House Armed Services Committee - The Economic, Technology, Vocational and Skills Implications of Department of Defense Trade Offsets

Federal News Service July 8, 2004 Thursday

July 8, 2004 Thursday

HEADLINE: HEARING OF THE HOUSE ARMED SERVICES COMMITTEE SUBJECT: THE ECONOMIC, TECHNOLOGY, VOCATIONAL AND SKILLS IMPLICATIONS OF DEPARTMENT OF DEFENSE TRADE OFFSETS

CHAIRED BY: REPRESENTATIVE DUNCAN HUNTER (R-CA)

WITNESSES: KATHERINE V. SCHINASI, MANAGING DIRECTOR, ACQUISITION AND SOURCING MANAGEMENT TEAM, GENERAL ACCOUNTING OFFICE;

DR. CHARLES W. WESSNER, DIRECTOR, PROGRAM ON TECHNOLOGY AND INNOVATION, NATIONAL ACADEMY OF SCIENCES;

STANLEY SORSCHER, LABOR REPRESENTATIVE, SOCIETY OF PROFESSIONAL ENGINEERING EMPLOYEES IN AEROSPACE

LOCATION: 2118 RAYBURN HOUSE OFFICE BUILDING, WASHINGTON, D.C.

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REP. HUNTER: We'll take your advice, Dr. Wessner. We will have industry here. I think this committee is prepared to strap this one on and try to do what we can for our country. Has the gentleman finished? I appreciate the gentleman.

The gentleman from Ohio, Mr. Turner.

REP. MICHAEL TURNER (R-OH): I'll just move for a moment. Thank you, Mr. Chairman. I appreciate your focus on the important issues of retaining our industrial capability and its impacts on our national security. I think we hear every day when we open a newspaper stories of the concerns throughout our industrial economy as to our ability to retain both our intellectual capacity and our industrial strength.

On the issue of offsets, inevitably, the discussion has turned to other areas of where we need to support our industrial base and our aerospace industry. Technology transfer was one that has been discussed, our tax structure, research and development and coordination of research dollars, offsets as an impact on trade, education or educational structure, how we are producing, the individuals who have a science related background. But Mr. Wessner, you said something that struck me and it's actually an issue that I have been working on in conjunction with the chairman and with Chairman Saxton.

And you said that we need a common vision in the industry. We need a forum to gather people together to have this discussion. And I also heard the comment that we need to talk about the public investment that we're making and private development. And one of the issues that has been important to me is the fact that in our aerospace industry, with our being a leader in the aerospace industry internationally, is that we have been unable to sustain an international aerospace trade show.

I'm not talking about an air show like just planes flying around for entertainment purposes which, of course, is usually a part of an overall international air and space trade show but really an aerospace trade show. And in part, that has been because we've not had the coordination, as other countries have, with the Commerce Department, the Transportation Department and the Department of Defense because it's really what it takes to pull one of these off. It's all three agencies working together in a focused effort with our aerospace industry.

We also have a disincentive for domestic aerospace trade show in that we do allow our contractors to include in their chartable overhead participation in foreign international trade shows but not in domestic trade shows. So we all in effect pay for our industry to participate in international shows. We don't allow them to include those costs. They have to bear them themselves if they are going to participate domestically.

Congressional Research Service also undertook a look at this issue and they said that the fact that we did not have an international aerospace trade show had an impact on small businesses because our small businesses, some of which are being squeezed out of this offset impact don't have an ability to participate on an international level because they don't go to travel outside of our borders where, if things were brought here or they were participating on an equal level with our large-scale aerospace industry that have the ability to more showcase their wares.

So my question is that, seeing as many of the things that you're talking about and where other aerospace industry foreign economies are thriving-in Europe, we have two international trade shows, Asia, we have a large one-could you speak just a little bit more about this issue of an industry forum because we do not have a place where we all come together here domestically with our aerospace industry from top to bottom to both look at what is the next generation of what people are working on, how are we coordinating our dollars, how can our small businesses participating in showcasing what they are doing and working together with government, commerce, transportation and the Department of Defense on that coordinated effort?

MR. WESSNER: I think there are two things. One-if you'll forgive my smile, as a representative of the National Academy, I'm glad you've asked that question. The National Academy is striving to provide a forum. There's work under way both on R&D, very modestly funded work on R&D for the aerospace industry and we are seeking to focus on the semiconductor industry. What we try and do in those forums, which I think is critical, is to bring together, as I think you're suggesting, public officials, labor representatives, multiple industry representatives, not simply one large company but the smaller companies as well.

And one of the things that we're proud of and one of our first offsets books is that for the first time, the Academies have brought in senior union representatives to let them explain how they were impacted. And we had researchers who had looked at the second and third tier supply base. So we know how to do a forum like that. Ultimately, the forum should be industry led, with public participation.

I think again the semiconductor industry is an interesting example.

What I'd like to propose for the committee's consideration is a roadmap exercise. I think you're familiar with that, where we would sit down and say this is where we are. Now, where are we going to be in five and 10 and 15 years? How will this play out? And have participation from union representatives of different types, have participation from the government. What kind of aerospace industry do we want and what are we doing to get there?

The semiconductor industry started this. I attended the first meeting in 1990 and it was quite impressive. This roadmap model, which is not a plan, I stress-it's a setting out what are a series of challenges that need to be met technically, how are we going to deal with capacity, how are we going to deal with the security requirements. I mean, you know, successfully trusted planes are absolutely essential for the operation of the economy. And I think that's a point that was stressed here and I'd like to reiterate.

So a roadmap is a way of bringing together all the concerned parties and addressing it. And I would encourage the committee to explore-and by the way, that can be very modestly funded. There's sometimes a disconnect between the stakes we have and the global economy and the funding that we put into efforts to help us compete better. Or to address a concern I've heard repeatedly, how do we capitalize on the existing R&D investments on the existing expenditure? And it often doesn't take much.

That Tekes program in Finland, just a footnote, helped fund a company called Nokia. You may have heard of Nokia. No one had before they funded that program and it was a question of capitalizing and developing new standards and new ways of working on cell phones. They did a good job.