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THE FUTURE OF THE DEPARTMENT OF COMMERCE Y 4, IN 8/16: C 73/3 The Future of the Departnent of Con... HEARING BEFORE THE COMMITTEE ON INTERNATIONAL RELATIONS HOUSE OP REPRESENTATIVES ONE HUNDRED FOURTH CONGRESS FIRST SESSION AUGUST 4, 1995 Printed for the use of the Committee on International Relations U.S. GOVERNMENT PRINTING OFFICE 93-516 WASHINGTON : 1995 ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments.CongressionalSalesOffice,Wa.shington,DC 20402 ISBN 0-16-047585-6 THE FUTURE OF THE DEPARTMENT OF COMMERCE Y 4. IN 8/16: C 73/3 The Future of the Departnent of Con... HEARING BEFORE THE COMMITTEE ON INTERNATIONAL RELATIONS HOUSE OP REPRESENTATIVES ONE HUNDRED FOURTH CONGRESS FIRST SESSION AUGUST 4, 1995 Printed for the use of the Committee on International Relations i V- , U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 1995 ForsalebytheU.S.GovernmentFVinlingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-047585-6 COMMITTEE ON INTERNATIONAL RELATIONS BENJAMIN A. OILMAN, New York, Chairman WILLI.'^JVI F. GOODLING, Pennsylvania LEE H. HAMILTON, Indiana JAMES A. LEACH, Iowa SAM GEJDENSON, Connecticut TOBY ROTH, Wisconsin TOM LANTOS, California HENRY J. HYDE, Illinois ROBERT G. TORRICELLI, New Jersey DOUG BEREUTER, Nebraska HOWARD L. BERMAN, CaUfornia CHRISTOPHER H. SMITH, New Jersey GARY L. ACKERMAN, New York DAN BURTON, Indiana HARRY JOHNSTON, Florida JAN MEYERS, Kansas ELIOT L. ENGEL, New York ELTON GALLEGLY, CaUfornia ENI F.H. FALEOMAVAEGA, American ILEANA ROS-LEHTINEN, Florida Samoa CASS BALLENGER, North CaroUna MATTHEW G. MARTINEZ, CaUfornia DANA ROHRABACHER, CaUfornia DONALD M. PAYNE, New Jersey DONALD A. MANZULLO, Illinois ROBERT E. ANDREWS, New Jersey EDWARD R. ROYCE, California ROBERT MENENDEZ, New Jersey PETER T. KING, New York SHERROD BROWN, Ohio JAY KIM, CaUfornia CYNTHIAA. McKINNEY, Georgia SAM BROWNBACK, Kansas ALCEE L. HASTINGS, Florida DAVID FUNDERBURK, North CaroUna ALBERT RUSSELL WYNN, Maryland STEVEN J. CHABOT, Ohio MICHAEL R. McNULTY, New York MARSHALL "MARK" SANFORD, South JAMES P. MORAN, Virginia CaroUna VICTOR O. FRAZER, Virgin Islands (Ind.) MATT SALMON, Arizona AMO HOUGHTON, New York Richard J. Garon, ChiefofStaff Michael H. Van Dusen, Minority ChiefofStaff Frank C. Record, Republican SeniorProfessional StaffMember Tracy E. Hart, StaffAssociate (II) CONTENTS WITNESSES Panel I: p^^ The Honorable Toby Roth, a Representative in Congress from the State ofWisconsin 3 The Honorable John L. Mica, a Representative in Congress from the State ofFlorida 5 The Honorable Dick Chrysler, a Representative in Congress from the State ofMichigan g The Honorable Donald A. Manzullo, a Representative in Congress from the State ofIllinois « Panel II: The Honorable Ronald H. Brown, SecretaryofCommerce 15 PaneTlhIeII:HonorableMichael Kantor, United States Trade Representative .... 20 Mr. Paul Freedenberg, international trade consiiltant. Baker & Botts 30 Mr. Ra3miond Garcia, vice president, public policy and governmental affairs, Rockwell International Corporation 33 Mr. Howard Lewis III, vice president, Trade and Technology Policy De- partment, NationalAssociationofManufacturers 34 APPENDIX Prep£ired statements: The Honorable Sam Gejdenson 49 The HonorableToby Roth "!!!!!!.".!!!!!!" 52 The HonorableJohn L. Mica 53 The Honorable Dick Chrysler 57 The Honorable DonaldA. Manzullo 68 Article entitled "A little of Everything Is Done at Department of Commerce Today", May 11, 1995, theWall StreetJournal 72 Prepared statements: The Honorable Ronald H. Brown 74 The HonorableMichael Kantor !."!.".."!!!. 94 Mr. Paul Freedenberg !."!.."!"!.." 102 Mr. Raymond Garcia .'". 108 Mr. HowardLewis III HI Report entitled "Why Exports Really Matter!", by J. David Richardson and|| Karin Rindal, published by the Institute for International Economics and The Manufacturing Institute II9 Letter to the Honorable Bob Livingston from Mr. Jerry Jasinowski, President ofthe NationalAssociationofManufacturers, datedJuly 18, 1995 150 General AccountingOffice reporton Commerce's Trade Functions, datedJune 26, 1995 152 ; (HI) THE FUTURE OF THE DEPARTMENT OF COMMERCE FRIDAY, AUGUST 4, 1995 House of Representatives, Committee on International Relations, Washington, DC. The committee met, pursuant to call, at 10:32 a.m. in room 2172, Rayburn House Office Building, the Hon. Benjamin Oilman (chairman) presiding. Chairman Oilman. The committee will come to order. Members, please take their seats. Our visitors, please take their seats. I take great pleasure in opening our hearing on the future of the Com- merce Department, welcoming our distinguished congressional panel, which will include Congressman Don ManzuUo of the 16th District of Illinois, a key member of our committee. Congressman John Mica of the Seventh District of Florida, author of the Trade Reorganization Act of 1995, and an acknowledged expert in the area of trade policy. Congressman Dick Chrysler ofthe Eighth Dis- trict of Michigan and author of the Department of Commerce Dis- mantl—ing Act. And the distinguished chairman of our international trade economic policy and trade subcommittee, Toby Roth of the Eighth District of