April 19, 2001

Analysis prepared by Democratic Staff, Committee on Energy and Commerce

The Bush budget makes significant cuts in programs that help American business compete in the U.S. and global markets. While these cuts would save money for government in the short term, it would be at the expense of American workers, the economy, and government revenue in the future.

Given the Administration’s repeated warnings of looming economic decline, cutting essential programs that ensure American competitiveness is problematic. American manufacturers can lose billions of dollars in export sales if the Export-Import Bank does not have adequate funds to finance export purchases as other countries do. The President’s proposal to terminate the loan guarantee program for near bankrupt U.S. steel producers may lead to American manufacturers becoming totally dependent on foreign steel that is subsidized and dumped in our market. Further, halting funding for new advanced technology programs will undermine future competitiveness. Finally, to be competitive, American firms must also be able to get innovative products to market quickly, and they simply cannot do that if their patent and trademark applications cannot get timely approval because of budget cuts.

An analysis of the Administration’s cuts in key competitiveness programs follows.

Export-Import Bank

The U.S. Chamber of Commerce, the National Association of Manufacturers, the Emergency Committee for American Trade, the Coalition for Employment Through Exports, and other business groups estimate that the President’s proposed budget cuts for the Export-Import Bank will "limit the Bank’s financing to about $8.5 billion in FY 2002" which would "set the Bank back nearly 10 years." Business groups have said Export-Import Bank financing is indispensable if U.S. firms are to compete in China, India, and other emerging markets since government financing for export purchases is readily available and routinely provided by our major trade competitors, including Japan, France, and Germany. In FY 2000, the Export-Import Bank provided financing for more than 2,500 sales by U.S. firms to foreign customers, by providing $12.6 billion in loans, guarantees, and export credit insurance.

A recent letter protesting cuts at the Export-Import Bank signed by CEO’s of major U.S. companies such as Boeing, Caterpillar, Conoco, Texas Instruments, United Parcel Service, and New York Life Insurance says 80% of the Bank’s transactions are with small business and that Bank loans support an estimated 200,000 American jobs among exporters and primary suppliers and another 1,000,000 American jobs indirectly among subsuppliers.

Emergency Steel Guaranteed Loan Program (Department of Commerce)

 
In FY 2001, this program has sufficient funds available to provide $1 billion in loan guarantees to U.S. steel companies on the verge of collapse. In FY 2000, the program received applications for $901 million in loan guarantees. Nevertheless, the President’s budget calls for no new applications to be funded in FY 2002; only pending loan requests will be funded. The U.S. steel industry is in crisis. Over the past five years, financial and economic problems in Asia have brought a flood of subsidized and dumped cheap steel imports into the U.S. despite record high steel inventories and low demand in the U.S. Foreign steel imports set a record in 1998 and in 2000 were again higher than any year except 1998. Since 1998, 15,000 U.S. steelworkers have lost their jobs, and since 1997, 16 U.S. steel companies have declared bankruptcy; two U.S. steelmakers have shut down operations altogether.

Advanced Technology Program (Department of Commerce)

The President’s budget proposes to continue funding for existing projects only. No new projects will be funded from this point forward. The Advanced Technology Program (ATP) was created 14 years ago and has provided funds for joint public/private sector research into technologies that are not yet commercially viable. Research funded by the program has led to the development of numerous innovative products that have helped keep American firms and American workers on the cutting edge of new technologies. The President of the National Center for Manufacturing Sciences said research ATP funded in conjunction with the printed wiring board industry "literally saved the industry" and its 200,000 jobs. And according to the National Institute of Standards and Technology (NIST) at the Department of Commerce, ATP grants to a biotech firm in Michigan also "accelerated by up to two years the design and construction" of a device that for the first time allows human cells to be grown outside the body, thereby reducing "the costs, complications, and pain associated with cell-transplant therapies for patients with cancer and other diseases... ." The NIST Task Force of the Council of Engineering, and the Council on Codes and Standards of the American Society of Mechanical Engineers (ASME International) has said it "is deeply disappointed in the President’s decision to suspend funding for the Advanced Technology Program (ATP)....These programs are needed to improve the transfer of new discoveries in science and engineering to innovative technologies, global quality practice, and profitable manufacturing capabilities on the shop floor."

U.S. Patent and Trademark Office (Department of Commerce)