I have a lengthy statement but I would simply enter it for the record and save time for those who have come to share their opinions with us.

[The prepared statement of Senator Dorgan follows:]

PREPARED STATEMENT OF SENATOR DORGAN

Mr. Chairman, I am please to be here today to talk about the future of the Department of Commerce. Frankly, I do not support the notion that this important department should be dismantled. In my judgement, if there is any department that has proved its necessity under the Clinton Administration, it is the Commerce Department under the excellent leadership of Ron Brown.

During the decade of the 1980's, the Commerce Department, while still performing vitally important functions in setting technology standards, taking census and economic data, and administering weather forecasting, not much was seen nor heard of the department's activities. It was somewhat of a backwater, not given much notice. That was under the Reagan and Bush Administrations. But when Ron Brown was appointed Secretary, the department became an important policy arm of the Administration-both domestically and internationally.

Since Ron Brown has taken over at the Commerce Department, he has secured billions of dollars in foreign contracts for American businesses, including a $10 billion aircraft manufacturing deal with the Saudi Arabian government. Under Secretary Brown, the Commerce Department has become the pro-business branch of government. The Commerce Department is government helping business. We hear a lot these days about folks wanting to get government off their backs. People are right, we need less government interference with people's lives and business. But that is not the issue with the Commerce Department. Commerce is not a case of government regulatory burdens. The Commerce Department is a case where government is doing something positive to help businesses compete overseas and at home against foreign imports, protecting them from unfair trade practices.

But the defense of the Commerce Department does not rest with the personality of its leadership—although I think Ron Brown has demonstrated how effective leadership can reap enormous benefits for American businesses and create American jobs. The fact is that the Commerce Department performs many "quiet" functions. For example, the National Institute for Standards and Technology performs a vital role for manufacturers by setting industry standards and helping American manufacturers design their products for overseas markets. Under the proposed legislation, S. 929, NIST would be dismantled and some of its remaining functions would be transferred to the National Science Foundation, where they are not equipped to carry on these critical functions. With minimal savings in federal appropriations, we will see the results when American manufacturers lose their support for technology development and commercialization. The cost will be in jobs and a decline in American competitiveness in the global market.

The proposed legislation will also eliminate the Economic Development Administration (EDA). The EDA invests billions of dollars in distressed communities, leveraging more than $3 in private investment with every federal dollar and creating more than 2.8 million jobs. The revolving loan program under the EDA has leveraged nearly $2 billion in private capital-$4 of private investment for every federal dollar. In rural, economically struggling States like North Dakota, EDA activities are critically important. This legislation would end that support.

The Commerce Department, under the International Trade Administration (ITA) performs vital trade enforcement. S. 929 would eliminate the ITA, thereby depriving American companies with the tools they need to become successful exporters. The antidumping and countervailing duty functions of the ITA would be transferred to the United State Trade Representative (USTR). In my judgement, marrying trade enforcement with trade negotiation would be a serious mistake. These functions should remain separate.

I could go on. The point is that the proposed legislation would put an end to many critical important programs and functions, while transferring others to other places in government. The result will be little savings to the federal treasury and a huge cost to American business. Much of what this legislation does is "re-house" certain functions, at no cost savings to the taxpayer.

I understand the need to scale back the size of the federal bureaucracy. I think the Congress should aggressively look at every federal agency and department and find more efficient ways to provide only the essential functions. We can and should do that with the Commerce Department. However, a broad sweeping proposal to dismantle the department is not the approach that will produce the best results. It

seems to me that we should look at consolidating where necessary and eliminating functions that are not cost effective. Commerce can use that analysis, as can the Defense Department, the Transportation Department, the Education Department, and so on.

Mr. Chairman, I think it is important for this Committee to examine the Commerce Department and look at ways to make it more efficient. However, let's not make the mistake of only looking at Commerce. Furthermore, we should not make the mistake of eliminating departments, as if we were on a trophy hunt. We should, in a careful, rationale manner, cut waste and inefficiency where it exists and support the critical functions that help create American jobs. I look forward to hearing from today's witnesses as to how we can do that at the Commerce Department.

Chairman ROTH. Thank you, Senator Dorgan.

We have a number of distinguished colleagues who wish to speak to this matter. I would ask, since we have a large number of witnesses this afternoon, if each would limit his statement to 5 minutes.

At this time, it is my pleasure to call forward Senator Hollings.

TESTIMONY OF HON. ERNEST F. HOLLINGS, U.S. SENATOR FROM THE STATE OF SOUTH CAROLINA

Senator HOLLINGS. Mr. Chairman, let me file my statement and give me an extra minute to correct a couple of impressions, one with respect to matters that had nothing to do with Secretary Brown. I am reminded by Senator Pryor's statement about defense conversion. We had a bill that passed for the National Institute of Standards and Technology, an authorization bill that passed unanimously through the Senate and over to the House. It was held up at the conference in the final days of 1992, but the conference report was ready and everybody was ready to go. We did not have the time. Later, when we tried again in 1994, what had once passed in an afternoon took a solid week.

