MR. DONOHUE: Good morning. Thank you very much. Things are going just as planned. I was told that I would speak last, so I am very pleased to speak first. Let me begin by saying that the Chamber is very supportive of the Bank's role in promoting U.S. products overseas and correcting the gross imbalance between exports and imports to a more reasonable level.

Many of our members, large and small, rely directly or indirectly on the Bank in their efforts to reach new markets and create jobs here in America. That's why we strongly support full funding for the Bank and reauthorization of such when it comes up.

When the Bank was threatened with a significant budget cut a couple of years ago, the Chamber expended a significant amount of effort to try and bring some common sense to those discussions. With all due respect to the Congress of the United States, their understanding of the complexities of global trade is not always at the highest level.

We've also worked to fight off a series of troublesome amendments that would have made it difficult, if not impossible, for the Bank to do its business. We, at the Chamber, see the Ex-Im Bank as an important partner in our mission, which is to give U.S. companies an opportunity to expand, to innovate and to create new jobs. I don't need to tell anyone here today about the importance of exports to our economy, the number of jobs it creates and the significance to our standard of living.

There are many factors that companies look at when deciding to do business with other countries and other companies. The size and openness of the market, the integrity of the host government, the degree of government interference in the economy, the quality of its labor force and the infrastructure are just but a few. But I'd like to spend my time this morning talking about what I think are three important factors that will significantly affect the ability of the U.S. firms to export and expand in the future.

First, is our economic strength depends on the ability of small businesses to compete in today's increasingly global marketplace. Small business in the United States employs more than half of the private sector, accounts for more than half of the private-sector output and creates between two-thirds and three-quarters of the net new jobs in our country. They are the only segment of the U.S. exporters that are growing in numbers.

They are responsible for 30 percent of the value of all exports, yet too many of them view international markets as an exclusive domain of large, multinational corporations, a difficult thing when you recognize that 96 percent of the world's consumers live outside of our borders.

It doesn't take a rocket scientist then to figure out that U.S. business, particularly small ones, must target those potential customers if they intend to remain strong and grow. Motivating small businesses to tap international markets requires greater awareness, more education, and more support.

The Chamber is delivering these essentials through a program called Trade Routes, the nation's only ongoing grassroots trade education program. We bring together small business owners, public officials and investors in communities all over the country for trade education and promotion events. Often small business owners, public officials and investors in communities all over the country for trade education and promotion events.

Often small business owners are fully convinced of the opportunity available to them in international markets, they just don't know how to go about it, and that's what we're trying to help them do.

I should compliment the Ex-Im Bank for the vast improvements its made over the years in reaching out to small businesses in this regard. In fact, public policy generally needs to do a better job in servicing this part of our economy.

The second important factor I'd like to mention is our country's ability to compete overseas will be our success in completing bilateral, regional and multilateral trade negotiations in the near future. It's important to understand, while we're talking about those negotiations, that our country is a major exporter of services.

We are the service economy, and we have to take those particular opportunities overseas, and sometimes government is still spending the majority of its time and energy on the heavy manufacturing business. We need to focus on the service side of this.

For years, the anti-trade forces in Washington, and by the way we have a lot of them, held sway, but the Chamber and many others and its pro-trading partner group have come up with some formulas that are working. The momentum began to shift two years ago when we passed China into the WTO, and last year we gave the president an extraordinary opportunity by finally getting a fast track bill that will allow him to negotiate trade bills.

As the U.S. sat on the sidelines during all of that time, our competitors were out eating our lunch, cutting deals with one another. And, in fact, of the 133 trade agreements in this world, we're a party to four of them; isn't that exciting? What about all of the others and what are we going to do about it?
TPA or Trade Promotion Assistance has sparked renewed interest and activity in free trade deals, and of course we're all going to see Singapore signed on the 6th, and we're fooling around with Chile, by the way, and my message to the administration, okay, they got the message, they weren't there for Iraq, but if we want to do something serious and central in Latin America, we need to sign that bill and sign it in a hurry. Finish it and sign it.

We're also urging the administration to move forward on bilateral deals with Australia and other strategic partners in that part of the world and with the five Central American nations here as a prelude to not only the Doha Round, but to negotiating a Free Trade Agreement with the Americas.
Finally, let me say that the third factor that concerns me most is balancing the need for security with the need to move people and products all over the world at ever-increasing speeds. I am concerned about the gut reaction to enhance security at any and all costs. We cannot have the cops running the world at the same time we need safe borders in this country.

But if we can't move goods, if we can't move people, people being very important through the Canadian border, then we're going to shut down a lot of our operations or move them somewhere else, and we need a strong working relationship between government and business to get this done. It is not mutually exclusive to be safe or to be mobile. We can do both, and with the right set of policies, I believe we will enhance our security and our mobility.

You know, more than 11 million trucks and 2 million rail cars cross into the U.S. each year and 7,500 foreign ships make 51,000 calls to U.S. ports, a daunting security problem, but also a major mobility problem. Well, we're going to hold a major summit on that subject on Thursday on cargo security at the Chamber. Anyone interested, let me know.

