[House Hearing, 112 Congress] [From the U.S. Government Publishing Office] BUREAUCRATIC OBSTACLES FOR SMALL EXPORTERS: IS OUR NATIONAL EXPORT STRATEGY WORKING? ======================================================================= HEARING before the COMMITTEE ON SMALL BUSINESS UNITED STATES HOUSE OF REPRESENTATIVES ONE HUNDRED TWELFTH CONGRESS FIRST SESSION __________ HEARING HELD JULY 27, 2011 __________ [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Small Business Committee Document Number 112-028 Available via the GPO Website: www.fdsys.gov _____ U.S. GOVERNMENT PRINTING OFFICE 76-495 WASHINGTON : 2012 ----------------------------------------------------------------------- For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC 20402-0001 HOUSE COMMITTEE ON SMALL BUSINESS SAM GRAVES, Missouri, Chairman ROSCOE BARTLETT, Maryland STEVE CHABOT, Ohio STEVE KING, Iowa MIKE COFFMAN, Colorado MICK MULVANEY, South Carolina SCOTT TIPTON, Colorado CHUCK FLEISCHMANN, Tennessee JEFF LANDRY, Louisiana JAIME HERRERA BEUTLER, Washington ALLEN WEST, Florida RENEE ELLMERS, North Carolina JOE WALSH, Illinois LOU BARLETTA, Pennsylvania RICHARD HANNA, New York NYDIA VELAZQUEZ, New York, Ranking Member KURT SCHRADER, Oregon MARK CRITZ, Pennsylvania JASON ALTMIRE, Pennsylvania YVETTE CLARKE, New York JUDY CHU, California DAVID CICILLINE, Rhode Island CEDRIC RICHMOND, Louisiana GARY PETERS, Michigan BILL OWENS, New York BILL KEATING, Massachusetts Lori Salley, Staff Director Paul Sass, Deputy Staff Director Barry Pineles, General Counsel Michael Day, Minority Staff Director C O N T E N T S ---------- OPENING STATEMENTS Page Hon. Sam Graves.................................................. 1 Hon. Nydia Velazquez............................................ 2 WITNESSES Mr. Suresh Kumar, Assistant Secretary and Director General, U.S. Department of Commerce, International Trade Administration, U.S. Commercial Service, Washington, DC........................ 3 Ms. Marie Johns, Deputy Administrator, Small Business Administration, Washington, DC................................. 5 Mr. Christian Foster, Deputy Administrator, U.S. Department of Agriculture, Foreign Agriculture Service, Washington, DC....... 7 Mr. Mark Rice, President, Maritime Applied Physics Corporation, Baltimore, MD.................................................. 19 Mr. Mitchell Goetze, President and COO, Goetze's Candy Company, Inc., Baltimore, MD............................................ 21 Mr. Maurice Kogon, Director, Center for International Trade Development, El Camino College, Hawthorne, CA.................. 25 Mr. Wade Merritt, Vice-President, State International Development Organizations (SIDO), Vice-President, Maine International Trade Center, South Portland, ME..................................... 23 APPENDIX Prepared Statements: Mr. Suresh Kumar, Assistant Secretary and Director General, U.S. Department of Commerce, International Trade Administration, U.S. Commercial Service, Washington, DC.... 35 Ms. Marie Johns, Deputy Administrator, Small Business Administration, Washington, DC............................. 39 Mr. Christian Foster, Deputy Administrator, U.S. Department of Agriculture, Foreign Agriculture Service, Washington, DC 42 Mr. Mark Rice, President, Maritime Applied Physics Corporation, Baltimore, MD................................. 50 Mr. Mitchell Goetze, President and COO, Goetze's Candy Company, Inc., Baltimore, MD............................... 52 Mr. Maurice Kogon, Director, Center for International Trade Development El Camino College, Hawthorne, CA............... 67 Mr. Wade Merritt, Vice-President, State International Development Organizations (SIDO), Vice-President, Maine International Trade Center, South Portland, ME............. 74 Questions for the Record: Questions for Mr. Kumar, Ms. Johns, and Mr. Foster........... 77 Chairman Graves Questions for Mr. Foster..................... 79 Rep. Owens Questions for Mr. Goetze.......................... 80 Rep. Owens Questions for Ms. Johns........................... 81 Chairman Graves Questions for Ms. Johns...................... 82 Chairman Graves Questions for Mr. Kumar...................... 83 Answers for the Record: Mr. Goetze Answers for Rep. Owens............................ 84 Additional Materials for the Record: Aerospace Industries Association of America Statement for the Record..................................................... 87 National Council of Textile Organizations Statement for the Record..................................................... 92 BUREAUCRATIC OBSTACLES FOR SMALL EXPORTERS: IS OUR NATIONAL EXPORT STRATEGY WORKING? ---------- WEDNESDAY, JULY 27, 2011 House of Representatives, Committee on Small Business, Washington, DC. The Committee met, pursuant to call, at 1 p.m., in Room 2360, Rayburn House Office Building. Hon. Sam Graves (chairman of the Committee) presiding. Present: Representatives Graves, Bartlett, Hanna, Mulvaney, Tipton, Ellmers, Velazquez, Clarke, Chu, Cicilline, Richmond, Keating. Chairman Graves. Good afternoon, everyone. I will call this meeting to order. I want to thank our witnesses on both panels for being here today. Today we are going to hear testimony on the National Export Strategy and the administration's efforts to increase coordination among federal agencies, reduce domestic obstacles to trade, and expand exports for small businesses. We will also hear directly from some small firms on the barriers that limit their ability to export. In March 2010, President Obama announced his National Export Initiative aimed at doubling exports by the end of 2014. There is strong bipartisan support on the benefits of exporting and it is a major contributor to the U.S. GDP totaling $1.8 trillion in 2010. It provides new sales opportunities for small businesses and most importantly, exporting creates and supports high paying U.S. jobs. However, of the 28 million small businesses in the U.S., only one percent currently export. There is a great untapped potential there. One important way to get more small businesses to export is by passing the three pending free trade agreements with Colombia, Panama, and South Korea. The independent U.S. International Trade Commission estimates a passing of three trade agreements would increase U.S. exports by $13 billion. President Obama stated this will create over 250,000 jobs. Unfortunately, until the administration and Congress act on these agreements, American small businesses will be at a competitive disadvantage with foreign firms. As we seek to open new foreign markets, we also need to reduce the domestic bureaucracy to make exporting much easier. The export process can be complicated and overwhelming, and many firms do not know where to start. It is just a simple fact. Small firms have a limited amount of time and resources to understand the complex federal and foreign regulations that are out there. There are over 20 federal agencies that can assist businesses with some or all of the export process. Small firms have long voiced that navigating the agencies may be as difficult as navigating the export market itself and it is our Committee's job to take a look at these programs and ensure that small businesses can access the help they need to effectively compete in the global marketplace. With the unemployment rate staying above eight percent for 29 consecutive months, exports can be a catalyst to create new jobs and get our economy back on track. I look forward to today's testimony and understand how we can work together to make it easier for small businesses to export. And now it is my pleasure to yield to Ranking Member Velazquez for her opening remarks. Ms. Velazquez. Thank you, Chairman Graves. The resilience of American small businesses is unquestionable. In the face of an economic downturn they have adapted and come to utilize foreign trade as a tool for growth. Even as domestic sales lapsed, U.S. exports grew more than 17 percent and shrunk the trade deficit to levels not seen in over a decade. Since 2003, American small business exports have grown by about 80 percent. They now account for nearly half a trillion dollars in annual export sales. Despite these figures, however, small exporters possess a significant source of untapped potential. While small businesses account for nearly 97 percent of all export firms, they are responsible for only 30 percent of all export revenues. Additionally, more than half of all small business exporters ship goods to just one foreign partner. If we are to achieve the goal set forth in the National Export Initiative of governing exports within the next five years and creating two million new jobs, it will be critical to increase both the number of small business exporters and the number of countries they ship to. The 2011 National Export Strategy was promulgated for precisely this purpose. The NES sets forth a strategy to implement the NEI. In the context of small exporters this means improving coordination of trade promotion activities. It means increasing access to export credit for small firms. It also means updating antiquated regulations and reducing redundancies that discourage small firms from shipping abroad. While the issuance of the NES undoubtedly represents a step in the right direction, much more must be done. We often hear from small businesses that red tape and convoluted agency processes prevent them from accessing the very programs that are meant to help them. Duplicative initiatives coupled with a lack of coordination between agencies can lead to conflicting messages about where to go for assistance. Breaking down these barriers should be a priority. Additionally, more must be done to provide small businesses with improved access to capital. Many small firms have continued to find lending conditions extremely unfavorable. This is particularly true in the context of export loans where banks are wary of financing products that will be shipped overseas. Despite unprecedented efforts taken over the last three years to support and expand the SBA's credit programs, its internal trade loans have actually fallen by more than half over the past five years. They now provide $390 million less in loans to small exporters. At the same time, small businesses have found credit difficult to come by on the programs operated by the Export- Import Bank. While small businesses receive more than 85 percent of all EX-IM bank loans, they receive only slightly more than 20 percent of the authorization dollars. With so many small firms continuing to struggle to find credit, it simply does not excuse why this agency should continue underperforming. Today almost nine out of 10 consumers live outside the United States. In order for small businesses to remain at the center of our recovery, they must be able to tap into those markets. If implemented correctly, the NES has the potential to advance that goal, making our small businesses more dynamic, competitive, and robust, while allowing them to focus on what they do best, creating new jobs. With that I take this opportunity to thank all the witnesses for coming and spending some time with us today. I would like to thank the chairman for yielding and I yield back. Chairman Graves. Thank you, ranking member. If any other Committee members have an opening statement prepared, I would ask that they submit it for the record. And just to explain the testimony process, each witness has five minutes. The light will stay green in front of you until you have one minute left. Then it turns yellow and then red after five minutes. I would ask that you please try to keep on the time limit. STATEMENTS OF SURESH KUMAR, ASSISTANT SECRETARY AND DIRECTOR GENERAL, U.S. COMMERCIAL SERVICE, U.S. DEPARTMENT OF COMMERCE; MARIE JOHNS, DEPUTY ADMINISTRATOR, SMALL BUSINESS ADMINISTRATION; CHRISTIAN FOSTER, DEPUTY ADMINISTRATOR, OFFICE OF TRADE PROGRAMS, FOREIGN AGRICULTURE SERVICE, U.S. DEPARTMENT OF AGRICULTURE Chairman Graves. Our first witness is Suresh Kumar. He is the assistant--did I get it right? He is assistant secretary and director general of the U.S. Commercial Service with the U.S. Department of Commerce. He has an Economics degree from Delhi University and an MBA from Bombay University. Thank you for being here. I appreciate you coming in and you have five minutes. STATEMENT OF SURESH KUMAR Mr. Kumar. Chairman Graves, Ranking Member Velazquez, and distinguished members of the Committee. Thank you for the opportunity to appear before you today. Priority number one of the National Export Strategy is to develop programs designed to enhance export assistance to small and medium enterprises. This is consistent with the statutory mandate of the U.S. and Foreign Commercial Service to assist SMEs to grow exports. It is essential to both the national economic recovery and global competitiveness that small businesses participate more effectively in export markets. Our clients consistently tell us what they need most is assistance to better understand complex documentation requirements, helping and identifying the right international partners and distributors--what we call matchmaking and our clients often term as entering a market but ensuring that they get paid. Our small business clients particularly value in connecting to federal and state government programs. This is exactly what the Commercial Services does. We serve as a one-stop shop, a single point of contact and a clearinghouse for small businesses. We are the surrogate export department