PRESIDENT'S EXPORT COUNCIL
Washington, DC
Room 4830
U.S. Department of Commerce
Washington, DC
Wednesday,
May 25, 2005
Gilmour
78 pp.
The meeting was convened, pursuant to notice,
at 10:11 a.m., MR. J.W. MARRIOTT, JR., Chairman,
presiding.
APPEARANCES:
MR. J.W. MARRIOTT, JR.
Chairman and CEO
Marriott International, Inc.
Chairman, President's Export Council
MR. JAMES C. MORGAN
Chairman
Applied Materials, Inc.
Vice Chairman, President's Export Council
MS. CECILIA OCHOA LEVINE
President
MFI International Manufacturing, LLC
MR. JOHN A. LUKE, JR.
Chairman and CEO
MeadWestvaco Corporation
MR. RAYMOND V. GILMARTIN
Former Chairman and CEO
Merck & Co., Inc.
MR. HENRY M. PAULSON, JR.
Chairman and CEO
Goldman Sachs Group
MS. BETTY MANETTA
President and CEO
Argent Associates, Inc.
MR. WARREN R. STALEY
Chairman and CEO
Cargill, Inc.
DR. PAUL S. HSU
Chairman and CEO
Total Parts Plus, Inc.
MR. JOHN F. SMITH, JR.
Retired Chairman and CEO
General Motors
MR. HAROLD B. SMITH
Chairman of the Executive Committee
Illinois Tool Works, Inc.
MR. ARNOLD DONALD
Chairman
Merisant Company
THE HONORABLE PHILLIP MERRILL
President
Export-Import Bank of the United States
MR. JACK FARIS
President and CEO
National Federation of Independent Business
MR. CHRISTOPHER JENNY
Senior Partner
Parthenon Group
ALSO PRESENT:
THE HONORABLE CARLOS GUTIERREZ
Secretary of Commerce
THE HONORABLE HECTOR BARRETO
Small Business Administrator
THE HONORABLE ALBERT A. FRINK
Assistant Secretary of Commerce
for Manufacturing and Services
THE HONORABLE PETER LICHTENBAUM
Acting Under Secretary of Commerce
for Industry and Security
MR. JAMES BUTLER
Deputy Under Secretary of Agriculture for
Farm and Foreign Agriculture
MR. JAN W. MARES
Business Liaison Director
Private Sector Office
U.S. Department of Homeland Security
THE HONORABLE MIKE ENZI
A United States Senator
from the State of Wyoming
MR. JOHN P. PRIECKO
Certified U.S. Export Compliance Officer
Office of the Assistant Secretary of the Army
Defense Exports and Cooperation
MS. CAROLINE JOINER
Executive Director for Trade Promotion and
Outreach
U.S. Foreign and Commercial Service
I N D E X
PAGE
AGENDA ITEM
MEETING CALLED TO ORDER
Mr. J.W. Marriott, Jr., Chairman6
WELCOME/INTRODUCTORY REMARKS
The Honorable Carlos M. Gutierrez
Secretary of Commerce8
THE STATE OF U.S. TRADE
The Honorable Albert A. Frink
Assistant Secretary for Manufacturing
and Services16
INTRODUCTION OF THE MIDDLE EAST BUSINESS
INFORMATION CENTER WEBSITE
Ms. Caroline Joiner
Executive Director for Trade Promotion
and Outreach
U.S. Foreign and Commercial Service23
DISCUSSION ON VISA ACQUISITION ISSUES
Mr. J.W. Marriott, Jr., Chairman27, 45
CORPORATE STEWARDSHIP SUBCOMMITTEE REPORT
Mr. Ray Gilmartin, Chairman
* Presentation of Proposed Letter on
Government Corporate
Stewardship Efforts39
SERVICES SUBCOMMITTEE REPORT
Mr. Henry M. Paulson, Jr., Vice Chairman
* Presentation of Proposed Letter on
Services Statistics42
TECHNOLOGY AND COMPETITIVENESS
SUBCOMMITTEE REPORT
Ms. Betty Manetta, Chairman
* Presentation of
Subcommittee Activities48
TRADE PROMOTION AND NEGOTIATIONS
SUBCOMMITTEE REPORT
Mr. Warren Staley, Vice Chairman
* Presentation of Proposed Letter on
TPA, WTO and FTA Issues51
I N D E X (Continued)
PAGE
EXPORT ADMINISTRATION SUBCOMMITTEE REPORT
The Honorable Peter Lichtenbaum, Acting
Under Secretary for Industry and Security
* Presentation of
Subcommittee Activities56
CHINA TASK FORCE WORKING GROUP REPORT
Dr. Paul Hsu, Chairman
* Presentation of
Working Group Activities60
GENERAL DISCUSSION69
MEETING ADJOURNED77
P R O C E E D I N G S
MEETING CALLED TO ORDER
By Chairman J.W. Marriott, Jr.
CHAIRMAN MARRIOTT: Good morning, everybody. Welcome to our spring meeting of the President's Export Council. It is good to have you all here today. It looks like we've probably got a break in the weather, so that's always good.
And a special welcome this morning to Secretary Gutierrez, who has now taken over the Commerce Department and is a great advocate. We look forward to working with you, and are delighted to have you here.
A few members have stepped down from the PEC since we had our last meeting: Mike Armstrong, Glen Barton, Riley Bechtel, Michael Dell, and Michael Cogin. We are grateful for the contribution they made. We hope to have some new members appointed very soon.
We are grateful for Betty Manetta, who has now agreed to serve as the new Chair of the Subcommittee on Technology and Competitiveness. Thank you, Betty.
MS. MANETTA: Thank you.
CHAIRMAN MARRIOTT: Today we are going to discuss three letters of recommendation: Corporate Governance Stewardship Efforts; Services Statistics and Trade Promotion; and the WTO and Free Trade Agreement Issues.
We are also going to have updates from the Subcommittee on Technology and Competitiveness, the Subcommittee on Export Administration, and our China Task Force Working Group.
We are very pleased to have Secretary Carlos Gutierrez with us today. He has been on board since February 7th. He has traveled around the world seven or eight times, I think, since then. He began his remarkable career with Kellogg Company as the sales representative in Mexico City in 1975, and rose to become the CEO in 1999.
It is an honor and a privilege to have you here and introduce you to the PEC group. Please say a few words.
WELCOME/INTRODUCTORY REMARKS
The Honorable Carlos M. Gutierrez
Secretary of Commerce
SECRETARY GUTIERREZ: Thank you, and good morning. I want to welcome you all to the Commerce Department. And very specially, I want to thank Bill for his leadership on the President's Export Council. We hope to make this a great meeting and have some tangible follow-up, and look back and say that we were able to accomplish things.
I understand there are members of Congress who are here, and I want to welcome them as well to Commerce and to this meeting. We appreciate the time that you are investing in this, and I know the President appreciates that you are serving and you are making a contribution to our economy as a whole.
I thought I would talk a little bit about the economy and just set the stage in terms of the numbers that we see at the Commerce Department. We are fortunate enough to see the actual numbers as they are published. Very often, you hear a lot of editorializing around the economy. I thought it would be good to just step back and look at some of the facts.
Over the past four quarters, our economy has grown at about 4 percent. Last year, the economy grew at 4.4 percent. So, a very healthy growth rate. I am still always amazed when I think about an $11 trillion economy growing at 4 percent.
If you compare that to other major industrialized economies, the European Union, as you know, is growing at about 1.7, Japan at 1.2. So, we are growing at twice the rate of our major trading partners, which I think is a great testament to the President's agenda and to the business community.
There are more Americans working today than every before. The unemployment rate, as you know, is about 5.2 percent. No one is satisfied. Every time the President talks about it, he will say we're not satisfied, we're not complacent. We will not stop until every American who wants to work is working. But 5.2 percent is below the average of the past three decades.