I went to my colleague, Senator Malcolm Wallop, and Malcolm said I will just tell you straight out. We met in the Republican Conference and there was a statement made by the Democratic Chairman out on the West Coast that California was the end-all, be-all of Presidential politics and that Secretary Brown was going to handle it. So, said Senator Wallop, we are just not going to give him anything.

That is why that NIST bill took a whole week of wheedling and crying and explaining and coming back around and everything else of that kind. There is a definite involvement, Senator, about Secretary Brown, even though he has done the most outstanding job. I have been through over a dozen Secretaries of Commerce. This is the first one I have really seen get out there and hustle, with a track record of having attracted some $24 billion in export sales and 300,000 jobs. He has done an outstanding job, but that is part of it.

Secondly, I am saying, where in the Lord's world are my Republican friends in business? They said, well, wait a minute. We have regulatory reform and we are going to get tax reform on capital gains. We think that is enough and we are not going to bother the Congress about the Department of Commerce.

Thirdly, to get into the mix, there are the multinationals that resent the good job that Commerce does on dumping and other measures under their control.

So with these three factors we have a difficult time coming to your Committee and getting complete support for the Commerce Department. I am grateful for the opportunity to appear today.

Let me say, Article 1, Section 8 of the Constitution designates, number one, the duty to raise taxes and pay the bills. Can you imagine that in a Constitution? You could not get that in there now. Who is going to vote to raise taxes and pay the bills?

Number 2, to borrow money. We will all vote for that in Article 1, Section 8.

Then number 3, it empowers the Congress to regulate commerce. You will not find agriculture in that Constitution. You will not find education or housing or energy. And yet, here are the Constitutional authorities, responsibility, and duty, and the opponents of the Commerce Department want to do away with them. It is absolutely ludicrous. I agree with the distinguished Senator. It is crazy. Let us get to the task of what we are about. Number one, yes, we all want to save money, but more than anything else, our security rests on a 3-legged stool. The first leg is our values as a nation, and they are strong. We feed the hungry in Somalia. We try to build democracy in Haiti.

The second leg is the strength of our military power, which is unquestioned.

But the third leg, that of economic strength, Senator, is fractured, intentionally so. For 45 years after the end of World War II, we sacrificed the economy, more or less, in order to keep the alliance together, with the Marshall Plan, the sacrifice, and all. But getting to the point given limited time, what happens now with the fall of the Berlin Wall is that we need to rebuild and strengthen that leg and build America.

And here, just when we need to do it, the front line entities, the Council of Economic Advisers, the Advanced Technology Program, the Commerce Department itself, the lead organizations, are the ones they are calling to abolish. To get rid of the Commerce Department here in the trade war is just like suggesting to eliminate the Pentagon back in the Cold War.

So what we need, as Lincoln said, is to think and act and disenthrall ourselves, disenthrall from the shibboleths about "free trade," disenthrall from the assumption that the Japanese want to be like us, disenthrall from the hostility to industrial policy. In free trade, the Japanese have adopted the model under Frederick List whereby the wealth of a nation is measured not by what it can buy but by what it can produce. There is none of this mealy-mouthed moral question about being "fair". The decisions are made on the nation's interest as to whether or not it strengthens the economy or weakens the economy, and it has worked for Japan.

Additionally, with respect to that, they do not want to be like us. The Japanese are richer. They are healthier. They have no homelessness, no unemployment, no child pornography or juvenile delinquency, no crime, no drugs, no illiteracy, no illegitimacy. I can go right on down the list. Their culture is hundreds and hundreds of years older than ours. They believe in it. They are not going to follow the American way. And incidentally, not only the Pacific Rim nations but also the East Europeans are following List, and Japanese capitalism, not the U.S.'s Adam Smith free trade.

So what we need to do is like old Harry Truman when he took over from Roosevelt. Casey was running upstairs saying, here is what intelligence shows. This is the policy. The State Department said, oh no, that is not the policy. The Defense Department came running in and said, that is not in our defense interests.

Harry said, the heck with you. I cannot stand all of these arguments. I am going to put this down underneath me right here and you all beat up the arguments, come up where with two alternatives, and I will make a decision. Out of that process we got the Atlantic Charter, the North Atlantic Treaty Organization, the Marshall Plan, the Truman Doctrine. A fellow that could not run a haberdashery knew how to run Government.

Just like he instituted that National Security Council, Mr. Chairman, you and I need an Economic Security Council to coordinate all of these trade and economic issues. There are 28 departments and agencies within trade, within the economic decisions, within the development of our technology. Yes, there can be tremendous coordination with putting the Export-Import Bank and the Overseas Private Investment Corporation into the Commerce Department. All that belongs in business with the voice of business and

commerce.