for small businesses. Background Dynamics, a $5 million, 20 percent operation which I visited on Monday, is a small business which epitomizes what we do for them and the services they need from us. They design and manufacture linear actuators, multi-axis automation, and mechanical motion systems for multiple industries ranging from defense to entertainment to health care amongst others. Our trade specialists help connect them to a support network to realize export success. By connecting to the Delaware Valley Industrial Resource Center, a part of the Manufacturing Extension Partnership Program, they received valuable manufacturing-related guidance. Contact with the Pennsylvania Department of Trade allowed Macron to access a $3,000 grant that permitted them to participate in a commercial service trade mission to Mexico, where through our matchmaking services they identified two potential distributors that provided them a beachhead in Latin America. Macron is currently working with the Commercial Service in exploring new opportunities in Asia and Latin America. The global network of the U.S. and Foreign Commercial Service spans approximately 1,450 trade specialists across 108 domestic U.S. export assistance centers and 126 offices in 79 countries. Our trade specialists are the boots on the ground in local communities across the country and in global markets across the world that connect businesses to market opportunities. Our programs connect SME exporters to international partners, distributors, and buyers. Our counseling and facilitation services help businesses across state and federal government resources to secure expertise, grants, and even financing. The U.S. Commercial Service works closely with state governments, trade associations, cities' local chambers of commerce, and institutions like the State International Development Organization to engage small businesses in our programs. Last year, the Commercial Service assisted 18,000 companies to export, 16,000 of which were SMEs, and we facilitated 12,300 export successes and helped 4,630 companies export to new markets. For every one dollar invested in the U.S. Commercial Service, we returned $135 to the American taxpayer by way of facilitated exports. Through the Trade Promotion Coordinating Committee (TPCC), the Commercial Service promotes joint collaboration amongst the 20 federal agencies involved in trade promotion. We helped design a single uniform method for referring new clients to the most appropriate service provider. Our enhanced client intake registration form on export.gov, the Federal government's export assistance web portal more accurately identifies and directs companies to the most appropriate federal agency. The National Export Initiative, which President Obama announced in March 2010, is off to a good start. Exports comprised 12.5 percent of U.S. GDP last year, up from 11.2 percent in 2009. The $1.84 trillion in exports of U.S. goods and services is the second highest annual total on record. We remain on pace in 2011 to achieve the NEI goals. Besides looking into the rearview mirror it is important to prospectively look forward to the future. This is why the pending trade agreements with Korea, Colombia, and Panama are a priority for the Obama administration. With the Korea Trade Agreement alone, U.S. exports could increase by more than $10 billion and could support more than 70,000 American jobs. The agreement would eliminate tariff on over 95 percent of industrial and consumer goods within five years, making small and big businesses globally competitive. A recent study by the U.S. International Trade Commission reported that tariff and non-tariff barriers disproportionately affect a small business's ability to export. FDAs are particularly important to small businesses to ensure low tariff, remove complex trade barriers, and secure access through a streamlined trade process. Small businesses do not need to navigate global markets alone. They have the full support of the U.S. government to connect to profitable opportunities worldwide. The U.S. and FCS of the Commercial Service Trade Specialists stand ready, willing, and able to connect small U.S. businesses to the 95 percent of consumers who live outside our country. I thank you again for the opportunity to appear before you today and I look forward to answering your questions. Thank you. Chairman Graves. Thank you. Our next witness is Marie Johns, the Deputy Administrator for the Small Business Administration. In her role she oversees the Office of International Trade, including the administration of the State Trade Export Promotion grants. She earned her Bachelor's and Master's degree from Indiana University School of Public and Environmental Affairs. Thank you for coming and welcome. STATEMENT OF MARIE JOHNS Ms. Johns. Thank you, Chairman Graves. Thank you, Ranking Member Velazquez, and members of the Committee. I am honored to be here this afternoon to testify. In his first State of the Union Address, President Obama announced the National Export Initiative and his goal of doubling U.S. exports in five years. This is an important goal. Increasing exports will strengthen our economy, bolster our global competitiveness, and create good jobs. As the agency that serves America's small businesses, the SBA has an important role to play. Administrator Mills chairs a small business working group of the Trade Promotion Coordinating Committee or the TPCC, which is the main federal body working to encourage more U.S. businesses to export. Meanwhile, the SBA is working with our partners across the Federal government to support small businesses. Small businesses are well poised for growth through exports. Since 2003, revenues from America's small business exports have increased as ranking member said about 80 percent. They now account for nearly $500 billion in annual sales. However, small businesses, as the ranking member also mentioned, only represent about 30 percent of export revenues and more than half of small businesses who do export are only shipping to one country. The SBA, along with our partners and the TPCC, is working to increase both the number of small companies who are exporting and the number of countries to which they ship. Our plan, which has been incorporated into the 2011 National Export Strategy, has four components. First, we identify small businesses that are ready to export. Second, we prepare those small businesses with counseling and technical assistance. Third, we connect those small businesses with export opportunities. And fourth, we support those small businesses with loans and counseling. The SBA and our partner agencies have done extensive outreach to identify and motivate small business exporters. For example, the Department of Commerce and the SBA have worked closely together to identify and refer new clients to the most appropriate resource. To better prepare small businesses for successful exporting, federal agencies have collaborated to train the trainers, offering export training for SBA resource partners such as counselors at our Small Business Development Centers, our Women's Business Centers, and SCORE. Meanwhile, the NEI is working to connect small businesses with export opportunities. In September of 2010, we launched a series of export matchmaking events, the first of which was in New Jersey, and it drew participation from approximately 150 small businesses, lenders, and others. Lastly, the SBA and other agencies, excuse me, continue to support small businesses once they have begun exporting. This includes an increased presence at international trade shows, coordination of marketing materials, and ongoing outreach to lenders to encourage their participation in export financing programs. Thanks to increased guarantee percentages, increased loan limits, and an improving economy, SBA export loan programs have seen a major uptick over last year's levels. These loans are helping small businesses across the country expand their export capabilities. For example, in Missouri, Environmental Dynamics, Inc., took advantage of an export working capital loan once the limit was raised to $5 million. The increased loan size made the program much more appealing to the company, and the firm which has sold internationally for 20 years, is using the loan to finance an expansion. Meanwhile, in New York, Turbofil Packaging Machines used an export working capital loan to help the company complete a large overseas contract. The success of the NEI depends on the work of more than a dozen agencies across the Federal government. Each agency has staff dedicated to working on NEI initiatives who meet and communicate regularly with their colleagues throughout the administration. We have worked to reduce bureaucratic barriers and make our efforts as crosscutting as possible. Overall, our goal is to ensure that we are connecting federal resources at every point and making them work for small businesses. Thank you, Mr. Chairman, ranking member, and members, and I look forward to answering your questions. Chairman Graves. Thank you. Our final witness on this panel is Christian Foster. He is the deputy administrator for the Office of Trade Programs in the Foreign Agriculture Service within the U.S. Department of Agriculture. He earned a Master's of Arts from Georgetown University in 1982 and a Bachelor of Science in Foreign Service from Georgetown in 1980, I believe. Welcome. And I appreciate you being here. STATEMENT OF CHRISTIAN FOSTER Mr. Foster. Mr. Chairman, members of the Committee, I am pleased to be here with you today. In his 2010 State of the Union address, President Obama told the nation we are launching a National Export Initiative that will help farmers and small business increase their exports. USDA has taken the President's charge to heart. The efforts of USDA personnel throughout the country and around the globe, bolstered by public-private partnerships, have assisted farmers, ranchers, and all agricultural exporters in achieving record export sales. In Fiscal Year 2011, we expect U.S. agricultural exports to reach their highest level in history, reaching $137 billion. For more than 50 years, the Foreign Agricultural Service has led USDA's efforts to build overseas markets. We know that every $1 billion in agricultural exports supports 8,400 jobs and generates an additional $1.3 billion in economic activity. At USDA, the commitment to NEI starts at the top. I am pleased to say that next week Secretary Vilsack will be hosting the administration's NEI Small Business tour event in Milwaukee, Wisconsin. The event is designed to connect small businesses with the resources they need to export. We will be collaborating with the Department of Commerce, the Small Business Administration, and the Export-Import Bank. I would like to now highlight a few of USDA's actions in NEI priority areas. Last year, more than 625 new small businesses benefited from the USDA administered Market Access Program to promote their products overseas, resulting in over 975 first-time sales. For example, a company, WildRoots, a healthy snack food company with production facilities in Illinois and Nebraska, matched MAP funds to market their products in Canada. Export sales from this company soared from zero in 2008 to $4 million last year. The company buys blueberries from Michigan, corn and soy products from Illinois, cranberry from Massachusetts, and almonds from California. Another example of our export assistance to small businesses is how we link them to foreign buyers at USDA hosted and supported trade shows. Last year, USDA supported U.S. pavilions at 27 international trade shows in 19 countries. Nearly 1,000 exhibitors reported $179 million in onsite sales and over $1 billion in estimated 12-month sales. Participating U.S. companies introduced over 6,000 new-to-market products. USDA-led trade missions link our producers to foreign buyers. A trade mission in January to Peru included 16 small businesses. Three hundred thirty eight one-on-one meetings were held with over 100 Peruvian and 10 Ecuadorian companies. To date, USDA has recorded $1.9 million in sales resulting from that mission. In addition, USDA supports reverse trade missions that bring foreign buyers to the United States to meet with potential suppliers of agricultural products. Such missions are particularly valuable for small businesses that may not have the resources to travel abroad. Tariff and non-tariff barriers remain challenges for U.S. agricultural exports. Securing congressional approval of the pending trade agreements with South Korea, Colombia, and Panama would significantly reduce tariff barriers to U.S. farm exports. USDA is also stepping up efforts to address sanitary and phytosanitary barriers to farm exports. In 2010, the USDA administered U.S. Technical Assistance to Specialty Crops Program assisted U.S. potato exporters in overcoming a Thai phytosanitary protocol that prevented U.S. exports. The U.S. Potato Board used program funds for Thai officials to visit and review U.S. seed certification procedures and pest mitigation measures. Thailand agreed to additional market access that more than doubles the number of states that are eligible to export seed potatoes to Thailand. I am pleased to report that USDA is making progress in the Administration's goals under the NEI. As our Secretary said, increased exports mean higher incomes for producers, more opportunities for small business owners, and for folks