF COMMERCE FIRST ANNUAL REPORT ON THE INTERNATIONAL ECO- NOMIC POSITION OF THE UNITED STATES— 1993 WEDNESDAY, JUNE 23, 1993 U.S. Senate, Committee on Banking, Housing, and Urban Affairs, Washington, DC. The committee met at 10:10 a.m., in room SD-538 ofthe Dirksen Senate Office Building, Senator Donald W. Riegle, Jr. (chairman of the committee) presiding. OPENING STATEMENT OF CHAD1MAN DONALD W. RIEGLE,JR. The Chairman. The committee will come to order. Let me welcome all those in attendance this morning and let me particularly welcome the Secretary ofCommerce, Ron Brown, to our committee. When we scheduled this hearing we could not know at that time that we would be bringing the reconciliation bill from the Finance Committee to the Senate floor today. There are a series ofmeetings underway right now to prepare for that, so members will be coming and going this morning. Today we are receiving the report, the first annual report of the Secretary of Commerce on America's export competitiveness, clearly a key issue facing our country which affects our economic and job future. These annual reports are required by section 206 of the Export Enhancement Act of 1992, a law that was formulated by this committee. Over the past 4 years, the Banking Committee has conducted over thirty hearings examining the position ofthe United States in the global economy. We have heard from experts across the entire range of opinion, most in a position to bring expert testimony to that subject. The most consistent theme of the testimony at these hearings has been that the U.S. industrial and technology base has weakened considerably in relation to our principal foreign competitors. We have also had a number of distinguished outside groups do lengthy analyses and present important national reports, such as the U.S. Commission on Competitiveness as well as others, that lay that out very clearly. In response to these facts, this committee has enacted several pieces of legislation designed to strengthen America's industrial base and our international trade position. Included among these was the Export Enhancement Act of 1992, which reformed our country's export promotion and financing programs. Among other (1) things, that legislation established in statute a Trade Promotion Coordinating Committee, chaired by the Secretary of Commerce, and charged it to develop a Government-wide strategic plan to bet- ter coordinate all U.S. export promotion activities among the nine- teen relevant executive branch agencies. I want to particularly commend Senator Sarbanes for his leadership in drafting that provision. The committee also included in last year's legislation a provision that I authored which requires the Secretary of Commerce to prepare an annual report on U.S. Export Competitiveness and to ap- pWeeardihdertehistointeostridfeyrotno fito,cuwshivcehryiscotnhceenotcrcaatseidonatotfetnotdiaoyn'sonheAamreirnig-. ca's continuing massive trade deficit and the need for coordinated technology and trade policies to strengthen our international economic position. I want to again thank the Secretary for his leadership and for being here, and I want to say that I've read your statement and I am very much impressed with a number of the points that you make. First, I think in your statement it's clear that you not only fully understand and acknowledge the importance of the manufacturing and industrial sector of our economy to the strength of our Nation and our national security, but that you intend to act in accord with that fact. Second, you state in your testimony, and I quote: We will pursue a relentlessly pragmatic trade policy. And then you go on to say, and I again quote: We will insist that our products and services be able to enter overseas markets on equal terms. I want to say that, by itself, is a very important policy statement. I think it marks a necessary and important change in the position of our Government. And I think it indicates that our administration can and will do much more to open up foreign markets to American goods and demand fair treatment from our trading part- ners. Finally, I want to also indicate that I appreciate your statement that this administration's, and I again quote: Pragmatism isexemplifiedby our new approach toJapan.. Your acknowledgement that Japan must open up its market to our auto parts manufacturers is just the first step. But I think you're on the right track when you state, and I again quote: We must promote critical sectors and technologies in our market-opening efforts. And while I agree with your statement that, again quoting: Our assistance on measuring the results ofour efforts to open the Japanese market to high-quality American auto parts has begun to pay off in terms of substan- tially increased sales. I must tell you from my vantage point, I think we've got a lot more to do in that area and I know you share that view. Clearly, this new administration recognizes the need to improve the international economic competitiveness of United States industry and therein lies a large part ofourjob future. We have a situation now where the new President has committed our country and his administration to fostering the creation of some 8 million new private-sector jobs over his 4 years. That's a demanding goal and it's important that we achieve it. Our ability to be able to sell across the board in foreign markets is critical to our ability to meet that kind ofnecessary goal. So we appreciate your testimony today and I want to commend you for your approach in revitalizing our manufacturing and industrial base and by linking our U.S. trade negotiating priorities with our technology policies. We'll make your