American Competitiveness

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 claims that it wants to stimulate economic growth, 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.

FY 2002	FY 2003 Request	FY 2003 vs. FY 2002
1,233	611	-622	-50%

For the second straight year, the President’s new FY 2003 budget proposes a major cut in funding for the Export-Import Bank’s loan program used to help U.S. exporters by providing financing for foreign firms to buy U.S. goods and services. While reserve requirements for the Export-Import Bank have been lowered making it possible to make more loans with less funding, the President’s proposed cuts are so substantial that they have limited and will continue to limit the Bank’s lending activity. For FY 2002, the President proposed a 25% cut in Export-Import Bank funding, and the President’s new FY 2003 budget proposes a 50% cut in total funding for the Export-Import Bank’s loan program. The National Association of Manufacturers (NAM) and other business groups have strongly supported full funding for the Export-Import Bank’s loan program. According to NAM, not adequately funding the Export-Import Bank constitutes an act of "unilateral trade disarmament" on the part of the United States. According to the U.S. Chamber of Commerce, the Export-Import Bank has supported almost 12,000 transactions since 1994 by providing $68.5 billion in authorized financing that each year sustains an estimated 200,000 jobs directly among exporters and suppliers, and an additional one million jobs indirectly among suppliers in the U.S. If the President’s proposed cuts take place, especially hard hit will be U.S. small business that currently are assisted by 80% of the Export-Import Bank’s transactions. Substantial funding cuts at the Export-Import Bank have already occurred. In FY 2000, the Export-Import Bank financed more than 2,500 sales by U.S. firms to foreign customers by providing $12.6 billion in loans, guarantees, and export credit insurance. In FY 2001, the Bank financed only 2,358 sales and provided only $9.2 billion in loans, guarantees, and export credit insurance.

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. Clearly, now is not the time to be cutting back on support for the sale of U.S. exports.

FY 2002

FY 2003 Request

FY 2003 vs. FY 2002

(96)

(96)
(Rescission of unobligated balance from prior year.)

-100%

Despite the International Trade Commission’s finding on October 22, 2001, that the U.S. steel industry is being injured by imports of foreign steel, the President’s new FY 2003 budget proposes to take away funds that have already been appropriated for the steel loan guarantee program. For FY 2002, he proposed no new loans be made at all. 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, 43,600 U.S. steelworkers have lost their jobs, and 31 U.S. steel companies have declared bankruptcy, including the second and third largest U.S. steelmakers -- Bethlehem Steel and LTV Steel Company. LTV has actually begun auctioning off its assets. This is no time for the President to deny the U.S. steel industry badly needed assistance the Congress intended it to have.

FY 2002	FY 2003 Request	FY 2003 v. FY 2002
186.765	107.926	- 78.839

Source: National Institute of Standards and Technology Presidential Request for FY 2003

The Advance Technology Program (ATP) was created 15 years ago and has provided funds for joint public/private sector research into technologies that would otherwise not be commercially viable. While this program encourages partnerships among companies of all sizes, universities and research organizations, over 150 universities have participated and 60% of all ATP-funded projects are led by small businesses. 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. Among these products are improved medical imaging systems, light-weight corrosion-resistant bridge beams, and composite materials useful in retrieving deep-water oil reserves. Also, according to the National Institute of Standards and Technology, ATP grants to a biotech firm in Michigan "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 of the body. The President’s budget proposes over $78 million in cuts from this highly successful program that benefits institutions of higher learning, small businesses, independent research organizations and ultimately all Americans.

FY 2002	FY 2003 Request	FY 2003 v. FY 2002
108.208	12.923	- 95.285

Source: National Institute of Standards and Technology Presidential Request for FY 2003

The President’s budget request would terminate Federal funding for all but two Manufacturing Extension Partnership (MEP) Centers. MEP is a successful federal-state-local partnership that provides small domestic manufacturers with access to technology, resources and expertise they would otherwise not be able to afford. There are currently over 400 MEP regional locations enabling small manufacturers to compete more effectively by increasing their quality and efficiency. Each regional center uses its network to assist small manufacturers by providing best manufacturing and business practices, workforce development and training, access to sources of financing, and environmental services. This is an important program to small U.S. manufacturers across the country, and the elimination of all but two of the over 400 MEP Centers will undoubtedly take a valuable resource away from these manufacturers.

FY 2002	FY 2003 Request	FY 2003 vs. FY 2002
-218	-162	56

The President’s new FY 2003 budget continues the practice of not letting the Patent and Trademark Office spend all the money it raises from fees charged to inventors and investors for patents and trademarks that it issues. The Patent and Trademark Office issues 150,000 patents each year. Over the last decade, $800 million of the fees collected for issuing these patents has gone to the general treasury rather than to help the Patent and Trademark Office do a better job. According to the President of the Intellectual Property Owners Association, "This practice of fee withholding has had, and continues to have, a damaging impact on the quality and timeliness of patent examination and PTO plans for adopting the latest information." Over the last 10 years, the waiting time to get a patent has gone from 18 months to 26 months and unless something changes it is expected to be 38 months by 2006. A 1998 survey conducted by the National Association of Manufacturers found that patent system delays caused 15% to 20% of companies to hold back new product introductions for up to a year. Clearly, competitiveness depends on being able to get new products to market, and it is time for the Administration to recognize that the Patent and Trademark Office needs the fees it collects if U.S. firms are to compete effectively with foreign firms for new product introductions.