who package, ship, and market agricultural products. They mean a thriving rural America which is good for our Nation as a whole. This concludes my statement. Thank you very much. And I am happy to answer any questions. Chairman Graves. We will move into questions and our first questions are going to come from Mr. Mulvaney. Mr. Mulvaney. Thank you, Mr. Chairman. Very briefly, Ms. Johns, Mr. Kumar, I was listening to your summary of what your agencies do and it sounded to me like there might be some overlap between those two things. Ms. Johns, tell me what your agency does that Mr. Kumar's does not. Ms. Johns. Congressman, we--our agency, as you know, we are the voice of small businesses in the administration among federal agencies. And so our entire focus is on small companies. Mr. Mulvaney. I understand. But in terms of helping them with exports, what do you do that is unique from what Mr. Kumar's organization does? Ms. Johns. We do a number of things. But I certainly want to emphasize that we work closely with the Department of Commerce under the Trade Promotion Coordinating Council. Our administrator sits on the president's Economic Council. So we are involved in the crosscutting federal efforts to coordinate federal resources to support exporting. What we do specifically. We have capital programs. We have counseling programs. And those areas of our agency's programmatic thrusts are the primary ways that we support small businesses. For example, we are working, as I mentioned in my opening statement, on training more international trade counselors so that we have a network across the country available to small businesses. Any small business in our country is less than an hour's drive away from an SBA resource where they can get counseling for exporting. We have specific loan products that are available for them. Mr. Mulvaney. Let me stop you there because the loan program was one thing I did hear that was different from what Mr. Kumar does. But what you just described is training counselors to help folks sort of get through the process of exporting, which is exactly what I heard from him. So Mr. Kumar, tell me what am I missing here? What is the-- help me understand how the SBA's efforts to promote small business exports and the Department of Commerce's efforts to do the same--how they are complementary and not duplicative. Mr. Kumar. Thank you very much for that observation. Trade, any trade, until it is consummated, is touched by a number of agencies. And indeed there are several things before you can consummate a trade. From identifying a customer to defining the access for finance, to getting the right distributor, it is an entire chain. And how the two of us or the two agencies get contrasted is this. First, physical availability of finance is handled by them but connecting customers who invariably, because we work in the communities--I mentioned the 109 offices we have across the United States. And we physically work with the businesses to connect them to the right resource. Second, we ensure this time through the National Export Strategy and National Export Initiative that how do we leverage the combined resources for maximum benefit? In fact, it was something the president challenged us through the NEI. And what we did as a consequence is we realized that dealing with new- to-export companies, people who want to export for the first time, people who needed to go through an education, information, and skills training program, were perhaps best leveraged through the SBA. On the other hand, dealing with the 280,000 current exporters and one of the members, representatives mentioned that 58 percent of them only go to one market, we chose to concentrate on exporters currently going to some to take them to newer markets. So here was a classic example of looking at the entire supply chain, concentrating the efforts of one agency towards new exporters and concentrating the efforts and the abilities and the boots on the ground as we call it towards current exporters to take them to newer markets. Mr. Mulvaney. Mr. Kumar, let me cut you off there, Mr. Kumar. I am sorry. I only have a few minutes. Because I am going to follow up on that point and ask Mr. Foster a question aside from congratulating him on where he went to school. If I am a farmer who is new to exporting, I want to get in the export business, do I go see you, Ms. Johns, or Mr. Kumar? Mr. Foster. Indeed, in the U.S. government there are vast resources available across all agencies. If you are a farmer you have a number of options to get support. You can go to the U.S. government portal, export.gov, which will direct you to the U.S. Department of Agriculture. You can go to your Department of Agriculture for the state, which will link you to our regional service provider that will help any small business in that region. You can come to FAS directly, again, via the internet. And then I should say we are working now with our local farm service agency offices and rural development offices across the country so that they know if any farmer were to walk in, any small business from a rural area were to walk in, they would know where to go in the Department of Agriculture. Mr. Mulvaney. Thank you. I yield back my time. Thank you, folks. Chairman Graves. Ranking Member Velazquez. Ms. Velazquez. Thank you. Ms. Johns, you do business planning, right, for small business exporters? Ms. Johns. Yes, we assist them with business plans. Ms. Velazquez. And access to capital? Ms. Johns. Yes. Ms. Velazquez. And Commerce does not. Right? Ms. Johns. We provide--I think that my colleague said it well. When we talk about exporting and small businesses, the clear issue that we, I think, all agree on is that there is tremendous upside potential to involve more small businesses in exporting in order to grow and create jobs in the country. So what the SBA does is to use its network and its longstanding experience in preparing more small businesses to be able to do just that. Ms. Velazquez. Okay. It has been almost a year since the state Trade Export Promotion Program was enacted under the Jobs Act. And the agency has yet to award a single dollar under the program. With three out of every five states' Export Promotion Projects being caught, this money, as you know, has netted more than ever before. So what can you tell us and the states that they can expect--when will they be able to expect these funds? Ms. Johns. Yes, ranking member. We have gone through a process, a very rigorous process, for managing this new grant program. First of all---- Ms. Velazquez. Thirty million, right? Ms. Johns. Thirty million per year. Ms. Velazquez. Per year. Ms. Johns. And it is a--we were authorized for three years but we have money appropriated for two. Every state that applied for the funds will receive funding. That is the first thing. Ms. Velazquez. Just answer my question. When do we expect for these funds to get into disbursed? Ms. Johns. My best estimate of that is early to mid- September. Ms. Velazquez. Okay. And under the STEP Program, grant recipients will have one calendar year to fulfill the requirements of the program. Will this year begin on the date states are notified of successful applications or from the date they actually receive the grant? Ms. Johns. That is a detail that I do not know. I will certainly get back to you on that. Ms. Velazquez. I would like to know that. Ms. Johns. I will let you know. Ms. Velazquez. While USDA and the Department of Commerce know the number of new-to-export firms they are providing assistance and which new markets the programs are helping to open, SBA has yet to begin tracking those numbers. And as you know, as part of the national strategy for small business exports, tracking numbers are going to be very important to measure success. So when are you going to start putting together the framework to collect those numbers? Ms. Johns. We have a requirement to report on the state activity with exporting and we are in the process of pulling that framework together now. I wrote to the committee saying that we needed additional time from the timeframe that was specified in the Small Business Jobs Act, so we appreciate your flexibility there and we are working hard to get that document to you. Ms. Velazquez. Mr. Kumar, of all the services provided by the Department of Commerce, the Gold Key Matchmaking Services is perhaps the best in terms of linking small businesses here in the U.S. with foreign buyers abroad. But what we continue to hear from small business exporters is that the cost is prohibitive. What can you tell us your agency will do to make this program more affordable so that small business orders can benefit? Mr. Kumar. Thank you, Ranking Member Velazquez. The Gold Key indeed is one of our more popular services. And what it does is physically matches---- Ms. Velazquez. Answer my question, please. I know what it does. What I am asking you is what will you do, the agency, to make this program accessible for small business exporters? Mr. Kumar. It is currently accessible to any business which wants to do it. The cost for that program is $700. The value through research that we find is perhaps more than 10 times what we charge for it. And it is already discounted for small and medium enterprises. We happen to believe it is a fair charge. And in discussions with several small and medium enterprises who not only use our services and those who counsel, the cost of a Gold Key has never come as a challenge to SMEs. Ms. Velazquez. Well, that is not what we hear from small businesses. We are going to have a second panel here and I will invite you to stay so that you can listen to what they have to say. Mr. Kumar. Thank you. Ms. Velazquez. That cost will go up. Do you foresee? Mr. Kumar. We have an obligation to Congress to assess the value of the services we provide. And measure the costing and adjust the pricing once every two years. That is the reason why I could give you the 10 time multiple. We are just in the process of going through the findings of that. I cannot comment whether it will go up or stay where it is but it appears that the value provided by the service and what is likely to be provided by any external vendor is about 10 times more than what we can get. Ms. Velazquez. Mr. Foster, a significant portion of the National Export Strategy seems primus on the passage of not just the Korea, Panama, Colombia Free Trade Agreements but also the ratification of a Trans-Pacific Partnership and completion of the Doha agreement. Can the Export Strategy succeed if these agreements are not completed? Mr. Foster. We continue to work as part of the Administration and remain committed to securing Congress's approval of the pending trade agreements that you mentioned. We are committed to seeing those through. The Trans-Pacific Partnership is another agreement we continue to work on. We at USDA, with USTR that has the lead on this, we remain committed and will continue to work on that. Ms. Velazquez. But do you think that if we do not get those agreements passed and ratified that the Export Strategy will be in jeopardy in terms of the success? Mr. Foster. As the Administration says, the agreements, we believe, have tremendous benefits for American exporters and jobs and producers' incomes. So we believe they will have tremendous benefits. Ms. Velazquez. Thank you, Mr. Chairman. Chairman Graves. Ms. Ellmers. Ms. Ellmers. Thank you, Mr. Chairman. My question is basically for each one of you, and thank you for being here today to give your testimony. As we know right now, small businesses are facing many obstacles domestically, including higher gas prices, increased government regulations, and always the looming possibility of tax increases. Can you explain how this impacts small businesses and their supply chain and your ability to help them export? And I will start, Mr. Foster, with you. And then if we could just move down the panel. Thank you. Mr. Foster. Our goal at FAS for the last 50 years is promoting agricultural exports. We believe we do that well and investment there is a wise decision. We are trying in every manner possible across government and within the multiple agencies in the Department of Agriculture to make sure small businesses get the support they need. We certainly understand that transportation infrastructure at ports and the like are incredibly important to moving exports, agricultural exports out of the country. We work through the NEI, on that topic. That is one of the primary recommendations of NEI looking at infrastructure. I believe we would all agree we will continue to focus on that. For agriculture that is vital. As we know for Louisiana, Congressman Richmond here, the Port of Louisiana is one extremely important example of getting agricultural exports out of the United States. Forty-seven percent of grain transports out of that region, a tremendously large amount. Ms. Johns. Thank you for your question, Congresswoman. At the SBA we are--our mission is to support our small businesses. And we are coming out of the worst economic downturn since the Great Depression. Small businesses were hit inordinately hard but they are bouncing back faster actually than some other sectors of the economy. The reason that this National Export Initiative and the work that we are doing at the agency in conjunction with our federal partners at the TPCC is that as has been stated earlier, 95 percent of market demand exists outside of our