Again, more Americans are working today than ever before. You hear a lot about, what kind of jobs are we creating? Household income is up 10 percent since the President took office. That is 10 percent in real terms. Over the past two years, the economy has created 3.5 million new jobs. The manufacturing sector has been expanding for two years. It was from a lower base, but has been expanding steadily for two years.
Productivity has grown at the fastest pace in 50 years. We know that home ownership is at an all-time high, so more Americans own a home today than ever before in our history. As we think about prosperity, that is probably one of the best indicators of prosperity.
Interest rates and inflation remain near historic lows. So the important thing is, if you step back and look at the bigger picture, we have got something going here and the challenge, of course, is to keep it going, continue to improve. No one is satisfied. We are not saying we are there, but there has been an awful lot of progress.
The President has an agenda to continue to expand the economy, to continue to strengthen the economy. It includes streamlining regulations. Passing tort reform was a major first step on that.
Affordable and reliable energy. We have got an energy plan in place that has been in place for four years. Four years ago, critics said it was too long-term in nature. Had it been approved four years ago, we would be four years into it. I think everybody has seen the wisdom of having a long-term energy plan today.
Reform health care, reduce junk lawsuits, make the tax cuts permanent. Then finally, of course, open new markets. That is a big part of the President's agenda. As you know, we have had several free trade agreements in the last several years and they are showing results. They are showing real numbers. I would just point to the agreement with Chile in 2003. Our exports are up 30 percent to Chile.
Today, our top priority for trade is CAFTA. I'm sure you've heard a lot about CAFTA. But we're working very hard to get CAFTA passed. We think there is a lot at stake here. It is not just the economics. These are important markets. It is $16 billion. It would make it the second-largest market in Latin America, after Mexico.
The important thing is, it is very straightforward. In the 1980s, we put in the Caribbean Basin Initiative, so exports coming out of Central America come into our country duty-free. Our exports going to Central America pay a duty. CAFTA eliminates that duty. So, pretty straightforward.
It is very good for job creation in the U.S., very good for U.S. businesses. We also have certain arrangements with Central America countries regarding textiles. We export raw material, they export back the finished product.
Without CAFTA, those agreements will expire in 2008, and I would hate to be sitting here talking about, how did we let those textile jobs go. So, we have an opportunity to do that.
The third thing about CAFTA which I find very compelling, as you will recall, in the 1980s, these were difficult markets, a lot of turmoil, civil wars, revolutions, military dictatorships.
Back then, the CBI was put in place so that they would embrace democracy and free enterprise. Twenty-five years later, they have done that. We have all democratically elected governments.
The irony is that the Central America presidents have been up here, trying to convince us to support free trade. So, an ironic turn of events. Twenty-five years later, they are trying to convince us of what we were trying to convince them to do 25 years ago.
So, a lot is at stake. Anything that, obviously, any of you can do to get the word out of how important this is and how much there is at stake, we would appreciate that very much.
It is very symbolic as well. We want to get to the Doha Round being in a good position. We want to be able to be strong at Doha. Not being able to pass an agreement with Central America is not going to help. So, again, I cannot emphasize enough how important this is.
The administration continues to be committed to opening up new markets, and committed to level the playing field. One issue that is very much on our agenda is IPR. We know that in countries around the world, very prominent countries, 90 percent of our software, 90 percent of our videos, 90 percent of our music is counterfeit.
We thrive on innovation, we thrive on creativity, on our brands, and we cannot create an environment whereby those assets do not really count. So, we are making this a very central part of our agenda with partners around the world. We have a meeting with China at the JCCT coming up in July.
I am actually visiting Russia next week, and China. I can assure you that intellectual property rights will be very, very high on our agenda.
I want to point out, just before closing out, you have this book in front of you. I think it is a great document, very clear. It is our 2005 National Export Strategy. A lot of work has gone into it.
I want to just highlight the essence of the strategy, because I think it enables us all to be aligned in terms of what we are trying to do, and as we think of how we allocate resources and allocate our time, that this document can provide direction so that we are all heading towards the same place.
The first priority that we've identified here, is to take advantage of the free trade agreements we have. We have some very good free trade agreements. I mentioned Chile. We have got Singapore, Morocco, Jordan, Bahrain. These are agreements that, throughout industry, we are probably not fully leveraging. The idea is, let us take advantage of them. Australia as well. That is the first priority.
Two, of course, is increasing our exports to China. The more we can do to keep the market open, to keep our exports growing to China, the better off we will be, given the growth rate of China. You will note that there is a lot of emotion around China these days. I am sure you will see that around town.
Spotlighting growth markets. We have identified Brazil, Japan, Russia, India, South Korea, the European Union, and China. That is pretty much a big chunk of the world economy. But to the extent that we can strengthen our position with those markets, strengthen our contacts, strengthen our business competitiveness in those markets, the better off we will be as a Nation, long-term. Then, finally, intellectual property rights is a big priority.
So, thank you again for your service. Thank you for what you are doing. It is a real pleasure to be with you. Thank you.
CHAIRMAN MARRIOTT: Thank you, Mr. Secretary.
Does anybody have any questions that you would like to ask at this point?
(No response)
CHAIRMAN MARRIOTT: Okay.
It is now my privilege to introduce Assistant Secretary for Manufacturing and Services Al Frink. Al serves as the chief advocate for U.S. manufacturing and the services sector in the Federal Government and brings 30 years of private sector experience to this job. Also, he conducts our monthly staff meetings.
Mr. Secretary?
THE STATE OF U.S. TRADE
The Honorable Albert A. Frink
Assistant Secretary for Manufacturing and Services
MR. FRINK: Thank you, Mr. Chairman.
Good morning, everybody. It is a definite pleasure for me to be here officially in this meeting as opposed to just an observer, from the last event, which did take place about three weeks after I was officially on board.
So, I did walk away from that meeting with a sense of being very impressed, Mr. Chairman and Mr. Secretary, with the individuals who have been working on PEC.
The fact that I oversee the staff meetings and I see the attention that is given to those meetings, and the consistent representation that I have seen, just speaks to the quality of everybody that is leading the PEC effort.
Since that meeting, there has been some very good news in the manufacturing world. The Secretary alluded to some of those details, but just to give you a bird's-eye view of the manufacturing side of life, for manufacturers, the ISM--which is the Institute of Supply & Management, for those who love acronyms--is a manufacturing index, which is now showing 23 months of a reading above 50 percent. Now, that is basically indicating strong expansion. ISM also has an employee index, which has been growing for 23 months. So, both sides of that equation are moving forward.
Productivity, as the Secretary mentioned, is up 2.6 percent. That is the key to rising standards of living. So, we say in many cases the same things, because they are very important to sending a positive message out that the President's tax cuts are working.
As the Secretary mentioned, we also need to continue leveling the playing field. So, I have been very active out there in support of CAFTA-DR. That is a win-win for, I think, for the most part, everybody.
When you think about 80 percent of what we bring into this country today is tax-free from those areas, and 99 percent of agriculture, we are really talking about very little to get this program in place, yet it has so many benefits for us in the export opportunities, especially for small manufacturers. So, I am passionately supporting CAFTA wherever I can do so.
We are also working with 12 other countries for free trade agreements after CAFTA. That is with Panama, Peru, Thailand, Columbia, Ecuador, and five nations of the Southern African Customs Union, and most recently the UAE and Oman. So, all of these areas are being worked on for future free trade agreements, which we hope to have, who knows, hopefully this calendar year.
But the new and pending free trade agreements with these partners would constitute, collectively, the third-largest export market in the world for us. That is as big as my home State of California. I just had to throw that in.
(Laughter)
MR. FRINK: But these agreements are not easy. They are always interest groups that will put up barriers to those agreements taking place. We, nonetheless, believe they will represent historic stepping stones to stronger partnerships, stronger economic relationships.
These agreements also create hope and opportunity. These are really the essential ingredients for peaceful transitions to free markets, so there is more than just business at stake here.