You can do away with the International Trade Commission. That is $48.2 million saved, the International Trade Commission that defines the dumping. Like the Smith jury down in Union, South Carolina, they have found the guilt. Now they are going to determine the sentence. Having found the dumping violation, that same entity, DOC's International Trade Administration, can decide the particular injury and relief, so we can save $48.2 million there.

We can revise and reform our securities laws, our antitrust laws, the laws with respect to foreign child labor and slave labor. We can do a lot of good things to improve coordination.

Mr. Chairman, I see my time has almost expired. Let me conclude by saying that I worked with you back 20 years ago when we worked with the Carter administration regarding the MFN, where we said we were not going to renew it. Remember, we took the commercial attaches and had them report to the Secretary of Commerce. You and I have been working on this thing 20 years. I put my bill in to improve trade coordination over 10 years ago, again in 1988, again in 1993, and I have it here. With this coordination, we can save money. We are going to have to save money. The Appropriations Committee has cleaned me out, and I know what Chairman Gramm is going to do with State, Justice, Commerce. He is going to give everything to the Border Patrol, the Immigration Service, the DEA, the FBI, law enforcement, crime, and everything else, and the State Department and the Commerce Department are going to be like cows grazing on a concrete tennis court. I can tell you, we are going to be gone economically, unless

we see sense.

So with that, I will put in my statement and leave this bill and suggestion with you, sir.

[The prepared statement of Senator Hollings follows:]

PREPARED STATEMENT OF SENATOR HOLLINGS

Mr. Chairman, thank you for this opportunity to appear before this Committee to discuss S. 929, the proposed Department of Commerce Dismantling Act.

In today's new, intensely competitive world economy, it makes absolutely no sense to eliminate the one cabinet department that looks out for the business community and for one of our Nation's most important functions-interstate and foreign commerce. We need to strengthen the Department of Commerce, not blow it up into ineffective fragments.

Let me make three specific points:

-First, today every other government supports its companies. Strong U.S. Government backing for U.S. companies and workers in trade, technology, and other areas is vital if the United States and our constituents are to prosper. -Second, the Department of Commerce is working, fighting for American business. Today, in fact, it is more successful at promoting exports and other activities than we have seen in decades. Its various units support and benefit each other, making the Department's total much more than the sum of its parts. -Third, it would be a grave mistake to break up this winning team of business and government working together. If we retreat now, we will lose exports, we will lose much of our technological edge, and we most assuredly will lose jobs. The Realities of the New World Economy

For 45 years we were engaged in a life and death struggle against the forces of totalitarianism. Through steadfast commitment and sacrifice, we emerged triumphant. Now, with the fall of the Berlin Wall and the collapse of Communism, this Nation has entered into a new era of competition where the exercise of power and influence will be determined by economic strength.

During the Cold War we willingly subordinated our economic interests to sustain the western alliance. Now, in the post Cold War era we must channel the same energy and commitment into rebuilding our economic strength on which the wages, jobs, and well-being of our constituents depend.

Strong government backing for American business is vital for two reasons that we must not ignore.

The first great reality of today's new world economy is that almost no American company, no American job, is immune from foreign competition. We have to be strong, or we will lose. It is foolish to think that we can destroy current programs to help exports and boost competitiveness without hurting American workers.

The second great truth is that there is no such thing as a "free market" elsewhere in the world. Every other major government actively supports its companies and workers, including providing export assistance and technology assistance. Just ask Boeing and McDonnell-Douglas what it is like to compete against Airbus. Or ask the U.S. semiconductor industry what it is like to face closed Japanese markets and competitors who receive strong technology assistance from their government.

In the real world, American companies and workers compete not just with foreign firms but with other governments. In the real world, leaving U.S. businesses to the "market" means abandoning them to competitors who do not share the outdated view that governments should not support their industries.

In market after market, in industry after industry, U.S. companies must compete against companies and their governments. In that competition the line between the public sector and the private sector is indistinct. Our competitors nurture industrial development through rigged capital markets, generous subsidies, infant industry protection, lax anti-trust enforcement, and unlimited export assistance. I don't advocate we adopt all their approaches, but I do suggest we need to preserve the entity that speaks for American business.

The invisible hand of the market did not develop Korea's world class semiconductor industry. Instead it was the iron fist of decrees laid down by Korea's Ministry of Trade which kept out foreign competition unless they licensed their technology to Korean companies. That iron fist was complemented by the largesse of the Korean Treasury which provided subsidies in the form of below market loans and closed the markets to U.S. computer chips while Korean manufacturers dumped chips into the U.S. market below the cost of production.

The invisible hand alone is not developing Europe's information technology. Europe is nurturing this industry through billions in subsidies from the European Community for massive research projects like JESSI, ESPRIT, and EUREKA. The law of comparative advantage no longer applies in America's top export industry where Airbus captured 30 percent of the market by flaunting international trade rules and China forces Boeing to build planes in the Guan Zhao province rather than Seattle, Washington.