country. The USA--Made in the USA brand is still a very, very strong, very valued brand. And so the extent--to the extent that we can get more of our small businesses ready for exporting, that is a huge win for the economy overall. As I mentioned in my testimony, we have a four-prong approach that first we identify those companies that have not yet exported but are right there and with some support can move into that category. Once we identify those companies, then we prepare them with the counseling through our national network of resource partners and the counseling that we provide through our 68 field offices. We have a robust and a very integrated network to provide the counseling for them. We have more international trade counselors available thanks to the Jobs Act, et cetera. Then we connect those small companies, excuse me, with opportunities working closely with the Department of Commerce and other federal partners in that role and then once the business opportunity happens we support those small businesses with what they need in order to be successful. So this effort is incredibly important to small businesses and to our economy as a whole because small businesses are the creators of jobs in our country. They really are our economic engine. Ms. Ellmers. Amen. I believe that, too. Mr. Kumar. Mr. Kumar. Thank you very much, Congresswoman. In the face of increased costs which everyone is going through the question really was how can we most effectively help small and medium enterprises engage in global markets. That is what we do through our business counseling sessions. And also through helping people develop business plans and marketing plans. But it does not stop there. Ours is a turnkey plan which we work with. And what we do is then connect the players to the most cost effective logistics provider. Logistics is a major part of the exercise. Then look at the best distributors through matchmaking services in external countries where they export to. In addition to that, we engage people through trade missions, which is an easier better way by scale to come to meet buyers. Additionally, we have increased the concentration we place and focus we place on international buying programs where we get buyers from foreign countries coming to shows here. So that also reduces the cost burden on an SME. And finally, even using technology. We now have, even wine tasting or export of wines from California. We have had virtual wine tasting missions put together where simultaneously when you are here on your Internet or website or through web access you are dealing with buyers in China or wherever they are who are tasting the same wine, educated on what the wine is about, and have all the product benefits and features which they can base it on. So we are interceded by looking at the elements of cost and trying to provide the value to small and medium enterprises in the most cost effective manner because we believe the price is right only when those who must buy, buy, and those who sell make a profit. Ms. Ellmers. Thank you so much. And I yield back. Actually, I think I went over a little bit. Thank you. Chairman Graves. Ms. Clarke. Ms. Clarke. Thank you very much, Mr. Chairman. And thank you, Ranking Member Velazquez. I would like to thank our panelists for their expertise and their testimony today. While I am a bit skeptical about the pending FDAs, I recognize that we are in a global economy where trade plays an important crucial role towards our domestic economic success. So to that end I would like to ask each of you if you could elaborate a bit more about the internal framework within your various entities regarding programs or initiatives that you have unveiled or plan to unveil in support of the NEI. Ms. Johns. I will begin, if I may. Ms. Clarke. Yes, please. Ms. Johns. You are asking about actual programs that we have launched in support of the NEI. Yes, thank you, Congresswoman Clarke. We have done a number of things. First of all, by our very--the very role that the agency plays as part of the president's Export Council where Karen Mills is a member, I work with the Trade Promotion Coordinating Council where Karen chairs the Small Business Working Group. That is the institutional way through the TPCC and the PEC where the SBA is involved. And the benefit of the TPCC is that it has allowed us to work in a much more collaborative fashion with our federal partners. And we have talked a bit in this hearing about the different pieces and different players who are involved in this process. It is complicated. It is certainly doable but it is complicated to ensure that we are providing all the resources that businesses need across the board to be able to export. And so what we are doing with the Small Business Working Group under the TPCC is that various working groups have been created. A working group focused on preparing--identifying small businesses. A working group focused on preparing, connecting, and supporting. Each of the four elements of the plan have a working group assigned to them and we have specific programs under each of those working groups that we have launched. For example, the Connecting Working Group is focused on matchmaking events. I mentioned in my testimony the first one in New Jersey. We intend to have more of those around the country because we found them to be very successful in bringing the players, the right players together to make business happen. Under the Preparing Work Group we have launched our Train the Trainers Initiative where we are working with the Association of Small Business Development Centers and training individuals who work in the SBDCs as well as our Women's Business Centers and our other resource partners. And we have created within each of our district offices, each of our 68 district offices, a district international trade officer so that any small business in the country will be in a very short distance able to reach someone who can provide expertise in those areas. Those are some of the initiatives. Ms. Clarke. Let me ask. Do you have sort of a, I guess, a formula for what you think participation of--given the number of businesses that exist in the small business, medium-size business sphere of our economy, what percentage of those businesses should be eligible to participate in these programs? And based on that, are you I guess targeting resources because when you think about it, you know, it--I think part of the pushback is not understanding how these businesses actually plug into a system of global economic--with global economic implications. And so no one quite understands what it means for the average small business in terms of its growth and its development. And for those who do venture into that area it is so very complicated for them to break through that they kind of discourage others because it is such a daunting endeavor. Do you get where I am? Ms. Johns. If I may respond, yes, Congresswoman. That is exactly why I have been--to your point, that is exactly why I have been focusing on the counseling and the nationwide network of counselors that the SBA is putting in place. Because that can address--it can take away the mystique. It can take away the complexity for that small business who needs that support. You are talking a large business. They have their own in-house resources for how to navigate this global marketplace but we are that--we stand in that gap for small businesses. And I will give you an example. I was in Indianapolis, Indiana not long ago at one of our Women's Business Centers, talking to a group of women, one of whom I will highlight. She is a jewelry maker. Because of the resources that she found at the Women's Business Center and was exposed to the idea of exporting, she is now able to take her jewelry making business and she, through the web, has launched in two countries. She is in Great Britain and she is in France. And she intends to grow from there. And I just use that as an example to say that with the benefits of technology that we have at our disposal now and I believe a strong role that we must play at the SBA is to build awareness to again demystify the notion of exporting, connect small businesses with the expert advice that they need and the other support, and we will see a breakthrough. It is our responsibility to develop metrics to track that. We are in the process of thinking through how we need to do that but the main point is getting these tools from the Small Business Jobs Act into the hands of small businesses, doing our part to develop the network of support that the small businesses need, and then building awareness. Because that is a big problem. Too many of our small businesses just have not thought about exporting. And when the issue is raised and when we talk about the tools that are there at the SBA and across the Federal government, a very strong positive reaction always results. Ms. Clarke. Thank you very much, Mr. Chairman. I yield back. Chairman Graves. Mr. Tipton. Mr. Tipton. Thank you, Mr. Chairman. Panel, I would like to thank you for taking the time to be here. I am a small business guy myself and certainly I recognize your appreciation that small business is the number one job creator in this country and probably one of the keys to being able to lead us out of this recession. If I could, Ms. Johns, you stated in your opening statement and I heard this, that the administration wanted to be able to double exports in the last five years--over the next five years. How is that going? Ms. Johns. Well, we are certainly working as hard as we can to---- Mr. Tipton. Where do we sit now? Ms. Johns [continuing]. To do our part but I would defer to my colleague on the actual data there. Mr. Kumar. Last year exports grew at 17 percent over a year ago. A doubling of export is a 15 percent compounded annual growth rate year over year. This year in the first seven months exports are tracking at 17 percent. Given the fact that over 19 months we are tracking at 17 percent, that is about our goal but that is why we always like to call it a beginning. Whether you look at macro level or micro level, the trend is quite heartening. Besides the 17 percent, exports were at 1.83 trillion last year, the second highest. And exports as a percent of GDP went up from 11.2 to 12.5. That is at the macro level. At the micro level we physically were able to touch 18,000 SMEs. No, 18,000 companies, of them 16,000 SMEs. And we were able to post significant increases in export success. Again, our approach was to divide and conquer to leverage our combined resources. The USFCS focused on taking newer companies-- existing exporters to newer markets. We succeeded in 4,700 such cases; 12,300 export successes. So whichever form we look at it, whether we look at it in physically facilitated exports and what it had been over a year ago or at the macro level, we are tracking well onto our goal. Mr. Tipton. Good. You know, I guess I am curious because part of the problem is when we are dealing with small businesses, as you note, you do not have some of the sophistication in the marketplace. Are all of the forms, all of the applications, are those available and deliverable online? Mr. Kumar. Export.gov is the single web portal which we would like every business to be directed to. And what we have done on that portal and continue to improve the portal is have the Trade Information Center intercede so that any inquiry from any one of your constituent companies is directed to the right agency. Mr. Tipton. I understand the direction but I mean in terms of filling out forms, are those available online? Mr. Kumar. Yes, it is. Mr. Tipton. All forms are available? Mr. Kumar. Not all. Most forms, through the Client Intake System. The right forms---- Mr. Tipton. Are you working to get them all online? Mr. Kumar. Yes, sir. Mr. Tipton. You are. What is your time of completion on that? Mr. Kumar. Export.gov is an interagency staff. Most of the forms which small business entities require are already online. And I cannot give you a finite time but it should not be more than six months or so when every form would be there. Mr. Tipton. Okay. Great. And I may be following up a little bit on Congresswoman Velazquez's question there. If I was interpreting it correct. But the return on investment that we were having for the cost of what you do versus the yield from a benchmark, do you have any idea what that is? Mr. Kumar. I do not have the benchmark idea but what we do is track the value of exports. Export successes. Mr. Tipton. On a year over year basis what would you say given some of the statistics that you just gave me earlier? Mr. Kumar. It is tracking upwards. I did mention in my testimony that the return on investment to date states that every dollar invested in the service is coming out at 1.35. And I do know it is significantly higher than what it was in the previous year. Mr. Tipton. Okay. I think there will be probably something because, you know, as Congressman Mulvaney was pointing out, it sounds like we do have some duplication going on. And I think it is probably in all of our interests right now to see where we can merge those components to be able to work the most efficiently, to be able to achieve that common goal of being able to export more at the most efficient cost that we can certainly have. Thank you, Mr. Chairman. And I yield back. Chairman Graves. Thank you. Our next questions come from Mr. Richmond. I might remind Mr. Richmond that that last