Anybody that has traveled internationally and has experienced international trade from my perspective, which I did for 25 years, as people do more trading, they get along better. They just find ways of solving issues at a business level that seems to have a carry-over effect into other places. So, free trade is good.
Regarding our services sector, that area continues to boom. It has been moving very favorably. Most people know it makes up the largest part of our economy. It represents about 68 to 70 percent of our total GDP. In the U.S., commercial services exports $325 billion. That was what we did last year.
That gave the U.S. a surplus in trade and services of $65 billion, so actually services is helping carry the load as an offset. It helped offset our trade deficit by 10 percent. So, services trade is very, very important.
On the tourism side of the sector, there is also great news. We had 5.2 million international visitors year-to-date, even with some of the visa issues we will be talking about. But that is an increase of 7 percent over the same period in 2004.
So, the U.S. has now seeing growth in visitations for 17 consecutive months--I am sure that puts a smile on Mr. Marriott--which has added $94 billion to our growing economy. So, it is a big part of what we need to do to make sure that the barriers for tourism are removed.
For small businesses, the President continues to pursue policies that benefit small businesses. Over the past several months, the President has signed the Class Action Fairness Act. That was tort reform.
That is not the end-all, but it is a beginning to level the playing field and reduce some of the costs of litigation that have affected so many companies I visited over the last eight months.
So there appears to be also movement in Congress with regard to estate tax, which I think we have branded, fairly, that it is the death tax. It is going to hurt mostly small, family-owned businesses. There is also movement on an asbestos reform bill. The President hopes to sign a viable version of that in the foreseeable future, which will be good for business.
As far as piracy and IPR, we all agree that that is a huge problem. The Commerce has joined other departments to initiative STOP, which, spelled out, is Strategic Targeting of Organized Piracy.
That is the most comprehensive initiative ever advanced. It is designed to smash criminal networks that traffic in fakes. We will also work to stop trade in pirated and counterfeited goods at America's borders, a huge problem.
Before his departure, Secretary Evans had his last visit to China. He stated at that event, "the violators who do not respect intellectual property must be thrown in jail," as strong and as forthright as that. So, we are taking that lead, I know the Secretary is, in getting tough in those areas. We need to be.
We have created a China Enforcement Office, which is designed to focus on China trade compliance. We also have established an Unfair Trade Practices Task Force. We have actually increased our ground forces in China by 25 percent. So, more is being put into that effort to level that playing field than ever, historically. All of them are focusing on investigating and identifying unfair trade practices before U.S. manufacturers are harmed, or businesses.
So I will kind of wrap up by saying that the policies of the President continue to be widespread in all aspects of the economy. I like to remind people in my travels that the President has an MBA from Harvard in Business.
This is a very business-minded administration, moving forward on all these agendas. This will not be a lame duck session in the second effort of the President. He is moving forward aggressively to help the needs of his agenda. Passing CAFTA free trade agreements, helping manufacturers promoting our service sector, ensuring the vitality of small businesses, remains the focus of Secretary Gutierrez, the President, and certainly mine.
So, I want to thank the council for letting me have a chance to give you that report, and I will turn it back to you, Mr. Chairman.
CHAIRMAN MARRIOTT: Thank you. Any questions for the Assistant Secretary?
(No response)
CHAIRMAN MARRIOTT: All right.
I would like, now, to introduce Caroline Joiner. Caroline is the Executive Director for Trade Promotion and Outreach for the U.S. Foreign Commercial Service. She is here to introduce us to the Middle East Business Information Center Website.
Caroline?
INTRODUCTION OF THE
MIDDLE EAST BUSINESS INFORMATION CENTER WEBSITE
Ms. Caroline Joiner, Executive Director
Trade Promotion and Outreach
U.S. Foreign Commercial Service
MS. JOINER: Thank you.
The Middle East and North Africa Business Information Center will be the first comprehensive U.S. Government resource helping U.S. businesses take advantage of the huge potential of these markets.
Like the China Business Information Center which was introduced to you last year, the creation of the Middle East Business Information Center was maintained by Congress in the FY 2004 appropriations.
The Center will have four key parts: the website, which you should be seeing screen shots of that in your packets; access to a team of specialists here in DC in our domestic and international field; and aggressive outreach and education tour.
The website portion of the MENABIC--everything has an acronym, of course--will be hosted on export.gov, the Federal Government's export promotion portal.
The website will feature practical information for our exporters, including market- and industry-specific information. The markets that are on there now are detailed information from the eight countries where the Foreign Service has a presence.
Before our formal launch in the next six or seven weeks, we will also include the markets where we have satellite and partnership posts with State. We eventually will move toward having all 21 countries in the region included on there.
The site also includes exporting how-tos, current market research, highway export leads, information on upcoming trade events, regulatory information, and direct access to counseling with our Trade Specialist through our "Ask the Specialist" features.
We also have another way to access our specialist through the 1-800 number at the Trade Information Center, where it has been staffed by Middle East and North African specialists.
We also have an international component to this. Our FSNs and Senior Commercial Officers in the region met last week in Charmalshake, and are committed to the success of this project. They are excited at how this raises the profile of the region. We are also going to be adding a few overseas contractors to cover countries where we do not have a presence.
Their main goal in-country is to be generating trade leads and helping us match buyers and sellers. They are also going to be continuing to populate the website with current research and information about what is happening in the region.
The biggest piece of this, though, is that we know that our selling job on this is hard for the domestic market. We know that we have an uphill battle to make sure that our exporters are aware of the huge potential in these markets. So to work on that, we are going to have an aggressive outreach tour.
We are going to utilize this strong team of domestic specialists, but also make sure that, every time our visiting FSNs and SCOs are here in the country, are out there educating our exporters through a series of outreach events and seminars.
Every time they're at a trade show, they're going to make sure our buyers and sellers are meeting up with one another. We are also going to tap into relevant trade and industry associations and work through relevant media outlets to make sure that this information is out there to our exporters.
The benefits of getting this information to the exporters is obvious: to help promote economic growth and political stability in the region, but also improve the quality of life and open a new avenue for our trade.
I am here today to see that you guys will help us endorse this and we can get this thing formally launched. Thank you.
CHAIRMAN MARRIOTT: Thanks, Caroline. Caroline has asked the council to look at and endorse the Middle East Gateway website. A message was sent to all of you to look at the site, and in front of you is a presentation on the website.
Are there any questions?
(No response)
CHAIRMAN MARRIOTT: Can I have a motion to endorse?
VOICE: So moved.
VOICE: Second.
CHAIRMAN MARRIOTT: Okay. All in favor, aye.
(A chorus of ayes)
CHAIRMAN MARRIOTT: Thank you, Caroline. It's a great tool. Good job.
DISCUSSION ON VISA ACQUISITION ISSUES
Mr. J.W. Marriott, Jr., Chairman
CHAIRMAN MARRIOTT: Before we discuss the three letters of recommendation, I'd like to take a few moments to talk about the visa situation.
During our last meeting, the council approved a letter to the president on Security, Trade and Travel, which addressed the challenges of balancing the new security requirements with the free flow of goods and people.
Since the letter, a lot of council members have expressed concern about the difficulties they encounter in obtaining visas for business, as well as for tourism.
These issues have been on the radar screen, for those of us in the travel industry, for a long time. We continually see the U.S. market share of international travelers drop, in spite of what Mr. Secretary Frink said this morning. We are not doing as well in attracting international visitors to the United States as we should.
Also, in recent months, many American businesses have begun to realize the impact that these same visa problems are having on their own businesses. I think all of us around this table are concerned with the issue. I know many of us have spoken with officials at Commerce, State, and Homeland Security.
The problem is, we are not getting very much done. So, hopefully today we can discuss some actual ways to make the situation better.
First off, I think I need to be clear that we are not suggesting that security of the United States should in any way be jeopardized. We do believe that there is a balance between security and free flow of goods and people, but we need to do a better job of finding that balance.
