Oversight Hearing on the "Trade Promotion Coordinating Committee (TPCC)"

Good Morning Chairman Sarbanes, Senator Gramm and members of the Committee. A number of you have been friends of the U.S. Trade and Development Agency (TDA) for many years, and are well acquainted with the agency. However, I recognize that TDA is a small agency outside the jurisdiction of the Banking Committee, and I would like to take this opportunity to outline briefly what the agency does and how it works with the Trade Promotion Coordinating Committee (TPCC) to promote U.S. exports and create American jobs.

TDA promotes American private sector participation in development projects in low- and middle-income countries, with special emphasis on economic sectors that represent significant U.S. export potential. As you all know quite well, this is no easy task in today’s global marketplace. In addition to the substantial economic challenges facing U.S. exports in many markets, U.S. firms face aggressive competition from foreign producers for contracts associated with projects in the countries where TDA operates. TDA’s biggest competitors for overseas projects are Japan, Canada, and the European Union and its member states.

Overseas competitors often receive substantial assistance from their home governments in pursuing projects. Many, if not most, of the countries I named earlier use foreign aid programs to secure contracts for their companies. They also concentrate their foreign aid on influencing spending by the World Bank and other multilateral development banks (MDBs) through trust funds. While TDA also maintains trust funds at these institutions, the contributions made by other countries dwarf TDA’s in size. Because of the manner in which MDBs look for financing, these larger trust funds give TDA’s competitors an edge in identifying project opportunities for their national companies.

TDA works hard to level this uneven playing field. Because foreign governments provide higher assistance levels to their businesses, TDA must work harder and smarter to produce results for U.S. firms. In particular, most of TDA's work focuses on the initial planning stages of development projects. By supporting U.S. company involvement at the ground level, TDA enhances the chances that project specifications will be compatible with U.S. standards and that U.S. firms will be well positioned for follow-on project work.

TDA's "toolbox" for fighting unfair foreign competition contains a number of instruments. The most common tools are funding feasibility studies, conducting orientation visits, and hosting trade conferences. TDA also provides training and technical assistance grants, and performs preliminary internal due diligence efforts to evaluate potential development projects and ensure that potential projects warrant the use of taxpayer funds. TDA's technical assistance may be project specific, or more broad- based, supporting capacity building institutions and trade agreement implementation. These tools assist TDA in building mutually beneficial partnerships between American companies and overseas project sponsors, which result in increased U.S. exports and jobs and the completion of high quality, successful projects in host countries. All TDA-provided assistance such as feasibility study grants or technical assistance must be used to hire U.S. firms to conduct the work.

For funding consideration, all TDA-affiliated projects must meet four criteria. The project must:

• Be likely to receive implementation financing and have a procurement process that provides "equal access" to U.S. firms;
• Represent an opportunity for sales of U.S. goods and services that is many times greater than the initial investment of TDA assistance;
• Be a development priority of the country where the project is located and have the endorsement of the U.S. Embassy in that nation; and
• Face strong competition from foreign companies that may receive subsidies and other support from their governments.

TDA’s goals are two-fold: helping American businesses export their products, thereby creating jobs, while simultaneously promoting commercially viable economic growth in developing and middle-income countries. Since 1981, TDA has been associated with more than $17 billion in exports – or over $35 in exports for every dollar invested in its program activities.

I mentioned above that TDA provides technical assistance in areas such as telecommunications and the environment. These programs are among the U.S. government’s tools for supporting capacity building initiatives and the implementation of trade agreements. TDA can provide funding for technical assistance to countries as they establish or revise laws and regulations, either in order to comply with existing or anticipated international agreements, or as a part of an overall strategy to expand trade and economic capacity. TDA aims to provide resources to governments seeking to create or modify their legal and regulatory structures in particular sectors that are compatible with competitive U.S. exports. Such assistance is intended to support TDA’s dual trade and development mission by both fostering development in the host country and assisting U.S. businesses develop relationships, which lead to an increase of U.S. exports.

TDA has funded such broad-based technical assistance projects around the world. For example, TDA has placed a technical advisor in the Venezuelan telecommunications agency, advisors in Bosnia and Herzegovina for developing infrastructure programs related to energy and utilities, and a privatization advisor with the Romanian Ministry of Transportation to provide policy, technical and executive support to privatization efforts. TDA is currently in the process of placing an advisor in Azerbaijan to assist with that country’s World Trade Organization accession efforts.

TDA has worked hard to achieve this level of success, but it has not done it alone. TDA takes great pride in the close relationships it maintains with other U.S. Government entities in identifying and pursuing U.S. export opportunities while advancing development priorities in low and middle-income countries. The agency is especially grateful to Secretary Evans for his leadership of the Trade Promotion Coordinating Committee. TDA believes that TPCC provides an excellent framework to coordinate the U.S. Government's trade promotion operations.

Most prominently, TDA works with TPCC policy agencies, such as the Departments of Commerce and State. Additionally, TDA frequently partners with the U.S. Export-Import Bank (Ex-Im) and the Overseas Private Investment Corporation (OPIC) to conduct trade promotion activities overseas and identify promising project opportunities. Notably, the three agencies work together in joint centers in Croatia and Turkey. In the near future, we will look to these field offices to respond more quickly to the commercial and developmental needs of countries in strategic locales and during difficult, uncertain times. TDA also supports initiatives of the Office of the U.S. Trade Representative.

TDA is extremely proud of its ability to increase U.S. exports by working with agencies that do not have a traditional trade promotion focus. For example, both the Federal Aviation Administration (FAA) and the Federal Emergency Management Agency (FEMA) have worked with TDA to promote U.S. exports in recent years. In support of TDA trade promotion efforts, the FAA has trained foreign air traffic controllers in U.S. technology and FEMA has promoted U.S. emergency management technology by co-hosting emergency management conferences with TDA. TDA’s coordination with these and other agencies allows TDA to promote U.S. exports and helps project sponsors meet their development objectives by utilizing the specific expertise of a wide range of U.S. Government agencies. Moreover, TDA’s export and development oriented mission helps other agencies to achieve their own international policy objectives.