pitch was not a strike; it was a ball. And I should limit your time and I am too nice a guy. Mr. Richmond. Mr. Chairman, I certainly appreciate that. And, you know, sometimes you get lucky and you just have to accept luck. So I just accept the luck from the baseball game and hope that I can repeat it next year. But you never know. Chairman Graves. Well, just remember when the chairman is up to bat and you are pitching. Mr. Richmond. I will tell you I was surprised and disappointed that the umpire called that a strike. I just did not want to overrule the umpire but certainly he was wrong for calling it a strike. I thought it was a ball all the way. First I will start with Mr. Kumar. First let me thank you because I had the opportunity to see and participate in a New Markets, New Jobs NEI Small Business National Tour, one of which was in New Orleans at Tulane University. And the feedback that I received from many constituents and small businesses in New Orleans was incredible in terms of the education and the information that was provided there. My question to start off with is for Mr. Foster and Mr. Kumar. How much do you all talk to other agencies? Because Mr. Foster, you correctly pointed out Louisiana and the Port of New Orleans, Port of South Louisiana, our role in exporting in the country. However, I do not know if the Corps of Engineers understands that if they are not dredging the Mississippi River, which is our superhighway for trade, you have now put road bumps in the middle of our highway. So the more you can talk to other agencies to let them know the importance of that it would certainly be helpful. Now my question to you, you talked a little bit about hosting a reverse trade mission. And I guess I wanted to hear a little bit more about how you do it and how you identified businesses outside of the country to come to it. And do you have that in such a model that cities can duplicate it if they have the resources to do it? We are a port city and we export a lot of things and we have the ability to do more. That would be something I am interested in if you all could give us a roadmap on how to do it. Mr. Foster. Thank you. I will answer that first. Thank you very much, Congressman. And again, yes, we at USDA are very familiar with your district and your state. I was mentioning earlier corn, wheat, and soybeans are going out through your ports at about $49 billion a year, so that means a lot to us. We at USDA have four regional trade associations, non- profits that help small businesses exclusively in those regions. In fact, our Southern United States Trade Association, which covers the whole south, is based in New Orleans. They work every day with new small and medium-size companies to help enter world markets. I have a note here that a company called Magic Seasonings, not far from New Orleans, is involved in our program and is now exporting to several countries after attending a number of trade shows that we helped fund them to go to. Another company, Crown Products, that produces sunflower seeds and popcorn and so forth in Louisiana, are working with us and going to trade shows. They are now selling to the Dominican Republic at the tune of $200,000. The Southern United States Trade Association (SUSTA) that we fund brings reverse trade missions regularly to Louisiana. We want to make sure they do this through all our partners there. We can do even more to make sure that they are reaching out to every small business in your state and any of the states--to make sure that they are meeting the buyers that our posts are bringing to the United States. We have 100 offices around the world covering 150 countries. They regularly bring buyer missions to the United States. Again, that is because small businesses cannot afford to get all over the world to meet the buyers. But I will say the SUSTA trade organization I mention has funds to supplement any company in your district, for instance, that wants to attend an international trade show to enter world markets. They get funding up to 50 percent of the cost to travel. And I must say USDA does not charge any services, any fees. I am sorry, charge any fees for our services. Mr. Richmond. Okay. Ms. Johns, I have a two-part question. When we talk about the STEP Program I guess the question becomes was there large participation from the states? And do you all anticipate allocating or leveraging all of the funds allocated for the program? Ms. Johns. Thank you, Congressman. Yes, there was a very good response to the STEP grant program. Fifty-three states and territories responded and as I mentioned earlier, each one of the entities who sent in an application will receive funding. We are in the process now of working with the states to ask them to--it is a comparative process. We are asking them to resize their application because we were oversubscribed. The applications that we received were over $42 million for a $30 million program. But that process is underway and as I said to the ranking member, we will have those dollars out the door within the next few weeks. And I am sorry. The second part of your question was regarding---- Mr. Richmond. Just would you leverage it all. Ms. Johns. Oh, I am sorry. Yes. There is a matching requirement. And the good thing about the STEP Program is that it really gives--it gives an incentive. A bit of a jump start and another opportunity for states to build their own capacity for supporting exporting small businesses because as discussed earlier, some of those resources have gone away at the state level but this is a way to help replenish that opportunity. Mr. Richmond. Thank you. Mr. Chairman, thank you. I exceeded my time but next year I will make that up to you. Chairman Graves. Does anyone else have any other questions? With that, I appreciate you coming. And I would encourage you if you have got to leave if one of your staff could stay to listen to the next panel. And I will go ahead and seat our second panel. STATEMENTS OF MARK RICE, PRESIDENT, MARITIME APPLIED PHYSICS CORPORATION; MITCHELL GOETZE, PRESIDENT AND COO, GOETZE CANDY COMPANY, INC., ON BEHALF OF THE NATIONAL CONFECTIONERS ASSOCIATION; WADE MERRITT, VICE PRESIDENT, STATE INTERNATIONAL DEVELOPMENT ORGANIZATIONS; MAURICE KOGON, DIRECTOR, INTERNATIONAL TRADE DEVELOPMENT, EL CAMINO COLLEGE Chairman Graves. We will bring the hearing back to order. Our first witness is Mr. Mark Rice, who is the president and founder of Maritime Applied Physics Corporation. His company designs and builds high-tech Maritime vessels, including hydrofoils and unmanned vehicles for the U.S. Navy. They started with one person and grew into 80 full-time employees with the help of a Small Business Innovative Research Program. Mr. Rice received his Bachelor's degree in physics from the University of Maine and is a licensed professional engineer. Welcome. I appreciate you coming in and traveling all this distance. STATEMENT OF MARK RICE Mr. Rice. Thank you very much. Thank you, Chairman Graves and Ranking Member Velazquez and members of the House Committee. I appreciate the opportunity to testify. Our company is a 75-person, 80-person employee-owned company. I founded it in 1986. The company builds five defense products. We are a manufacturer of defense products and these range from unmanned boats to very automated cranes. We also have about 10 R&D contracts mainly with DOD. We have exported to South Korea, Germany, Scotland, France, and hopefully to Brazil. Our company has offices in three states and through the recession we have grown at an annual rate of about 20 percent due in large part to exports. Our journey has not been easy to become an exporter and I would like to share a particular story with you about our experiences in South Korea. It began in the year 2000. We received an email from a business agent in South Korea. The agent had researched our involvement in a U.S. Navy project for supplying ship rudders through the Internet. And he indicated there was a similar program in South Korea. He invited us to visit the world's largest shipbuilder, Hyundai Heavy Industries in South Korea, and at this point we were a 25-person company with no exporting experience. We did not understand the laws, the customs, or the cultural aspects of doing business overseas. We had no idea who the Department of Commerce was or where to get financing. We were totally ill-prepared. We did not understand the laws, either in this country or overseas, and at the time it was really unclear to us whether we needed an export license, and once we understood that we might it was not clear whether this was from the Department of State or the Department of Commerce. We learned through trial and error until we found the U.S. Export Assistance Center in Baltimore and they really bailed us out of the export license problems that we got ourselves into. So with that scare behind us we continued three more times to Korea and we got, in one case, the State of Maryland Export Assistance Grant. On each trip we were sort of gradually drawn a little further into this. We had never built these products ourselves. We had largely done the engineering for the products that we were talking to the Koreans about. We ended up in a head-to-head bidding competition against a British firm that was a multi-billion dollar firm. They brought in representatives of the British government. They had a retired Korean admiral on their staff. And we went head-to-head with them over a period of about six months. And at the end of that process we won the competition on both a technical basis and our cost was about half a million dollars below the British cost. We received a contract for 100 tons of machinery, hydraulics, and electronics. We came home to celebrate and to find 20 new workers to do the work. We then went to our bank, shared the news with our bank, and they promptly canceled our credit lines and said the deal was too big for us. And it was a large U.S. bank. So we were in a very disparate business situation at that point and I approached a local bank and I found a very brave banker who understood the SBA Export Assistance Program, went to the SBA and basically stitched the deal back together. He saved our company. And after three years we basically got through the export process, delivered 100 tons of equipment, and broke even on the deal. So without the Export Assistance Center, the SBA and Sandy Spring Bank, we would not have survived as a company. It was very difficult and it required a lot of commitment and time and resources, both from our company and from those people who helped us through this process. It was overwhelming and I can attest to that. So the USEACs, the SBA, the local offices, the people we really go out and interact with on a one-to-one basis, are the people who saved our company, put this deal together, and turned us into an exporting company. So there are four recommendations I would like to make at the end of this. The interagency coordination of export licensing has gotten a whole lot better since we did this. The Department of State and Commerce are pretty well coordinated but we need to get to a one-stop shop here. Having two parallel processes is just confusing and it makes it twice as hard. We got caught between the two agencies. The second one is the same recommendation on export financing, whether it is SBA, EX-IM, there are a myriad of opportunities out there. Not only do the small companies not understand these options but their bankers do not understand. So in many cases the banks that have to act as the go-between between the small business and EX-IM or SBA are not well informed in these programs and things like letters of credit and the complexities of international business are just tough. The third one, as a country we need to increase our awareness of the need to export and the national priority given to exporting. When I went to a shipyard in South Korea and I talked to the average worker, every worker in that shipyard knew the importance of exporting. When I go hire someone from a U.S. university or a U.S. high school, they have no idea. It is a cultural thing that we teach and we need to learn how to teach it. The fourth one is the Department of Commerce recently reduced its staff in Washington by sending people out to the field offices. That is great. The real work in this business is done in the field offices. In our case the SBA representative was with the USEAC sitting in that office and had the Department of Agriculture been there and everybody else this whole thing would have gone more smoothly. So get people to the field and get the decision-making in the field. There is far too much bureaucratic time spent in these programs discussing the administration in the offices as opposed to the execution of their missions. So I would like to thank the members of your Committee, Chairman, ranking member, and I look forward to your questions. Chairman Graves. Our next witness is Mr. Michael--Mitchell. Mr. Mitchell Goetze, president and COO of Goetze Candy Company, Inc. Goetze Candy is a fifth generation family business that manufactures the trademark candy Caramel Creams and Cow Tales. Mr. Goetze grew up in the family business, attending his first trade show when he was 12, and he is testifying on behalf of the National Confectioners Association. Welcome and I appreciate you being here. STATEMENT OF MITCHELL GOETZE Mr. Goetze. Thank you, Chairman Graves, Ranking Member Velazquez, and other members