From the perspective of the travel and tourism industry in the year 2000, the United States had 21 million international travelers visit the country. In 2004, we had dropped from 51 million to 44 million.
This reduction in our market share is coming at a time when the dollar is down and international travel is up, which means we are the place to visit. We are inexpensive, we are a bargain. Yet, more people are traveling around the world, we know that, and they still are not coming to our country.
You have to ask, why not? Obviously, we have somewhat of a negative image in some countries around the world, but I think we have a visa process that is expensive, time-consuming, unpredictable, and the fact that travelers have hassle-free options in other countries that are aggressively marketing themselves has an impact.
We cannot solely attribute all these losses to the visa issues, but we know there have been a lot of major groups, like the World Masters Indoor Track and Field Event, which has gone elsewhere because they were concerned about being able to get their attendees their visas in a timely fashion.
Our company participated recently in a travel mart in New York City with 5,000 people, where buyers and sellers of travel come together, travel agents, hotels, airlines.
We invited a prominent travel agent from India to attend. We sent an invitation in March. She approached the embassy and they told her that she could not get her visa until July. They were too backed up and couldn't handle it.
So, since the mart was held in May, she was not able to attend and we lost business, as did many of those other people who had come to do business. I am sure she took her business to some other country.
Recently in a survey, 73 percent of U.S. companies solicited were currently experiencing visa problems, getting business travel visas to the United States.
This means we can't get our own employees, based internationally, here for training. It means the U.S. companies can't get their customers into this country to buy their products. And according to the Business Roundtable, in 2003, U.S. exporters lost an estimated $30 billion in indirect costs as a result of delayed visa processing.
Companies are aware of, and have identified, what they deem to be the biggest problems with the current visa system. One, is inconsistent and opaque consular processes for processing these visas.
The next, is visa application expenses that can be as high as $10,000 in local economic terms for people from countries like Pakistan, Bangladesh, Nicaragua, and a dozen other countries.
Lack of adequate staffing, I believe, is probably the biggest problem at the consular offices and other agencies to meet the need of the newly mandated level of scrutiny and security requirements as a result of security.
Lack of channels for U.S. companies to consult with appropriate officials to provide input on behalf of application for key customers or employees, is another problem.
Our universities are losing students, our hospitals are losing patients, and our businesses are losing sales and profits.
So let me now, at this time, open up the floor to any comments by any of you PEC members as to any experiences you may have with this issue and what you think some of the solutions might be. I'd really like to hear from you for a few minutes this morning as to what you think about this.
MR. SMITH: Mr. Chairman?
CHAIRMAN MARRIOTT: Yes, sir?
MR. SMITH: Illinois Tool Works has numerous overseas operations, on the order of 300 in 45 different countries, largely for a manufacturer of U.S.-developed product in those countries for local markets. As such, we are exporting a significant amount of capital equipment to support those manufacturing operations.
I would like to address one of the particular items that you mentioned, although I would have to say we are affected by all of them.
One of them, is the inconsistent and rather opaque way that some of these visa applications are dealt with at the consular level. We had an instance where we had a piece of equipment going into China. An employee of our Chinese subsidiary applied for a visa.
During the interview with the consular officer, the consular officer alleged that the letter had been forged. We understand there is a black market in letters, but this one was not forged. He was sent away. He came back two weeks later, trying to re-open the case, and was told, no, the rules are, you cannot come back for three months.
The solution was to hire somebody else in the subsidiary, send that person in. For whatever reason, that letter was not alleged to be a forged letter and the visa was eventually issued. There was a three-month delay overall in getting a piece of equipment out of the United States an into China.
We have the same kinds of problems occasionally with the customers. There, the risk is more a competitive risk. If it is difficult to buy our equipment as an export from the United States, it is difficult to get their employees in to either inspect the equipment or to be trained on the equipment, we are at a competitive disadvantage.
I think one of the problems with this problem, is that so many of the incidents are small. These are not big deals. But as they add up, they are a big deal. How do you deal with such a series of small, individual issues, like the fake letter issue as an easy example, is a real problem and I understand that.
Is there a way that these kinds of problems can be better studied, better identified, and some kind of a joint effort between this group, or perhaps it is something in Commerce, with Homeland Security, with the State Department, with whatever the appropriate agencies are, to identify specific things to more standardize and make clear the rules to avoid the kinds of various interpretations and misinterpretations that are going on in order to at least make it a more straightforward A, B, C job, here's what you've got to do. That, I think, would be useful.
CHAIRMAN MARRIOTT: That's great. Thank you.
Anyone else? Hank?
MR. PAULSON: Hank Paulson from Goldman Sachs. I just have one other comment. We don't run into the problem to the same extent that others do, but we run into variations of this. I think what you're suggesting, and what Mr. Smith is suggesting, makes sense in terms of more transparency and more staffing.
I have seen some issues where I asked myself, does a one-size-fits-all policy really make sense? That is really getting at not just the implementation, it's getting into the basic policy. Aren't there classes for categories of people that could be treated differently?
I've run into situations where there are important people, senior officials in governments and so on, that even do not choose to come to New York, or are very embarrassed when they come in terms of the way they're treated and the processes they go through.
I know this is difficult, because my 80-year-old mother has got to take off her shoes, and so on, when she goes through the airport. How many 80-year-old midwestern Caucasian women have created terrorist incidents?
So, I understand why we want to treat people the same, but I can think of instances where, for instance, Chinese visitors, heads of major companies that are looking at listing in the U.S., and so on, one of the things that argues against them doing that, is just everything that they've got to go through and the whole way they're treated coming in.
So, I know I'm going off in a different direction, and I think we should be concentrating on what you've suggested for now. But at least I want to raise the issue that I am hoping we can someday get to the point where we don't just have one size fits all for every group of foreign visitor.
CHAIRMAN MARRIOTT: Thank you. Good comments.
Others?
MS. LEVINE: Mr. Chairman?
CHAIRMAN MARRIOTT: Yes, Cecilia?
MS. LEVINE: I have a comment. I'd like to speak for the Board of Regents. We are integrated in every respect. Our economies depend on each other. This visa issue has created a very significant dent in the economy of -- I'm going to speak for El Paso, Texas retailers, and all along the border.
There is no reason why we can't establish some fast training into our consulates to allow our people to understand that security is an issue, but they have to distinguish who they're rejecting.
Last week, we had a Federal Reserve joint meeting of the Banco de Mexico and our Dallas Federal Reserve Board. A top official of the Banco de Mexico was rejected for a visa, so he could not attend the meeting.
I think there have to be certain criteria that have to be set up so that we can show our efficiency and our productivity also in our consulates. The consulate in Sudajuarez is having a training session in June, which I appreciate that the State Department is working on it, but I think it has to be a bigger effort to try to alleviate some of this, and also the social tension that it's creating in Sudajuarez and other border towns. We have groups that are forming at this time to protest against this issue in our region.
CHAIRMAN MARRIOTT: Okay.
MR. PAULSON: That was the kind of issue I was talking about.
CHAIRMAN MARRIOTT: Good.
Arnold?
MR. DONALD: And just to reinforce the point, Mr. Chairman, a couple of weeks ago, the Honorable Chung Suei was at the Kennedy School of Government, where he was invited to participate. He just made a kind of flip comment about, he was delighted to be there and that he was able to get a visa to be able to participate at the conference.
Then off-line, there was quite a discussion amongst those that were in the conference representing all types of industry players about the difficulty in their ability to engage in exporting to China or providing services because they can't get their Chinese counterparts here to the U.S. to meet and get to see the facilities and the people.
So, just to reinforce what everyone else is saying. While we certainly don't want to compromise national security in any way, I think it is a matter of priority if we really want to take advantage of the world markets. Thank you.
CHAIRMAN MARRIOTT: Mr. Secretary?
SECRETARY GUTIERREZ: The Chairman and I were speaking this morning about trying to find a way to move forward on this, and we agreed that we are going to get the right people in the room.
