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Testimony Before the Senate Committee on Commerce, Science and Transportation

Wednesday, March 2, 2011

Commerce Secretary Gary Locke
Testimony Before the Senate Committee on Commerce, Science and Transportation

Chairman Rockefeller, Ranking Member Hutchison, Members of the Committee, thank you for the opportunity to appear today.

I’d like to begin by stating very clearly:

The Obama administration believes that manufacturing is essential to America’s economic competitiveness.

Manufacturing is a vital source of good middle-class jobs.

And it is a key driver of innovation, with 70 percent of all private sector R&D spending done by manufacturing companies.

The United States is still the world’s largest and most productive manufacturer.

On its own, U.S. manufacturing would rank today as the seventh-largest economy in the world.

And just yesterday, it was reported that U.S. manufacturing activity hit its highest level since 2004.

But manufacturing productivity gains – which are so essential to growth – are partly responsible for millions of lost manufacturing jobs.

Factories that once needed 1,000 people to build a product  can now do it with 100.

Meanwhile, competitors abroad are consistently producing quality goods at less cost.

America can’t escape this global competition.

But we can win it, by leading the development of new industries and manufacturing higher value goods that the world's consumers demand.

And it is important that when American companies invent something here, that they make it here – not all the time, but a healthy proportion of the time. Because the fact is that companies learn by doing.

The manufacturing process itself helps companies develop more efficient ways of doing things, and even develop second and third-generation product innovations that would never be discovered on the front end of the design process alone.

That’s why so many of the Obama administration's economic policies are focused on:

Number one: Creating incentives for American companies to build more things here; and

Number two: Opening up global markets so they can sell those things in more places around the world.

Early on, the Recovery Act made critical investments in basic infrastructure critical to manufacturers like roads, bridges and rail lines, as well as in emerging industries like advanced batteries and smart electric grid technology.

At the Commerce Department, we’ve been helping U.S. manufacturers become more efficient and productive through our Hollings Manufacturing Extension Partnership.

The Commerce Department has also been addressing one of the most urgent needs of manufacturers -- fixing a broken patent office that had a 770,000 application backlog and a three year evaluation time when I arrived.

Under the leadership of USPTO Director David Kappos, management processes have been overhauled, and the application backlog has been cut by 10 percent, even as the volume of applications has increased by seven percent.

Recently, we announced a fast-track measure that would let applicants have their patents evaluated within a year for a small fee.

And if the Senate passes the pending patent reform bill, it will finally give the patent office the tools it needs to:

  • Simplify the patent process;
  • Reduce unnecessary litigation; and
  • Set its fees so it can hire more examiners and bring its IT system into the 21st century.

Meanwhile, President Obama has favored tax policies that overwhelmingly benefit those who make and build things in America.

There’s the 30 percent tax credit for manufacturers of renewable energy components.

In the December tax cut package, there was the provision allowing 100 percent expensing for all equipment in 2011 -- the largest temporary investment incentive for manufacturers in U.S. history.

In his 2012 budget, the president proposes simplifying, expanding, and making permanent the R&D tax credit.

These efforts to spur domestic manufacturing have been partnered with an equal focus on helping our companies compete abroad through the National Export Initiative.

Although the United States overall is a strong exporter, only one percent of our companies export and of those that do, 58 percent only sell to one market.  We can and must do better.

Manufacturers are responsible for 68 percent of all U.S. exports, and they've been a particular focus of our outreach at the International Trade Administration.

We have been working with the National Association of Manufacturers, as well as FedEx, UPS and the Postal Service to identify companies well-positioned to take advantage of new export opportunities.

We’re pairing these companies up with our trade specialists in 77 countries around the world whose sole job is to find new customers for Made-in-the-USA goods and services.

Meanwhile, my department led 35 trade missions last year – that’s a record.

In fact, I just returned from India, where I was helping 24 U.S. companies capitalize on new opportunities in the wake of the president’s reforms to how India is treated by U.S. export control rules.

So, the Commerce Department and the entire Obama Administration are working hard to make our manufacturers more innovative at home and competitive abroad.

I know that sentiment is shared by many people on this committee, as evidenced by your support of the America COMPETES ACT, which supports the education and technology investments that are so critical to the future of manufacturing.

And I hope we can build on that support in Congress to continue strengthening American manufacturing.

With that, I will be happy to answer your questions. . . .