of the Small Business Committee for inviting me to testify on behalf of our company, as well as our trade association, and highlight some of the issues facing our industry and small business today. The Goetze Candy Company is located in Baltimore, Maryland, and I am certainly honored to be here. The Goetze Candy Company was founded in 1895 by my great-great-grandfather and it has been in my family for five generations. We have 100 employees and manufacture, as you said, confections under the brand names Caramel Creams and Cow Tales. I am also the chairman of the National Confectioners Association. The association is representing the United States Gum, Candy, and Chocolate industries of which 85 percent are small businesses like mine. U.S. confectionary is a $30 billion industry with international sales of well over a billion dollars. Industry sales grew by about three percent a year and international sales grew by about seven percent. Industry employs over 70,000 in manufacturing and over 200,000 when we include our suppliers and distributors that support the sale of our products. The confectionary industry is a critical component to manufacturing in the United States overall. We welcome the opportunity to grow our exports but two key obstacles stand clearly in our way of export growth. First, the input costs of American products that are higher than our foreign competitors; and second, several bureaucratic obstacles and larger public policy issues that add complexity and impede trade. As a small company it is hard to find the resources to adequately research global markets and execute sales orders. Input costs drive a small company's ability to export our goods and present an extreme challenge. Sugar is the most widely used ingredient in the confectionary industry but the current U.S. sugar policy is woefully outdated. The current law allows only about 15 percent of sugar to be imported and what we are forced to buy domestically from a handful of sugar suppliers is priced at twice the world price. Actually, we had a price increase yesterday from the top three U.S. suppliers of sugar and it has officially doubled over the last three years, the price per pound. The artificially high price of sugar directly drives the price of all other agricultural materials we buy. To be able to compete, companies today are moving operations to Canada and Mexico to avoid the U.S. sugar restrictions and take advantage of lower business operating costs. We need reform to the outdated sugar program now. Health care expense has dramatically increased over the past 10 years. Goetze's cost to provide health care to our employees has risen two and a half times, pushing our rate from $182 to $465 per employee per month. We need to address the uncertainty of health care and the abuse of the system or companies like mine will be forced to raise employee contributions or worse, drop health insurance altogether. All goods need to be transported to our ports on our coasts to be exported. Transportation costs are roughly 10 percent of operating costs for our industry and the freight cost per pound shipped has risen by 15 percent in two years. That increase along with a rise in diesel fuel price surcharges have led to a 34 percent increase in overall shipping costs for us. We advocate for increase in the truck weight limit to offset enormous transportation costs associated with the diesel fuel index. The U.S. Government provides some great services to business but the promotion of these services offered must be increased. The Foreign Agricultural Service has been particularly instrumental through their Market Access Program known as MAP. We certainly support continuing MAP funding. I would like to point to the U.S. Department of Commerce Gold Key Program, which was mentioned earlier, that could be a good model for use in the agricultural sector which it does not apply to us. A similar program would help us with basic steps of how export--how to export would be very helpful and make entering new markets less intimidating. On a broader policy scale, 95 percent of the world's population lives outside the United States and what an enormous opportunity for exporting small goods manufactured here. If tariffs were reduced by 10 percent to our top 17 export markets, NCA estimates that we could see more than a $14 million increase in U.S. export sales of confectionary goods. We support the president's National Export Initiative to double U.S. exports and the most efficient way to do this is through congressional approval and a timely implementation of the pending Free Trade Agreements with Korea, Colombia, and Panama. With Free Trade Agreements in place, we would help lower our input costs, make our products more competitive, which will increase exports and grow jobs. When a product is labeled Made in America that message resonates around the world. I believe that we can grow U.S. manufacturing but only if we consider a careful balance of reduced domestic regulatory burdens, smarter, more competitive supply management, increase marketing of government resources, and have the policies in place to not only allow our products to enter new markets but to be able to enter those markets at a competitive price. In conclusion, owning or running a small company today, small confectionary company today, is far more challenging than even my grandfather could imagine. It has become so complicated and challenging at times that I forget that I am just manufacturing candy. There are many bureaucratic obstacles to overcome in order to even ready one's product to be able to break into an international marketplace and grow exports. I would like to say that our National Export Strategy is working but with the ever-growing obstacles and challenges I cannot. Again, thank you for inviting me to share my perspective and I look forward to working together to find solutions to resolve these issues. And I am happy to answer any questions. Ms. Velazquez. Now it is my pleasure to welcome Mr. Wade Merritt. He is currently vice president of State International Development Organizations, the leading U.S. organization dedicated to supporting state international trade agencies. He also serves as vice president for the Maine International Trade Center where he works directly with small and medium-size businesses, as well as federal agencies to coordinate trade missions, technical assistance, and export credit assistance programs. Welcome, and thank you for being here. STATEMENT OF WADE MERRITT Mr. Merritt. Thank you, ranking member, Chairman Graves, Ranking Member Velazquez, members of the Committee. Thank you for inviting me to testify today. My name is Wade Merritt. I am the vice president of the Maine International Trade Center and currently serve as vice president of SIDO, which is the National Association of State Trade and Export Promotion Agencies. And an allied but separate group of boots on the ground providing export development services in the United States. Nationally, SIDO states currently boast a domestic staff of 300 with a total budget of over $83 million for international development. I know that is not a lot when compared to the overall budget for the commercial service. Our overhead is lower and we have become experts in doing much more with much less. The president's goal of doubling exports is ambitious and requires robust export development programs at both the state and federal level. The president also suggested that this growth be led not by the Boeings and Caterpillars of the world but by small and medium-size businesses like my friend here from the University of Maine, Maritime Applied Physics, or the 80 percent of my clients in Maine who have fewer than 100 employees. These small and medium-size businesses hold the largest potential but also require the greatest level of overseas support. A 2006 World Bank study demonstrated that on average every dollar spent by countries on export promotion yielded $40 in new exports. And you heard from Director General Kumar that Commerce is showing a much higher number than that. And I would point out that our number was from 2006. Presently, our country's export promotion spending by percentage of what we export--and this is state and federal combined--is much closer to that of a developing country than to our peer nations. There is a lot of room to grow and the time to take advantage of that opportunity is now. The states working collaboratively with the Federal government are ready to do our part. However, as states are being called upon to provide even higher levels of service, the current fiscal crisis has prompted state governments to make difficult choices. In just two years, state support for trade development and investment attractions dropped by 20 percent. States are having to choose short-term budget fixes over long- term solutions. And as I mentioned earlier, foregoing an investment with a proven 40, 90 or 135 to one return is not-- just is not a choice that states should have to be making. The STEP Program to the U.S. Small Business Administration is now poised to provide much needed support to our state trade offices and exporters. While the roll out of the program has been delayed as metrics have been revisited, proposals have unexpectedly had to be reformatted and resubmitted. And I can attest that I have personally been wrestling with this while simultaneously preparing this testimony. The program has the potential to truly revitalize American exports. Once STEP Program funds are awarded, states will quickly be in a position to enhance the services and assistance available to small and medium-size exporters in our states. I think that is a key point because we are much closer to the ground. There are several export promotion priorities that should be addressed and implemented in order to maximize the chances of success for the NEI. First, the commercial service will be essential to deliver--a revitalized commercial service will be essential to deliver on the NEI's commitment. Even the best funded state trade program cannot provide global market coverage and all states depend on the worldwide network of commercial service posts to provide their businesses with market access in countries where the state has little or in my case no independent resources. State programs are well positioned to complement federal promotion efforts domestically through our on-the-ground practical assistance programs but reductions in CS budget and overseas personnel deployment adversely affects our programs and has a chilling effect on the ability of U.S. producers to export their products. Secondly, access to traditional markets is essential. While accessing emerging markets is a worthwhile objective, most new- to-export companies will find the best opportunities where our exporters have enjoyed a comparative advantage in the past. Case posts such as Hamburg, Barcelona, Amsterdam have been closed and Canada, our largest trading partner and often the first export market, has just one American officer responsible for the entire country. These offices should be reopened and staffed as soon as possible. Third, pricing for CS services. We heard that earlier, such as Gold Key and International Partner Search should be maintained at the current rate which we believe is affordable for small business. These programs represent some of the tools most frequently used to enter new markets and increasing the costs would be counterproductive to the growth of the NEI. Fourth, support for the SBA's Office of International Trade is essential to the success of the STEP Program. Through STEP, the Federal government has provided much needed assistance to boost non-agricultural exports. Now it is necessary to fulfill that commitment by affording the SBA the resources it needs to name a full-time associate administrator for international trade and to supplement its staff with the numbers necessary to roll out this pilot program successfully and efficiently. And finally, an enhanced partnership between the federal and state trade agencies to seamlessly deliver customer focused services is critical to expanding the pool of successful U.S. exporters and promoting market diversification among existing exporters. In order to better coordinate efforts and avoid duplicative services, there needs to be a mechanism for sharing metrics, tracking successes, and identifying the areas for improvement where currently there is no incentive for collaboration. American exports create and sustain millions of jobs in the U.S. and current prospects for expansion are excellent, but a collaborative partnership that combines resources and finds efficiencies at the federal and state levels in a systematic manner is the best way to assist companies in finding export success. Thank you, members of the Committee, for allowing me the opportunity to speak. And I will also welcome your questions. Chairman Graves. Our final witness is Mr. Maurice Kogon, director for International Trade Development, El Camino College in Hawthorne, California. Mr. Kogon has over 50 years of international business experience as a U.S. government official, business executive, educator, and consultant. His experience includes over 30 years with the U.S. Department of Commerce, which he held management positions in trade promotion and strategic planning. Mr. Kogon has a Bachelor's and Master's degree in Foreign Affairs with George Washington University here in D.C. and we welcome you. STATEMENT