I don't know if there's somebody here from the State Department, or State Department and Homeland Security, to see if we can get a working plan in place and start addressing some of the specifics, and perhaps there is something that can be done to show progress. I think you've all identified the problem: it's finding the balance between security and commerce.
So, I just wanted to let you know that I've committed to doing that. I'll be in touch with the Chairman and we'll get a small group of people in a room, show the facts, and see if we can discuss some solutions.
CHAIRMAN MARRIOTT: Thank you. It's been a good discussion. I'm looking forward to working with the Secretary, and I'm sure we'll be recruiting some of you on our task force here to see if we can't get some action on this.
I think it's very important to get some speed behind this and get some energy behind it, and we intend to do so, working through the summer. I think by fall we should have at least a good report to give to you. So, thank you for your participation.
Before we launch into the subcommittee reports, I'd like to establish a rule of order. Once the reports have been presented, I will open the floor for comments on the three letters for consideration. They're in your binder, posted online, and available outside this room for the public.
First off, I'd like to call on Ray Gilmartin, Chairman of the Subcommittee on Corporate Stewardship.
Ray?
CORPORATE STEWARDSHIP SUBCOMMITTEE REPORT
Mr. Ray Gilmartin, Chairman
MR. GILMARTIN: Thank you, Mr. Chairman.
Good morning, everyone. On behalf of my subcommittee colleagues, I am pleased to update you on the status of the Corporate Stewardship Subcommittee work. Today, the subcommittee presents a letter, which is behind Tab 4, for your consideration that highlights and supports the U.S. Government's current efforts to recognize corporate stewardship.
Our goal in providing the President with this letter is two-fold. First, we hope to inform American business and the public about the positive contributions that the U.S. Government is making to acknowledge corporate stewardship. Second, we want to encourage the continuation of these efforts and inspire more such efforts.
This letter highlights the corporate stewardship awards presented by the Department of State, Department of Commerce, and Department of Labor, and urges the President to support their continuation.
This letter also urges the President to encourage other government departments and agencies to recognize corporate stewardship efforts. So, we seek your approval of this letter and encourage you to support it.
As you will recall, last year we prepared a report that showcased examples of U.S. corporate stewardship in developing nations. This letter builds on that report by underscoring the rule the U.S. Government can play in encouraging U.S. businesses to engage in corporate stewardship activities through recognition.
In preparing this letter, we sought to identify the U.S. Government's efforts to acknowledge corporate stewardship, so I'd like to thank those of you who provided us with information about the existing awards and recognition efforts.
The awards we've highlighted in this letter demonstrate that the U.S. Government, like Secretary Gutierrez has said, supports the view that companies, as stewards of democratic, free market capitalism, transform our world by introducing opportunity, lifting lives, and helping to build the institutions that bring stability, order, and fully functioning societies.
Thank you.
CHAIRMAN MARRIOTT: Thanks, Ray.
Are there any comments, questions?
(No response)
CHAIRMAN MARRIOTT: If not, I propose the letter be transmitted to Secretary Gutierrez for submission to the President. Any objections to that?
(No response)
CHAIRMAN MARRIOTT: Hearing none, the letter is approved.
I would now like to call on Hank Paulson, Vice Chairman of the Subcommittee on Services, to give his report.
SERVICES SUBCOMMITTEE REPORT
Mr. Henry M. Paulson, Jr. Vice Chairman
MR. PAULSON: Thank you, Mr. Chairman.
I am filling in for Mike Eskew today, who is not here.
Again, I think the letter is quite straightforward. Services account for about one-third of U.S. exports and about 80 percent of U.S. private sector GDP and private employment.
Now, I listened to Assistant Secretary Frink, and I think he said he thought it was about two-thirds. I think this may sort of be the issue. I think people do not really know. They estimate and we know it's big, but we don't have as much data as we should about the service sector and its role in the U.S. economy.
The idea here is, we know it's big, we know it's important, we know it's diverse, we know it's vital. If we had more data, if we had more information, it would help us in formulating our own policies, it would help us negotiating in the export arena.
I, for one--and I'll make some comments later--know that, for instance, the part of the service sector that I represent, brokerage investment banking, that we've got companies that are big, real, and vital to the capital markets and are exporters.
They are leaders in their industry and they're imported here. Like, for instance, when I go overseas, whether it's in China, India, or whatever, they say, you guys make the case here, but your government doesn't.
If your government made the case, it would be easier for us to give you some of the things you need. So in any event, the idea here is, this letter just makes the very simple recommendation to the President that we take some concrete steps to approve data gathering by a number of agencies, including the Census Bureau, the Bureau of Economic Analysis, and the Bureau of Labor Statistics.
So I said, let's just get more information on the service industry in its broadest form, and that has got to be a good thing. So, I think it's not very controversial and it's a straightforward letter.
CHAIRMAN MARRIOTT: Okay. Thank you.
Any questions, comments?
(No response)
CHAIRMAN MARRIOTT: Motion to approve it?
VOICE: So moved.
CHAIRMAN MARRIOTT: All in favor, aye.
(A chorus of ayes)
CHAIRMAN MARRIOTT: Any opposed?
(No response)
CHAIRMAN MARRIOTT: The letter is approved. We will submit that letter to you, Mr. Secretary, and you can submit it to the President.
DISCUSSION ON VISA ACQUISITION ISSUES (Continued)
Mr. Jan W. Mares, Business Liaison Director
Private Sector Office
U.S. Department of Homeland Security
MR. MARES: Mr. Chairman, I'm Jan Mares. I'm in the Private Sector Office of the Department of Homeland Security. The head of it is the Special Assistant to the Secretary for the Private Sector is Al Martinez-Fox.
We appreciate the comments that are being made here. They are not surprising to us. We actually agree with them.
I'll give you one piece of historical information and two pieces of current information.
Before we go further, we have a visa issue here. John Mares is the Business Liaison Director for the Private Sector Office of Homeland Security, and has offered to give us some comments about visas.
A little over a year ago, the Department of State and the Department of Homeland Security worked together to begin to change some of the non-immigrant visa practices. Some of that has been done. There has been some progress.
If you looked at the rate of issuance, there is actually posting of average wait times on the website, which serves as a metric which is going to, over time, put pressure on the system to work better. We're not there yet. I think all of us in our office, and many of us in the Department, believe that we need to do more, such as has been said here.
When the Secretary became Secretary, he initiated what he calls a second-stage review. Essentially, we've been in business two years. It's time to re-think what we're doing. One of the programs and groups in that regard deals with non-immigrant visas. Their report will be given to the Secretary next week.
We actually had a meeting regarding it, and others, yesterday and there are several very thoughtful suggestions in there. I can't guarantee all of them will be implemented or how soon it will take, but they and a member of the State Department is in that workgroup.
This afternoon, in fact, the chairman of that group and myself, my boss, Al, are going to meet with the representatives of 18 national associations--probably every member of this council is a member of one of those associations--to talk about their suggestions as to how we as a country could improve the non-immigrant visa situation, for the very reasons you recited.
We're not finished with this. We've got a long way to go. It is a balance of security versus economics. But at least our office and others within the Department are very conscious of the importance of giving better recognition to the economic implications, both short-term and long-term, to think about the implications on this country of students who don't come here and go elsewhere. So, we're hard at work on it.
We would like very much to work with your council. In fact, any statistical or other information that you have or would like to share with us, we're most willing to take it and try to work on your behalf. Thank you very much.
CHAIRMAN MARRIOTT: Thank you very much. We appreciate your comments and will look forward to working with you.
Next, we have Betty Manetta, the Chairman of the Technology and Competitiveness Subcommittee, to give a report.
TECHNOLOGY AND COMPETITIVENESS SUBCOMMITTEE REPORT
Ms. Betty Manetta, Chairman
MS. MANETTA: Thank you, Mr. Chairman. It is an honor to be here today. As you said earlier, Mr. Glen Barton of Caterpillar stepped down, retired recently, and he was the Chair of the Subcommittee on Technology and Competitiveness.