Wisconsin, a key figure in the trade policy de- bate. I would also like to mention other members of our committee who continue to exert a leading role in the discussion about the future of the Commerce Department, and they include Congressman Bereuter of Nebraska's first district, distinguished chairman of our Asian and Pacific affairs subcommittee and Sam Brownback, ofthe Second District of Kansas, who has played a key role in the area as a member of our budget committee. We are also fortunate to have before us a very distinguished panel ofwitnesses from the pri- vate sector, who will be representing a broad cross-section ofAmer- ican companies. Commerce Department Secretary Ron Brown and U.S. Trade Representative Mickey Kantor have also agreed to join us today to discuss the administration's views on the legislative proposals pending before Congress in the area of trade promotion and export control. As I am certain my colleagues are aware, the fiscal year 1996 budget conference agreement makes it clear that the elimination of the Commerce Department has been made a high priority. While the offices and functions of the Department of Commerce that are under our committee'sjurisdiction constitute only a very small part (1) of its overall budget, they are of critical importance to the Depart- ment's overall mission. When the Congress returns from its August recess, our committee will be considering legislation fulfilling our role in the effort to streamline government. At the same time, we will make certain that critical functions performed by the Commerce Department will be fulfilled by other offices or agencies of the Federal Government. Just as H.R. 1561, the American Overseas Interests Act, stream- lined the operations of our foreign affairs agencies and programs, the trade reform proposals before us today also provide a similar opportunity to downsize another Federal department in order to save taxpayer dollars. As was the case with the passage of our foreign affairs reorganization measure this past June, a Commerce Department reorganization proposal can serve as—a down payment on billions of dollars of savings realized over 5 over the next 5 years. Moreover, it will help foster continued U.S. export growth. I would also like to note that several days ago, former Secretary of Commerce, William Verity, joined a list of former officials who have concluded that the Department of Commerce is too big and should be reformed. As I understand his position, he has concluded that the Department should be replaced by a Cabinet-level agency focused on international trade issues. I would note that the legislation introduced by our distinguished witness this morning, Congressman Mica, would largely accomplish that objective. I would urge our colleagues to closely study this bill, and any other legislative vehicles that can accomplish our efforts to try to streamline our Grovernment and improve its efficiency. I would ask our panelists if they would be kind enough to sum- marize their statements, and we will be certain to submit their full statements in the record. We look forward to hearing your remarks. I am reminded that the floor has indicated there will be a series ofvotes starting at 11:00, so I would urge you to be as briefas pos- sible. Why don't we start with our distinguished subcommittee chairman, Mr. Roth? Mr. Roth. Thank you, Mr. Chairman. Chairman GiLMAN. I am sorry. I am going to ask if our ranking minority member, Lee Hamilton, has any opening statements. I think we will limit it to that, since we have a time limitation. Any opening statement may be submitted, though, for the record. Mr. Hamilton. Mr. Hamilton. Mr. Chairman, thank you very much for having the hearing. We welcome our distinguished colleagues before us this morning and look forward to their testimony. Thank you very much. Chairman GiLMAN. With regard to any opening remarks, if the members wish to place them in the record, there will be no problem about submitting them at this time. Mr. Roth. Mr. ROTH. Thank you, Mr. Chairman. Mr. Hamilton. May I yield Chairman GiLMAN. Mr. Roth, ifyou would- Mr. Hamilton. May I yield for a moment to Mr. Gejdenson? Mr. Gejdenson. Mr. Chairman, I will be brief and place my entire statement in the record, but I believe that the discussion that we are entering in is as serious as any issue that affects the national security of this country. Since January 1993, Secretary Brown and the Commerce Department have made a difference by creating 300,000 new American jobs with exports alone. The U.S. Trade Representative has been skillful and able to respond quickly in a number ofareas, particularly with the tremendous progress he has made in the auto talks. It seems to me at a time when, ifyou go to the national security agencies ofthis country, and take a look at what the Japanese, the French, the Germans, and most of our other economic competitors are doing, that to propose to eliminate an agency and redistribute its assets will only cripple America's ability to compete with coun- tries that are tightly focused on taking advantage of every economic opportunity in the world. This may meet someone's ideological view of reducing