OF MAURICE KOGON Mr. Kogon. Thank you, Chairman Graves, Ranking Member Velazquez, and Committee members. Thank you for the opportunity to provide this testimony. As you said, my name is Maurice Kogon and I have spent a lot of time in this field, at the federal and state level, with a multinational, as a small business owner and as an educator, including 33 years in the Commerce department. My testimony today raises a basic question about the National Export Initiative, specifically does it adequately meet needs of the thousands of small businesses that are or could be exporting? In my view, it is not yet as relevant or as helpful as it could be to meet needs of this vital constituency. I have three main points. First, the NEI has an ambitious goal to double exports in five years but not a strategy that will get us there. The strategy relies too much on global economic factors we cannot control, while the programs we can control are not focused enough on the small businesses that most need export help, and also not enough on the services they most need at critical early stages. The NEI's export promotion programs are basically only what the government can afford; not on what can best help small businesses at each stage of their export development. Far too many small businesses with export potential are left to fend for themselves. Claims that the NEI is on pace based on recent large export gains belie the reality that most of these gains came from recovery and world import demand and would have happened anyway. My second point is that the NEI does not adequately address what I see as our national export paradox. That while we are a very large exporting nation, we are not a nation of exporters. Roughly 85 percent of U.S. manufacturers do not export at all and over half of the 15 percent that do export sell only to Canada or Mexico. The NEI addresses the half of the 15 percent, the low hanging fruit, but essentially writes off the far larger group of potential new exporters in the 85 percent. U.S. exports would increase significantly if we could get more of the 85 percent into the export base. For that, in my view, we need to go beyond a low hanging fruit strategy. We need what I call a fertilize the tree strategy to optimize exports--that is, to increase exports to our full potential and capacity as a nation. An optimization strategy would focus not just on getting existing exporters into new markets, but would also cultivate the far larger group of potential new exporters that could most contribute to long-term export expansion. It would have two interrelated goals. First, we need to increase U.S. exports as a percent of GDP. Although we are the world's third largest exporter, our exports to GDP ratio lags well below our major world competitors. For example, Germany is at 45 percent; we are at 12 or 13 percent. Our competitors, with comparable economies and competing in the same global marketplace, are more fully exporting to their capacity. We have the potential to close this gap. We are, after all, the manufacturing powerhouse of the world and the world leader in innovation and technology. And, most of our manufacturers are not even exporting yet. Second, we need to increase the number of new exporters. We could come much closer to our national export potential if more non-exporters were to start exporting. We now have roughly 280,000 actual exporters in the U.S. As noted, they account for only 15 percent of all manufacturers. Many of the 85 percent non-exporting manufacturers may well have export potential. Why? For one reason they have succeeded in the world's toughest market--our own--against the same competition they would face in foreign markets. If they can sell competitively here, they have the potential to export to at least one or perhaps even many of the roughly 200 world markets. If my suggested priority on new exporters makes sense, why is the NEI so narrowly wedded to the low hanging fruit? The reason is, and Mr. Kumar mentioned that and I agree, they cannot afford to do both. Limited resources should be reserved for the export ready firms able to make the best use of the trade promotion and matchmaking services. But that misses the larger point. The new-to-export sector is too important to ignore or write off. The solution is obvious. It is not to stretch federal resources further, but to collaborate with non- federal partners well equipped to fill the gap. This gets to my third and final point, the need for systematic collaboration with non-federal partners. The vast network of state and local export assistance organizations could be part of an overarching export optimization strategy to both fertilize the tree and pick the low hanging fruit. Centers like mine and others are at the grassroots of potential new exporters. We have the expertise and resources and are ready and willing to engage in a meaningful collaboration. Unfortunately, I do not see a federal mindset, a plan, or a mechanism to collaborate. The NEI is more concerned with internal collaboration within the TPCC. It gives abundant lip service to collaboration with others, but not much else. Here is what real collaboration would look like in my view. Nonfederal partners would have a seat at the TPCC table. They would help plan and develop a holistic export optimization strategy that shares data with potential and existing exporters, jointly recruits prospects, reconciles programs to reduce wasteful duplication and overlap, and coordinates the seamless delivery of complementary services to both new and existing exporters. Before concluding, let me emphasize that my concern is with the strategy, not with the programs. They do increase exports and do have a high ROI to justify their costs. The only problem is that they do not go far enough and do not meet enough small business needs. Thank you again for the opportunity to share my thoughts. My written submission elaborates on all my points today, including specific needs of small businesses through all stages of the export process from start-up to getting paid. Thank you and I welcome your questions. Chairman Graves. Ms. Velazquez, I will start with you. Ms. Velazquez. Sorry. I was not ready. Chairman Graves. That is okay. Ms. Velazquez. Mr. Kogon and all of you, it has been incredibly helpful to us, your testimony, and specifically your experience in the exporting business. Mr. Kogon, you said you do not have any issue with the program but the strategy. In putting together the formulation of the strategy did the administration reach out to any of you or do you know of any input that was requested from businesses that are in the export business--in the exporting business? Mr. Kogon. When the NEI was first issued there was an opportunity to submit comments to the TPCC. I submitted a very detailed white paper saying basically what I said today in much more detail and laying out a complete strategy that I thought would be more effective. I do not believe anybody paid any attention to that frankly and I thank the Committee for recognizing that that paper exists. Ms. Velazquez. Any other? Yes, Mr. Rice. Mr. Rice. Yes. Yes, ma'am. There was an outreach effort and there were several visits through the District Export Council. There were road shows that traveled through the country but I agree that I think it as more show than substance. I did not feel that I had an opportunity to significantly influence it. Ms. Velazquez. Mr. Rice, you spoke that when you first were contacted by the overseas industry or business you went to the State Department, the Department of Commerce, and the SBA to complete your first overseas sale. Of all those agencies, which of them was the easiest one to work with? And this is not to be critical of the agencies; it is just to learn how to better improve what they do. Mr. Rice. There were two key people. There was in the USEAC in Baltimore a gentleman named Bill Burwell and in the SBA there was a woman named Debora Conrad. I mention the names because they were individually extremely helpful as opposed to organizationally. They understood our problem, they took us under their wing, and they really helped us through these things. And that interagency interaction worked extremely well. And to your earlier question, there was a great division between the financing role and the overseas Gold Key sort of reach out role. And I understood that very clearly from the first interaction with the two groups. Ms. Velazquez. Mr. Kogon, I asked the representative, the witness from the USDA the question that the strategy was predicated into the success of trade agreements--Korea, Panama, and Colombia. What will happen to the strategy if we do not get those trade agreements ratified? Mr. Kogon. The strategy is multifaceted. It includes the reduction of trade barriers and it also---- Ms. Velazquez. Oh, the success of the strategy. Mr. Kogon. Yeah. I do not, you know, they were already claiming success of the strategy based on export increases of the past two years. I do not think it had anything to do with the strategy. For the same reason, a couple of years ago exports went down and I do not think they would blame bad strategy on that. So I think strategy is not really the driving force here. It is what we can do to help companies get into exporting. Ms. Velazquez. Okay. Mr. Goetze. Yes, sorry. Mr. Goetze. That is okay. Ms. Velazquez. You wanted to add something? Mr. Goetze. Yes. I would just add to that. You know, from our perspective with the Free Trade Agreements, I mean, what they allow certainly is the first step of opening those new potential export markets. But along with Free Trade Agreements, they also include the protection of intellectual property. There are agreements on that which is a big concern of U.S. brands like ourselves. Mr. Rice manufactures a product that is very successful because of its technology, whereas a piece of candy, you know, is not all that complicated to go into another foreign land. It is easily duplicated. So the protection of intellectual properties is important. And then certainly some of the issues that have floated around about child labor certainly dealing with countries with Free Trade Agreements. There are also stable economies. The governments usually have collaborative efforts. Ms. Velazquez. Are those the reasons why in your testimony you said that the North American Free Trade Agreement created a disincentive for you as companies to remain here but you also said that you support Free Trade Agreements with Korea, Panama, and Colombia. Why will these trade agreements produce different results than the ones from North America? Mr. Goetze. Well, first of all I think I am here representing certainly the U.S. company with extreme input costs and, you know, when we originally spoke I thought my contribution could be that before a product is even ready to be exported, input costs are important. I think when you take a look at Free Trade Agreements, you know, if you talk about the north or the south of us they are very similar to what we did. That is the way we see the world. When we try and take this product and go to the Middle East which we were recently over in Dubai looking at a show or Germany through the NCA, through the MAP Program, it is more complicated. But with an agreement in place I think as a small company you feel more secure conducting business with a country like that or a country that falls under a Free Trade Agreement for all the reasons I mentioned--the intellectual properties, the stability of the economy, things of that nature. Ms. Velazquez. Thank you. I have another question. I will come back. Chairman Graves. Okay. I have got a question concerning-- and it was brought up in the earlier panel. And it comes to marketing plans. How much, you know, we have so few firms obviously or small businesses in particular, you know, exporting stuff. How much of that is related to--and I welcome input from all of you--how much of it is related to market? I mean, that is obviously--it can be extraordinarily expensive. And if you are concentrated on domestic here in the United States obviously and I suppose it could be very, very tough to go into another country and try to even let them know you have got a product out there available, I mean it is very curious to me and, you know, is it just too expensive to try to do that? And you know, where do you go, you know, what country do you pick to try to make a dent at least? Let us start with Mr. Rice. Mr. Rice. A couple of thoughts. Number one, the expense of going overseas is in the $5,000 to $10,000 range for a reasonable thing. And that is a lot for a small company, a very small company. So the more you can do virtually--so the Department of Commerce has some virtual methods to get you overseas to get your feet wet. The second thing I would say is when I came back we put together a program that is called Export Tech, which is a three-day program where a CEO from a small company comes in. The first day it is really infusing them with knowledge. The second day is addressing specific problems they may have in the markets they think they want to go to. And the third day, which is two months later, they have to provide a business plan to a council of their peers and experts on where they want to go, what it is going to take, and what the realities of the business plan might or might not be. I think that is the sort of training we need to get out to people, whether it is through Mr. Kogon's