As you well know, this subcommittee has been working with President Bush on No Child Left Behind. As you know, it is imperative for children to be competitive and to be able to compete in a global marketplace in math and science, and therefore this impacts technology in the U.S. So, we've been working on that.
In the fall, we will be working on the subcommittee in trying to attract new members. As you said, some of our members stepped down, so we're looking for new members in the subcommittee. We are going to be working in the fall on technology and competitiveness, how it impacts minority women and small businesses in the United States.
As you know, that is the growth engine of this economy. In order for us to be competitive in the global marketplace, we really need to focus on several things: working with Fortune 500 companies, working with agencies like Hector Barreto's Small Business Administration, Ron Langston's MBDA. We're going to be partnering and looking for some solutions.
Last week, I attended the Billion Dollar Roundtable, which is the Fortune 500s that spend a billion dollars or more with minority- and women-owned companies. The impetus of that committee was to look at ways that we can expand and grow small minority companies, especially in a global environment, and how do we become more technology savvy to be able to compete in the global marketplace.
As you know, RFID is coming up and it is very difficult for small and minority companies to be able to do some of these things. So, we'll be working in putting a letter together that will be very prescriptive, Mr. Chairman, that will talk about some of the initiatives and how we can do some of these things to enhance our ability to compete in the global marketplace, as well as looking at the issues of world products, the lack of raw materials.
In order for us to be able to come up with new technology, we need to be able to, number one, partner with some companies, and secondly, talk about the issues of raw materials that are not available.
Thank you.
CHAIRMAN MARRIOTT: Thank you for your update, Betty. We look forward to discussing your letters at the fall meeting.
Any comments on Betty's report?
(No response)
CHAIRMAN MARRIOTT: Warren Staley is Vice Chairman of the Subcommittee on Trade Promotion and Negotiations, and will now give us his report.
TRADE PROMOTION AND NEGOTIATIONS SUBCOMMITTEE REPORT
Mr. Warren Staley, Vice Chairman
MR. STALEY: Thank you, Mr. Chairman.
I am pleased to be here representing the Trade Promotion and Negotiations Subcommittee. This committee's staff and members have been very busy at work since the last meeting, continued their good work. I am happy to submit a letter on all of our behalf today that speaks to the critical trade issues facing the U.S. in the coming months.
The first, is the pending trade agreements and negotiations. The council strongly supports the administration's efforts to achieve Congressional approval of the CAFTA-DR agreement.
The agreement is important to market access and provides U.S. exporters political and economic development within Central America, and, finally and very importantly, the signal it sends to the result of the world on the ability of the U.S. to lead the trade agenda.
In addition, the council supports the bilateral and regional negotiations with countries in the Middle East, South Africa, Latin America, and East Asia.
The second point in the letter is trade promotion authority. Without the renewal of TPA, trade promotion authority, America's ability to negotiate substantive trade agreements declines precipitously.
Our trade partners simply will not provide their best offers of market opening if, in fact, the U.S. Congress can withdraw or amend the commitments made by U.S. negotiators.
Finally, TPA extension is very critical to the future of the Doha Round, which is the final point of our letter.
The council encourages the administration to uphold membership in WTO as a multilateral rules-based system that provides the greatest chance for the countries to make difficult, but very necessary, reforms in trade policy.
Although bilateral and regional trade agreements are important and can capture immediate market access opportunities, the U.S. stands to gain the most from a comprehensive global trade negotiation.
As the leader in a global trading system, the U.S. must be prepared to take serious offers in the most challenging areas as agriculture, intellectual property, and services.
So, we urge the administration to focus its resources and pursue an ambitious agenda toward a successful Hong Kong ministerial in December of this year, 2005.
On behalf of the subcommittee, Mr. Chairman, I thank you for the opportunity to present this letter.
Mr. Chairman?
CHAIRMAN MARRIOTT: Thank you very much, Warren.
Are there any comments?
MR. PAULSON: Mr. Chairman, just to build on something I said about the securities industry. Investment banking and the securities industries is facing regulations in a number of developing markets that are very important to the global economy that have opposing restrictions that make it difficult for us to offer investment banking services, security services on a level playing field. We have developed a model schedule of expanded trade commitments and we have talked about it.
When I was in Brussels a month ago, I met with Peter Mendelsohn and we've talked to the EU about doing much more in this country, also, because we think it's just very, very important.
Now, one thing I want to flag. I don't think there's an easy solution for this, because it's just a unique political issue in the U.S., is this Mode 4 issue, which is so big on Capitol Hill, which has to do with people crossing borders.
So, in the U.S. it is not just a trade issue. It is, in a sense, a political issue. I know that there is some feeling, which I understand, that you want to separate this from the trade issue because there's such a sense of a political issue on Capitol Hill.
I would just say, with regard to our industry, which I would argue is an important industry, it's hard to foster increased protection for the export of our services, where we aren't entering into discussions with -- you know, we want our people to be able to travel back and forth across borders, and we're making it more difficult for other countries to do so.
We've had problems in a variety of countries where you want to send someone over from the U.S. to work on a transaction, and it is just very difficult. We get cited by regulators, and so on, in other countries. So I just wanted to say, I don't think that's going to be the most pressing thing you're dealing with. I just wanted to put that on the agenda.
CHAIRMAN MARRIOTT: Thank you.
Any other comments or questions?
(No response)
CHAIRMAN MARRIOTT: Do we have a motion to approve the letter?
VOICE: So moved.
CHAIRMAN MARRIOTT: All in favor, aye?
(A chorus of ayes)
CHAIRMAN MARRIOTT: Any opposed?
(No response)
CHAIRMAN MARRIOTT: Okay. Thank you very much.
This letter will be given to you, Mr. Secretary, for submission to the President.
Peter Lichtenbaum is Acting Under Secretary for Industry and Security, and will now give the council a report on the Subcommittee on Export Administration. Brian Ferguson is Chairman of the Subcommittee on Export Administration, but could not be here today.
So, Peter?
EXPORT ADMINISTRATION SUBCOMMITTEE REPORT
The Honorable Peter Lichtenbaum
Acting Under Secretary for Industry and Security
MR. LICHTENBAUM: Thank you.
Mr. Chairman, Mr. Secretary, I am pleased to be here on Brian's behalf to provide the report for the Subcommittee on Export Administration.
We have met twice since the last PEC meeting, and I'd like to discuss three issues that we've been talking about in our meetings.
First, the renewal of the Export Administration Act. This is the legislation under which sensitive items are licensed for national security reasons.
Since 2000, the President has advocated a streamlined and strengthened export control system. Last fall, the subcommittee drafted a letter to the President, urging the President to make comprehensive export control legislation a priority for the second term. In December, Chairman Marriott signed this letter to the President on behalf of the PEC.
The PEC expressed concern that the Export Administration Act has been in lapse for almost four years now, and that the Export Administration Act itself is based on a Cold War policy framework rather than the threats of the 21st century, and that we also need to look at removing any unnecessary barriers to exports.
I would also bring to your attention that, in addition to the PEC support, the President's Commission on the intelligence capabilities of the United States regarding weapons of mass destruction, or the WMD Commission, recently called for Congress to renew the Export Administration Act, so they share your view.
As the administration moves forward in our consultations with members of Congress on this legislation, we will continue to value the support of the PEC and hope to receive further input from the subcommittee regarding recommended statutory changes.
The second issue I'd like to mention, is nanotechnology. As Brian Ferguson mentioned at the September meeting, the PEC has asked the subcommittee to form a nanotechnology working group, and we formed that group in October.
The members include nanotech industry experts, as well as subcommittee members who have experience with these issues. For exmaple, we've reached out to firms such as Nanosys, Nanotechnologies, and industry groups such as the Nano Business Alliance.