full statement a part of the record and I'd like you to go ahead now and present your thoughts to us. STATEMENT OF RONALD H. BROWN, SECRETARY, U.S. DEPARTMENT OF COMMERCE, WASHINGTON, DC Secretary Brown. Thank you very much, Mr. Chairman. It's al- ways a pleasure to be with you in any forum. I'd like to thank you and members of this committee for the opportunity to appear before you today for the purpose of reporting on the administration's plan for real economic growth and U.S. export competitiveness. We take great pride in this effort. It's really a report on the important role that trade and technology policies play in achieving that goal. I don't believe that there's anything more important that we can do than promote exports. Ifyou look at economic performance in America over the last several years of recession and stagnation, about the only bright spot has been exports. But I don't believe that we have scratched the surface yet. We can and must do much more. For every $1 billion increase in exports, we create 19,000 new jobs for the American people. This administration can have no more important goal than job creation and sustained economic growth. I'd also like to thank you, Mr. Chairman, as author of the provision mandating this report which we present today. Your efforts to bring these issues before the Congress and the public are indeed worthy of commendation as is your hard work to emphasize the centrality oftrade policy to our economic agenda. The litmus test ofAmerican economic strength is indeed our ability to produce products that meet the test of the global market- place, while raising the standard ofliving for all the American people here at home. Although the United States has the most prosperous and productive economy in the world, economic indicators reveal that we face serious long-term structural problems. I think the recognition of that is also new. There are many who have argued for years that our problems are just cyclical. Ifwe just sat on our hands and wait- ed long enough, they would go away. We knew that was not true. The fact is that many of our problems are structural. We must deal with them as serious structural problems. Over the past 20 years, our standard of living has grown more slowly than that of our leading industrial competitors, including Japan and Germany. From 1981 to 1991, our growth in manufacturing productivity trailed France, Italy, Japan, and the United We Kingdom. are just not investing enough in factories, in equip- ment, and in civilian research and development, core requirements for future economic growth. The administration's goal is nothing less than the revitalization of the American economy and the establishment of 21st-century America as the most prosperous, the most productive, and the most competitive nation on e—arth. — But this goal cannot I repeat, cannot be reached through Gov- ernment efforts alone. We must create a public/private partnership, for it is the private sector that fuels the engine that pulls the train of economic growth and job creation. It is the private sector that creates jobs. It is the private sector that designs new products and technology. Government efforts are designed to support, not to sup- plant, those ofthe private sector. The Department of Commerce is determined to create this new partnership with the private sector. We will listen to the private sector and, with its help, we will determine how Government can best help create thejobs that we're talking about. We need to foster a rising standard of living and increase economic opportunity for all ofthe American people. The Departmen—t is tackling this task head-on by focusing on two key policy areas trade and technology. And I might say, Mr. Chairman, that this is also new, since trade and technology as far as Federal policy is concerned, h; really been on two separate tracks. We need to create a confluence of those tracks, to bring trade and technology policy together. We are pursuing a comprehensive technology and trade strategy that will aggressively promote technological innovation and the commercialization ofnew technologies. We in America have been geniuses at creating Nobel Prize win- ners, but we haven't been very good at commercializing those new technologies, at creating profits from that technological innovation that can then be used to create jobs here in America. And we need to significantly increase our exports through more effective trade promotion programs, targeted market access initiatives, and strong enforcement ofour trade laws. Let me first, Mr. Chairman, address the issue of technology. Technology plays a critical role in economic growth and in creating and preserving high-wage jobs for American workers. This is why President Clinton made technology leadership a national priority. Manufacturing is the expertise that turns our technology into wealth. The Nation's investment in new technologies and in im- proving our manufacturing capabilities will pay dividends well into the 21st century. The Department of Commerce is a focal point in the development and commercialization of new civilian technologies. R&D One key area of technology activity relates to increasing funding for generic civilian technologies for use by private industry through our advanced technology program. We're very proud ofthis program. It's a bottom-up program. It's private sector-driven, it has a peer-review process, just the kind of thing that we know works and that connects Government in an effective and appropriate way with the private sector. So far, we have funded projects covering critical technologies, including a number of manufacturing projects with a variety of com-