organization or these public-private partnerships. People just do not understand what the markets are. The business plans are daunting. They do not understand the cultural aspects and they need help. And they have to have help coaching themselves through the process. They have to do it. As a farmer, if you were going to export, you know, to Dubai and you needed to understand what crops you were going to raise and what might there be a demand for, that is where the foreign-- where the foreign presence and the commercial service really helps. It lets you reach into the country, understand through their culture what their market is, and then feed that information back through the USI Act to the local business to reach their educational level up to where it needs to be. Mr. Kogon. I would like to comment on that. Mr. Chairman, I think you started to say how important is marketing and market planning. For new-to-export companies, which is my focus today, none of which is being provided by either SBA because they do not have the competence to do it and US&FCS because they are not interested in helping new-to-exports; they are focused on the other. It is not one thing or two things you can do. That is why we developed a seven-step export enabler program. And we start with assessing whether that company has the potential and readiness to export. Then we train them on how to export. Then we provide the research to identify which markets are most promising and what is the best strategy to get into those target markets. Then we help them develop an export market plan. And the market plan would address the distribution pricing, promotion, and adaptation strategy in each target market. Then we move to the marketing, the promotion, to implement those aspects of the market plan. So we take them to trade shows or we recommend that they improve their website or they do all the marketing things. And the seventh step is the matchmaking. Matchmaking through Gold Keys is very important. What you should know is the U.S. and Foreign Commercial Service is no longer able to provide the level of Gold Key support that is needed. And when the STEP Program comes along with more demand for Gold Keys it is going to be a mess--there are going to be some problems. Mr. Goetze. I would say when talking about marketing a product overseas, we spend approximately $12,000 to send two people to let us call it Germany. Germany every year. That is two people. That is time away from the office. We participated in that show for 10 years. So in essence we have spent about $120,000 just in participating in travel and the show. Right now we roughly do maybe a half a million dollars in export sales. The real challenge is when you show up there, is actually selling the product and having the person that you are trying to sell it to understand, you know, your product just in general. Again, I go back to the input costs. Usually sugar and other agricultural products that are in our Caramel Creams, you throw the cost out to them and they shake their head and say, well, no, that is not what it should cost. So once you get over that and you come home it is usually a nine-month to a 12-month sale cycle for confectionary. By the time you finish your communication and negotiation you might have to come up with some type of special packaging or labeling to comply with that country. In our case, those sales, unlike the United States, you go and you sell a retailer here in the United States, it is sold and it usually stays on the shelf if you perform. International business constantly needs this feeding that you hear. There are not the retail--other than Europe there are not the retail placements that there are here in the United States. It is mainly an ad hoc sale. So every year it seems we are duplicating the sale thing. We know you get residual sales if the product sells well or they find a different market. But the challenge is it is not placed on a retail shelf in most cases. Chairman Graves. Mr. Merritt. Mr. Merritt. Thank you, Mr. Chairman. I completely agree with my colleague form California that the ability that it will sell in the United States pretty well, you know, you are battle hardened by the time you reach the world market. I think that is a good thing. What we find is that it is incredibly difficult to shake some of these small business owners from their complacency, that they have been able to survive on the U.S. market for so long that the thought of even getting out of the office is, you know, it is not there. It is very expensive to market. We run trade missions in Maine on a complete total cost recovery basis. Those are, again, they match up very nicely with Mr. Rice and Mr. Goetze. About $7,000 for a participant to go overseas with us for a week. The USDA has fantastic programs for agricultural exporters and then we have been able to stretch those into fishers and into forest products, which for a state like mine that is a large portion of our base but that is not the case necessarily for other states. It is why we got really excited about the SBA STEP Program, honestly, which is that there is lots of money out there for agriculture and for forestry and for fisheries, but there has never really been anything for manufacturers which is one thing that we have kind of thrown out there for a long time of our competitor nations are, you know, providing whatever. I mean, it does not have to be much. In our case, small--we were able to find from another pot of money small grants. A thousand dollars to put towards companies participating with us on trade missions to offset costs of travel or matchmaking services or whatever. And just that tiny little bit of money was enough to be an incentive to get them out of the office and actually looking at that international market. So, you know, we had not pushed. We, the states, had pushed Commerce to do something like this, to do a market access program like grant program for manufacturers. SBA kind of came out with this more flexible program that said the states could apply for it and do whatever you would like to do for export development. Most of us have decided to go that route. That is what we are doing with our application is to provide offsetting costs for Gold Keys. Mr. Kogon mentioned, however, there may be an issue with capacity at the commerce level as to whether or not the posts are going to be able to handle this influx of Gold Keys which is going to come out of many of our STEP proposals. And then finally, just to kind of put a point on the difference between USDA and the ag programs and everything else. We heard a couple of years ago that there was actually more money that was given to the California Raisin Board for marketing of California's raisins than there was in the entire one grant program that the Commerce Department offered for manufacturers. Just one industry was receiving more money than all the rest of the manufacturers could even have the potential to get their hands on which was not much honestly. So I guess that would be my key. It is just difficult to get people out of the office and if you are able to provide them even a small incentive, you know, they are willing to do it and willing to think about it. Chairman Graves. Mr. Goetze, do you guys use beet sugar or cane sugar? Mr. Goetze. Cane. Chairman Graves. Cane. Ms. Velazquez. Mr. Merritt also answered my question. Chairman Graves. Okay. Ms. Velazquez. Thank you. Chairman Graves. Mr. Bartlett. Mr. Bartlett. I am sorry that I could not have been here for the testimony and the questions but I wanted to get back because two of our witnesses are from Maryland. Thank you very much. When I ran for Congress 20 years ago there was an article in Money Magazine that said that Maryland was the least attractive state in the union for retirees and business. And just the other day, I forget which entity it was, said that once again Maryland is the least attractive state in the union for business. So I wanted to come to see two really triumphant warriors. You are still making it in Maryland. Thank you very much. You know, every six hours, in fact, just a little less than that, we have another billion dollar increase to our debt. And about every 12 hours we have another billion dollar increase in our trade deficit. I know people who have been--who feel that because that dirty smokestack industry is moving overseas and we have that nice, clean service-based economy in our country now. And sometimes if you push something to an absurdity you can say, gee, that is not going to work. Is it? And no matter how much you charge for cutting each other's hair and doing each other's laundry, that is not going to be a viable economy. Is it? And so what this hearing is about today is enormously important. And we have got to do something to reduce that trade deficit. I do not know which one of those two deficits will bring us to our knees first; whether the budget deficit and the increasing debt or the trade deficit. When every 12 hours another billion dollars of wealth leaves our country--it comes back. A lot of it comes back but it comes back to buy us. Seventy percent of all of our cement, about the same number--70 percent of our track is owned by foreign countries now. So I really appreciate what you all are trying to do increasing trade because that will help to lower that trade deficit. We have--one of the first things that we can do, you know, what you have to do to compete with those people over there, unless you are competing with somebody in Japan, every one of those companies pays less corporate tax than you do. You have the second highest corporate income tax in the world. That is a little tough for you to compete in a global marketplace when you start out with that deficit, is it not? And then we have probably more regulations here than most places. There was an article that really gave me some pause. It must be a year or more ago now and it was in a strange place. It was a National Demographic. I do not know if you read it or not. It was the story of two Chinese businessmen, a local contractor, and a reporter. And they went to a shell of a building in a small Chinese town. And they were going to build a factory. And the reporter says that the senior businessman took a scrap of paper out of his backpack and wrote an outline of the building on it and said I would like to put, you know, restrooms here and manufacturing here and so forth and so forth. And he timed them and it took him an hour and eight minutes. And he had engineered the conversion of all three floors of this building for a factory. And then he turned to the--the businessman turned to the local contractor and said if you do not use cheap materials and do a good job, I will get you to do my next factory conversion. And he said and I would like you to start immediately. And the local contractor looked at his watch and he said it is 2:30. Is it okay if I start tomorrow morning? Wow. How many years would it take us before we could get to that point after our environmental impact study and so forth? And I wondered, you know, just how long--just how long can we continue this fight with all of the problems that we have with the second highest corporate income tax in the world with all of the regulations, and with the impediments starting a new business. Can you start--I would like you to start immediately. It is 2:30. I said, okay if I start tomorrow? So I want to thank you very much for what you do for our country and, you know, help us fight the battle to get the taxes down, to get regulations down so that you have a truly level playing field. The fact you are able to export at all means that you are super performers because all the impediments that we have laid in your way you do very well to be able to compete. We would like to help you compete better. Thank you very much for what you do for our country and thank you, Mr. Chairman. Chairman Graves. Thank you. I want to thank you all for participating today. We are going to closely follow the bureaucratic obstacles that small business exporters are facing right now. And I plan to let you know--I plan to send a letter to the U.S. Government Accountability Office. The GAO requesting a report on the efficiency of trade promotion, the efficiency of the Trade Commission, coordinating committee, and the barriers faced by small business exporters. I would ask unanimous consent that members have five legislative days to submit statements and supporting materials for the record. Without objection, so ordered. And with that this hearing is adjourned. [Whereupon, at 4:00 p.m., the Committee hearing was adjourned.] CERTIFICATE OF NOTARY PUBLIC DISTRICT OF COLUMBIA I, Stephen K. Garland, notary public in and for the District of Columbia, do hereby certify that the forgoing PROCEEDING was duly recorded and thereafter reduced to print under my direction; that the witnesses were sworn to tell the truth under penalty of perjury; that said transcript is a true record of the testimony given by witnesses; that I am neither counsel for, related to, nor employed by any of the parties to the action in which this proceeding was called; and, furthermore, that I am not a relative or employee of any attorney or counsel employed by the parties hereto, nor financially or otherwise interested in the outcome of this action. Notary Public, in and for the District of Columbia My Commission Expires: May 31, 2014 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]