The working group is considering a number of issues, including the national security implications of nanotechnology, because it's very useful for our military, for others' militaries; the extent of foreign availability of nanotechnology; the effect of imposing any export controls on nanotechnology.
The basic goal is how to protect national security without impeding legitimate trade. We are circulating discussion papers and hope to provide a report to the PEC sometime in the next year.
The third issue, is deregulation of technology transfers to foreign nationals here in the United States, something known in the trade as "deemed exports."
The Department's Inspector General issued a report last year asking us to consider certain steps to tighten our controls on the release of technology to foreign nationals here in the United States.
We published in March a rule seeking public comment on the Inspector General's recommendations, and have asked the subcommittee to provide comment specifically.
I think the subcommittee generally feels that any rule changes should be very carefully considered because any changes should not stifle innovation. Research and development activities in our academic and business communities are vital to our economic growth.
So, Mr. Chairman, thank you. I appreciate the opportunity to provide the subcommittee's report on these important export control issues.
CHAIRMAN MARRIOTT: Thank you very much, Peter.
Anybody have any questions of Peter?
(No response)
CHAIRMAN MARRIOTT: Okay.
Now I'd like to call on Dr. Paul Hsu to give the council a report on the activities of our China Task Force Working Group.
Paul?
CHINA TASK FORCE WORKING GROUP REPORT
Dr. Paul Hsu, Chairman
DR. HSU: Thank you, Mr. Chairman, Mr. Secretary.
Last September, after our fact-finding trip to China, the President's Export Council was asked to review the competitiveness of U.S. companies exporting to China. According to statistics from the Department of Commerce's world trade analyst, U.S. companies' share of China's total imports was 8.2 percent in 2003, compared with the EU's 12.9 percent and Japan's 18 percent.
The China Task Force was established to investigate the factors that contribute to this relatively low percentage of the U.S. exports to China. Our mission statement is quite simple: we like to help U.S. companies to become more successful in the China market.
Since then, the China task force has received a tremendous amount of help and guidance from many PEC participants, such as Marriott, Applied Materials at ITW, Merisant, UPS, MFI, Argent, Exxon-Mobil, Eastman Chemicals, and many other outstanding companies. I believe, Mr. Chairman, by working together, we will accomplish this mission.
Our first goal was to construct a website so that information could be shared between all members of the China Task Force. The website provided contact information, the useful links to collecting data, and a library for useful documents. This website is available for all users and will be updated frequently.
The next task was to gather information related to how companies are exporting into China. We prepared a questionnaire for distribution to all of the China Task Force members. These questionnaires will cover the barriers that these companies might have faced while exporting to China, as well as some successes they experienced.
I would like to thank all the members of the China Task Force in advance for participating in this questionnaire, because your detailed responses will serve as a very solid foundation for our study. Soon, you will receive the questionnaire and you will have about two to three weeks to respond.
Additionally, we would like to acquire information about the government assistance programs for foreign countries, such as Japan and the EU. Department of Commerce professionals, such as Hank Levine, Mark Chatham, Christina McDaniel, and many others have really worked diligently to help us to get this information, and I'd like to express my sincere appreciation for their willingness to help.
This is a very complex issue involving collection data from sources outside of the United States, but it will be a very important part of our study.
Mr. Chairman, I would also like to point out that there are several very useful government assistance tools designed to help the U.S. companies in penetrating the Chinese market. Some of them have been mentioned earlier.
I have found the China Business Information Center and the Gold Key Service, both of which are offered by the FCS, to be extremely useful. The staff is knowledgeable, helpful, and they provide great content.
So with all this information gathered, we are shooting to submit a draft report to you, Mr. Chairman, for your approval this coming September.
Again, thank you, Mr. Chairman, for the opportunity to serve.
CHAIRMAN MARRIOTT: Thank you, Paul, for all your hard work. We look forward to receiving the letter.
Are there any questions of Paul? Comments?
MS. MANETTA: Yes. I have one question.
Paul, are you going to be looking at some of the issues that are currently happening, for example, the tariffs of 400 percent for textiles? One of the things that was mentioned earlier, you ship out export raw materials and in place you have the preassembled stuff coming back in, so maybe that's a way to kind of offset it.
DR. HSU: Right. Right.
MS. MANETTA: But, unfortunately, everything that they need is what everybody is short of, like steel, wood.
DR. HSU: Right. Right.
MS. MANETTA: So are you also looking at some of the things that we can do, especially as it relates to the Chinese?
DR. HSU: To answer your question, honestly, yes, I did. But again, the deadline for this report is this coming September, so it is really depending on how big of an area we'd like to cover.
The visas, definitely, is a very important issue. Intellectual property right protection is a very important issue. We'd like to see more transparency for import-export laws, and those are also very important issues. But we just have to choose.
This is kind of really, in a way, like a general report to the Chairman and the Secretary of where we stand on the China Task Force.
MS. MANETTA: But on the website, will it have data?
DR. HSU: It will.
MS. MANETTA: You know, facts, and things like that?
DR. HSU: Yes, ma'am. It will.
MS. MANETTA: Okay. Thank you.
CHAIRMAN MARRIOTT: Thanks, Betty, for your comment.
I just had a note that Senator Mike Enzi from Wyoming is here and would like to say a few words.
Senator, welcome.
SENATOR ENZI: Thank you very much, Mr. Chairman. I apologize for arriving late and having to leave extremely early. I'm Chairman of the Health, Education, Labor and Pensions Committee and we've got a few issues that we're trying to work through before the break comes up this weekend.
But you are covering some issues that are very near and dear to my heart. I appreciate all the effort and leadership that you are putting into this. I appreciate being able to call you my chairman, and also my fraternity brother.
(Laughter)
CHAIRMAN MARRIOTT: Thank you.
SENATOR ENZI: I also appreciate the efforts of my subcommittee chairman. That's where a lot of the effort, direction, and push for the Export Administration Act has to come from, and you've been doing a marvelous job.
It is something that needs to be done, desperately needs to be done. The Export Administration Act ran out in 2001. We did pass a version through the Senate. In fact, we passed it 84 to 14. It happened to be five days before September 11th.
That had a drastic effect on whether anything could be done in an international way after that. The House kind of closed down and started coming up with amendments that were dealing with security. You can get enough security that you can't have an economy.
Had that bill passed with the 30-some amendments they wanted to add on the House end, we would not have an economy. So, we were part of helping to slow that down a little bit so that it didn't happen, but it needs to happen. We do have dual-use items in the United States, and the sale of them is really the fount of invention, the reason that people invent and become entrepreneurs. It's kept us ahead of the rest of the world. We talk about out-sourcing.
Usually what happens with out-sourcing, is products that have become kind of passé and normal, we pass those on to other countries to mass produce while we come up with newer and better inventions. We have to keep that cycle going.
One way we do that, is to have licensing in a streamlined form so that people can be assured that they can sell their products overseas. We have encouraged multilateral agreements.
I've been to Russia and talked to them about the need for them to do an Export Administration Act, for them to work in a multilateral way with us so that bad products won't get in rogue countries' hands. They were extremely cooperative. They have done the work. We talked to Mr. Putin about it, who met the next month with our President.
When President Bush got back from over there, he called me up and said, I guess if you've lobbied this as far as the leader of Russia, that I probably ought to be urging people a little bit more to get this done. I told him that was the case. They have made more changes, but we have not. So, we do need to emphasize that.
We do need to get it done, with emphasis from this distinguished group, who I really, really appreciate taking all the time to be so vigorously involved and such good proponents of things that we need to do on the Hill. I just appreciate your efforts and I appreciate what you're doing, Mr. Chairman.
CHAIRMAN MARRIOTT: Thank you. Thank you for your comments.
Peter?
MR. LICHTENBAUM: Just a quick comment to say that it's frankly an honor to be sitting next to Senator Enzi. As someone who works on export control issues, Senator Enzi has taken the lead in the Congress in working on this very difficult and complex issue over a number of years. Those of us who work in the field really owe you a debt of gratitude, sir. So, thank you for your work over the years and for coming here today.