government, but it seems to me what we are offered here today is moving around parts of government without any cost saving. If there are parts of the Commerce Department that provide services that you think are no longer needed, then get rid ofthose parts. But what we have here is a team that has been assessed by industry as one of the most successful and able teams this country has ever had. Secretary Brown is universally recognized in industry for helping American industry gain access to foreign markets. Chairman Oilman. If I might interrupt the gentleman, we have 20 minutes left before a vote on the Mr. Gejdenson. Yes, Mr. Chairman. Chairman GiLMAN [continuing]. A series of votes on the floor, and we do not want to delay the panelists. Mr. Gejdenson. I am just going to be another moment, Mr. Chairman. I think this is a terribly important issue. And there may be people who ideologically think it makes sense to give up our fight at time when we have finally begun to make some progress. I think this endangers American national security. I believe this proposal is reckless with the economic future of this country. If you want to rename it, if you want to shovel it around, well, maybe there are some things you can do within it. But I think it is —terribly dangerous, when you look at what the Japanese are doing and I would hope every member that is here today would go look at what is at NSA about the Japanese war game against our economy. And to simply talk about just getting rid of departments here because it may make good press, I think is inviting disaster for America's economy. [The statement ofMr. Gejdenson appears in the appendix.] STATEMENT OF THE HONORABLE TOBY ROTH, A REPRESENT- ATIVE IN CONGRESS FROM THE STATE OF WISCONSIN Mr. Roth. Thank you, Mr. Chairman and colleagues. I ask that my entire statement be entered into the record and I will abbre- viate my remarks. Chairman GiLMAN. Without objection. Mr. Roth. My ideas on trade reform really have come from the instruction by people like you. Chairman Gilman, like ranking member Hamilton, Mr. Bereuter, Mr. Burton, and especially Mr. Sam Grejdenson, whom I have worked with for so many years in this area oftrade. It is clear as a bell that both the House and the Senate will act in the next several months on legislation to dismantle the Com- merce Department. That is just a fact of life. Working on that as- sumption, it seems to me that our focus must be on the future of our trade-related programs. Our goal must be to keep the programs that work, to streamline the bureaucracy and to bring forth legislation that will strengthen our trade posture. As the next step, my subcommittee on international economic policy and trade will meet on September 6 to examine the various proposals for trade reorganization and how they will affect programs under our jurisdiction. Working with you, Chairman Gil- man, we are going to prepare for these deliberations and we will submit our recommendations to you. My intention is to amend and refine the Chrysler bill so that it strengthens our trade programs. I encourage all members of the committee to participate in our hearings and the subsequent legislative action. In this committee, we spend a good deal of time on diplomatic and security issues. However, my view is that U.S. national security is even more dependent on our trade and global economic relations. Economic strength is replacing military might as a key to global leadership. In trade, the United States is strong, but we face very serious challenges. The Chairman and members of the committee know that last year we exported $502 billion in goods, another $198 billion in services. That is 10 percent of our gross domestic product. Today, exports account for 10 million jobs in America; and that figure is almost a third higher than it was just three years ago. So nearly four million jobs have been created in the last three years because of exports. What is more, export related jobs pay 20 percent more on the average. Now last year, we faced a $166 billion merchandise trade deficit. This was the largest in history. This year, projections are that we are going to have a merchandise trade deficit of almost $200 billion. We cannot live with trade deficits like that. And that is why I think our focus on trade is so very important. The reality is that every major exporting nation is engaged in massive efforts to promote their exports. Every nation wants to capture more markets overseas. Whether it is Japan, Korea, Ger- many, France, other major exporting nations are all searching for markets. They are going around the world with the verve ofa door- to-door salesman, and we must be aggressive as well. And that is why I think that as we consider the Chrysler legislation, it is ex- tremely important that we also consider the Mica bill, which I have co-sponsored, and so has the chairman ofthis committee and other Congressmen that are with us. We must move forward with legislation that our colleagues can support in strengthening our trade ini- tiatives that we so desperately need. Thank you, Mr. Chairman. [The statement ofMr. Roth appears in the appendix.] Chairman Gilman. Thank you, Mr. Roth. Mr. Mica.