An example of where TDA has coordinated with the FAA is aviation technology in India. Over the next decade, India’s air passenger traffic is projected to grow at an annual rate of 12.5% for domestic travel and 7% for international travel. TDA and the FAA are working to ensure that India can meet this demand through the implementation of a modern and efficient integrated communications, navigation, surveillance, air traffic, and maintenance (CNS/ATM) systems. To help India develop this system, last year TDA provided a $450,600 grant to Airports Authority of India (AAI) to hire an American firm to conduct a feasibility study on implementing such a system. Subsequently, TDA funded a workshop for the FAA to train AAI and Indian Ministry of Civil Aviation officials on the new technology. As the leading manufacturer of CNS/ATM systems, TDA expects U.S. companies to export over $180 million in procurements related to this project when it is implemented.

TDA also has worked with FEMA on several events in recent years. In 2000, TDA cosponsored an Asian regional conference with FEMA and the Department of Commerce on emergency management in Honolulu, Hawaii. The conference highlighted 40 projects in 10 Asian countries that hold significant U.S. export potential in a variety of sectors, including flood plain management, disaster management information and communications systems, and interagency disaster training. The National Oceanic and Atmospheric Administration, the Data and Information Service, the Centers for Disease Control and Prevention, the Department of Defense’s Center for Excellence, the U.S. Agency for International Development, and the U.S. Export-Import Bank also participated in the Honolulu conference.

As mentioned previously, TDA is an active member of the TPCC in its efforts to coordinate trade promotion activities and develop trade-related data to evaluate U.S. export promotion policy. TDA is actively supporting the TPCC's efforts to identify and quantify the means that foreign governments use to obtain advantageous benefits for their national companies at the expense of U.S. firms.

TDA and the other members of the TPCC are ready to meet the challenges before us in preserving and promoting commercial environments around the globe, even in these difficult times. We are particularly focused on those countries in which the United States has particular trade, economic or strategic interest.

In fact, this is exactly how the TPCC can be most useful, by providing focus to the various agencies in order to respond to particular priorities, such as coordinating trade development efforts in the wake of the September 11 attacks, supporting the administration’s environmental strategy, and supporting the negotiation and implementation of new trade agreements. Additionally, the TPCC can focus efforts to work with foreign governments making the shift to democracy and to market based-economies. The best long-term strategy for the United States to make its presence felt in such countries is by supporting commercial development, and the TPCC is well-suited, and well-positioned, for such a role.

TDA typically promotes U.S. exports by providing assistance for specific infrastructure projects around the world. TDA's record shows that the agency excels at using this approach to assist U.S. companies competing for development projects. However, TDA is also effective in promoting U.S. exports at a more fundamental level. For example, TDA looks at supporting broader sectoral efforts that can result in increased U.S. exports and prevent other countries from imposing standards that exclude U.S. firms. This strategy of helping countries develop better legal and regulatory regimes promotes exports by creating a more favorable commercial environment for U.S. firms. For example, TDA recently provided technical assistance to aid the Venezuelan government's deregulation of its telecommunications industry and to develop new specifications for modernizing that industry. TDA estimates the potential value of exports to Venezuela in the telecommunications sector will top $10 billion over the next few years. Because of TDA's work with the Venezuelan government, U.S. firms are well positioned to provide the bulk of these goods.

TDA-provided technical assistance also can be a useful tool for USTR. Once USTR negotiates a trade agreement, TDA can provide the technical assistance some trading partners may need to implement their commitments. Most U.S. trading partners want to comply with the standards in international agreements, but some of them may not posses the technical expertise to bring their international trade regimes in line with their obligations. By providing such technical assistance to our trading partners, TDA enhances their capability to meet their commitments and ensures that U.S. firms will be able to realize the benefits of these agreements, namely a fair and open regulatory and legal environment. TDA is committed to working with USTR in this manner to create favorable export climates for U.S. firms.

TDA also is committed to improving the physical climate and environment of the nations in which we operate. Water and environment projects constitute TDA's third largest economic investment sector and typically involve such projects as clean potable water and wastewater treatment. Additionally, TDA examines environmental issues in virtually all TDA activities and identifies possible solutions to minimize or alleviate these concerns. By promoting environmentally friendly projects, TDA is a valuable part of the U.S. Government's tool kit for promoting trade.

As an agency dedicated to promoting U.S. exports overseas, TDA supports the administration's efforts to obtain presidential trade promotion authority (TPA). As you know, prior to this administration, every president since President Nixon has had the authority to negotiate trade agreements with foreign nations. TPA is necessary because other nations are unwilling to negotiate with the United States and make trade concessions if the U.S. Congress is likely to overturn elements of the final package. Currently, there are over 150 free trade agreements among world nations. The United States is a party to fewer than half a dozen of these. Every free trade agreement negotiated without U.S. involvement puts American firms at a further competitive disadvantage in exporting goods to the nations involved in the agreement.

Currently, free trade agreements give our competitors an advantage and make U.S. goods comparatively more expensive in the affected markets. These tariff differentials hinder TDA's ability to do its job because cost considerations make project sponsors less likely to select U.S. suppliers if American goods are significantly more expensive. The United States must level the playing field for U.S. firms by securing equal tariff treatment for them in foreign markets.

In closing, I would like to the thank the members of this committee for the opportunity to appear today and discuss what TDA is doing to increase U.S. exports and create American jobs and how TDA works with the other members of the TPCC. I look forward to answering your questions.

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