CHAIRMAN MARRIOTT: Absolutely. Thank you very, very much. Your comments are great. Appreciate it.
Any other comments for Paul on the China report?
(No response)
CHAIRMAN MARRIOTT: Well, thanks, Paul, for your hard work. Thank you, all subcommittee people, for all the work you've done. We have three solid letters that we've approved today that will go to the President. We have more work ahead of us. We will have a busy summer and we'll have another meeting in the fall.
GENERAL DISCUSSION
CHAIRMAN MARRIOTT: Are there any other comments or suggestions? I'll open the floor. Does anybody have anything they'd like to add or subtract?
MS. MANETTA: I would like to ask Hector, how are things going with SBA relative to what we're looking at on the export and import issues? I know that you guys are busy over the summer, traveling to several countries. I think Mexico is an upcoming, and Argentina later on in the year. So, can you tell us how that is going?
MR. BARRETO: Well, as you said, we've been pretty active over the last few months. You know, a lot of times people don't realize that the SBA has an Office of International Trade. Of course, we work very closely with Department of Commerce, the Trade Development Agency, OPIC, Ex-Im Bank, and many others.
We have seen a nice spike-up in our international trade loans, and that's been something that we're very proud of. We've also reorganized the way that we work. A lot of folks that we had out in the field, we're not really plugged into a central office. They are now. They report directly into the Office of International Trade.
Of course, besides the loans and the trade assistance that we provide, the trade missions that we participate in, we are also very busy advocating a lot of issues that are important to small business.
A lot of times people don't realize that 97 percent of all companies in the United States that do international trade are small businesses, by our definitions, but they only represent 30 percent of the trade that's actually occurring.
So, any time that we can grow the pie of opportunity for them through things like CAFTA and some of the other trade agreements, that's incredibly important to small businesses.
A lot of small businesses we talk to say that they'd be interested in getting involved in international trade if they had somebody to help them, so efforts like the President's Export Council are very important to forwarding that agenda.
Of course, we are also very involved in collaborating with some of our international counterparts. We receive delegations into the SBA on a monthly basis from many different countries who are interested in duplicating SBA programs in their own countries.
Of course, over the last couple of years we've been very involved in issues like the Partnership for Prosperity, the initiative between President Bush and President Fox, to identify investment opportunities in Mexico, and we've had some great successes already. We helped facilitate one of the first small business development centers internationally in Mexico.
The Mexican government liked it so much, they've dedicated a significant amount of funding to create a couple of hundred of these small business development centers in Mexico.
Of course, OPIC has recently been approved to go into Mexico, for the first time in decades, to be able to make investments there for infrastructure, which we think is very important. This initiative also helped to lower the cost of remittances into Mexico.
So, there's a lot of opportunities. Of course, the SBA -- it's not one of the largest agencies in government, but I think we have a pretty large footprint, with the way that we collaborate with other agencies of government and with other private sector partners.
I'll be going to Mexico next week to continue fostering some of the work that we've done down there, and then we'll be going back in July to meet with President Fox.
Of course, we're advocating CAFTA every day in our travels around the country, an we've gotten some progress there as well. The U.S. Hispanic Chamber of Commerce has endorsed CAFTA. They're probably one of the most prominent Hispanic business groups in the United States.
We've got to keep reminding people of those kinds of opportunities, so we're going to stay very active, very busy, and make sure that we continue to capitalize on as many opportunities as possible for those 97 percent of exporters which are small businesses.
MS. MANETTA: Thank you.
CHAIRMAN MARRIOTT: Thank you. Thank you very much.
If there are no others -- yes, go ahead. Jim?
MR. MORGAN: One of the things I have been sensitive to as a result of doing business in China, and also a result of many of us on the PEC who accompanied you and Secretary Evans last year in June to China, and the major challenge to us was, why can we not get more exports, which of course led to Paul's activity.
I just would like to encourage people to be alert and be helpful because, as we get these debates by different issues relative to China from the different parts of our community, that we don't end up really shooting ourselves in the foot.
Our industry, the semiconductor equipment and materials industries, had kind of an unfortunate experience in getting what should be a pretty straightforward import-export support for shipping equipment there.
But we have very high market shares. Half of our industry has about half of the world shares there, and we'll continue that for decades to come, but are likely to have the ability to shift that to Japan and Europe if we don't kind of get our collective approach to supporting export activities.
So, I think it's more significant, not as a particular trade for us, but I think it's a little danger for everybody in sort of the environment that's developing. We should be very careful about that. I think the administration should be, because I think it hurts the administration's credibility pretty substantially.
CHAIRMAN MARRIOTT: Okay. Thank you.
Yes, sir?
MR. PRIECKO: Mr. Chairman, one comment here that ties some of your issues together on visas, China, and exports. There are quite a few discussions in the inter-agency environment involving national labs, the military labs, and how we handle foreign participation.
I would caution you to step very carefully in making policy and procedure changes, because a minor nuance can have a tremendous impact on not only how the government functions, but industry as well.
Procedures happening with these exports and how you handle licensing, et cetera, which may appear to be very simple on the surface, may have a dramatic impact.
CHAIRMAN MARRIOTT: Okay. Thank you.
Other comments?
(No response)
CHAIRMAN MARRIOTT: Well, it's been a very productive meeting. We're proud of what we've done today.
I'd like to ask Secretary Gutierrez to make any closing comments or remarks he'd like to make.
SECRETARY GUTIERREZ: Thank you, Mr. Chairman.
I just want to follow-up on two items. One, of course, is DR-CAFTA, and to tell you again how important this is, not just the activity itself, but how symbolic it is of our overall trade strategy, how important it is for small businesses, how important it is for our economy, especially in those States that do business with Central America, and, importantly, how critical it is for our region, for our hemisphere, for our neighborhood, for our standing in the world.
So in the spirit of asking for something specific, if I could request that each of you make one contact regarding DR-CAFTA, just contact one person, whether it be a member of Congress or whomever, to let them know how you feel about it and how important it is.
I also want to say that one of the things I've heard very often coming from the President since I've been here, is that there's a very clear understanding that our role in Washington is to create an environment so that you can do what you do best.
We do not make deals in Washington. We do not do business in Washington. We do not allocate investment capital. There's a very clear understanding that you do that. Too often, the role of the private sector goes unrecognized.
I just want to say that there is a very clear acknowledgement that those numbers that I talked about before, the unemployment rate, the growth, the fact that more Americans today own a home than ever before, more Americans are working today than ever before, that is, in large part, because of what you are doing. You are the true heroes of what is happening today, and the kind of prosperity that we are creating.
I think it should be said that this economy would not be where it is, this country would not be where it is, without the role of the private sector. We're here to help. We're here to serve you. We're here to create the environment so that you can continue doing what you do so well. So, I thank you.
I congratulate you for that. Please, let us know what we can be doing to clear the playing field for you so that you can continue making this the great place it is.
Thank you, Mr. Chairman.
CHAIRMAN MARRIOTT: Thank you, Mr. Secretary.
MEETING ADJOURNED
CHAIRMAN MARRIOTT: We need a motion to adjourn. May I have a motion to adjourn?
VOICE: So moved.
VOICE: Second.
CHAIRMAN MARRIOTT: Okay.
All in favor, aye.
(A chorus of ayes)
CHAIRMAN MARRIOTT: We will leave this room at 11:45 on buses for the White House so we can take a break, and we'll see you here at 11:45 in this room. Thank you all for being here. Thank you for your good participation. Thank you, Mr. Secretary.
(Whereupon, 11:33 a.m. the meeting was concluded.)
C E R T I F I C A T E
This is to certify that the foregoing proceedings of a meeting of the President's Export Council, held on Wednesday, May 25, 2005, were transcribed as herein appears, and this is the original of transcript thereof.
LISA DENNIS
Court Reporter