Let me end with one thought, Madam Chairman. The industrialization of the developing world is a challenge for us, and we need not to lose sight of the fact that we don't own the market. We have, for a long time, felt a very strong competitive advantage because of our technological and innovative leadership. There are a lot of people around, by the way--the Chinese, and the Indians, to mention two--that are trying to seize that.

We ought to, with this bank and others, focus on education, technologically and innovation. It's our ace card, and we shouldn't lose it.
Thank you very much.

MS. GIBBS: Bill Marriott?

MR. MARRIOTT: I'm honored to be here today to discuss with the Ex-Im the fact that we thought that $50 million was the cut-off.

We're thrilled to know that they will finance some of our products overseas. We're a very different company from most exporters in that almost all of our export dollars are generated here in the United States with inflow of international travelers to our hotels here in the United States.

About 15 to 20 percent of our hotel business within the United States comes from abroad, and certainly the biggest countries to visit us are the most logical ones that come to mind--Canada and Mexico, followed by the U.K., Germany and Japan. Those are really the big five for us, and then it tails off into many smaller groups of visitors.

Looking at our industry, we are engaged in what I would call today as the "Perfect Storm," starting in the recession which began to impact us in March of '01 and then finally with September 11th, we had the terrible incident in New York, where we lost a hotel at the World Trade Center, and the impact of 9/11 was significant on our industry.

Over 50 percent of the jobs lost since September 11th in the U.S. economy have come out of the tourism and the aviation industry. So it's been very impactful. Then, of course, we had the Iraq War, which slowed down everybody, and now, of course, we have SARS in Asia, which has of course spread into Toronto, Canada.

So we have lots of opportunities. We're seeing tremendous problems as a company in Asia. We have several hotels in Hong Kong, which are in the single digits in occupancy. I think we're the market leader at 15 percent with our one hotel in Hong Kong and the others are below 10 percent in occupancy. Singapore has been severely impacted. Parts of China have been very severely impacted, but we're seeing some interesting things happen as a result of this.

The Japanese, who would have been traveling to China as a group, are now beginning to come to the United States more than we had anticipated, and we hope that they'll start to be coming soon back to Hawaii and back to the U.S. shores. But that's been a phenomenon of this total chaos that we're going through today in our industry.

We expect the Caribbean to do pretty good this summer because it's close to home. We don't expect to have a lot of international arrivals in this country. And one of the biggest challenges that we have that the federal government can help us with is the fact that there is no focus at the senior levels of our government on tourism.

And, for instance, there are 130 countries around the world where terrorism has a Cabinet rank. And in this country, there is no Cabinet rank, there is no Department of Tourism. There is some money been allocated by Congress to the Department of Commerce by $50 million for trade promotion to get tourists to come to the United States, but it's 15 percent of the income of the hotel business in this country to 20 percent comes from abroad. It's severely impacting us, the fact that we are not generating that traffic today as we were prior to September 11th.

So that is a major impact for us. The other side of our business is that we do operate almost 450 hotels outside the United States, but most of these hotels outside the United States are owned by others. Like 99 percent are owned by people who live in the countries where the hotels were built. They build and develop these hotels, and they would be great customers for Ex-Im Bank as they seek to finance elevators and computer equipment, as well as many of the parts of the buildings that they cannot procure in their own country, such as the heating, and ventilating and air conditioning systems.

So we have an interesting business with lots of challenges. Travel and tourism is the second-largest industry in the world. It employs 10 percent of the world's population that are involved in restaurants, and shops, and hotels, and airlines and ground service, and rent-a-car, and so it's a huge industry. It's been a terrific growth industry.

Year 2002 was the first year that it actually declined, in tourist international arrivals declined since 1982. So there's been a significant increase over the last 20 years, and so has this, this past year.
Thank you.

MS. GIBBS: Thank you. William O'Shea, Bell Labs. Would you like to comment?

MR. O'SHEA: Yes, just quickly. A couple of things. Thank you to Ex-Im for having me here as part of this dialogue.

Listening to Bill describe tourism as the "Perfect Storm," I'm reminded that the telecom industry, which Lucent takes part in, has been described as in a nuclear winter.

And so having our challenges both in the U.S. and ex-U.S. Lucent, in 2002, is about a $12-billion business, about a third of it ex-U.S. And of that, about a $1.2 billion was U.S. export into international markets. It's an increasing part of our business. In fact, the one market in our business that was showing some sign of growth, including recently, but we're a little bit concerned about its future, is the Asia-Pacific Region, led primarily by China, Korea and India.

Obviously, the same kinds of things that Bill discussed as having pressure on the tourist business has the prospect, although it hasn't shown up yet, of having pressure on our business as our travel for sales and customer meetings has been significantly curtailed. And so we're both part of Bill's problem, but a growing challenge for ourselves to build our book of business for the future.

Many of our products, actually, are targeted primarily at international markets. There are international standards that are different than the telecommunication standards that are utilized in this country, and so we literally have to design and manufacture products that are specific to international applications. What's important about that is, one, the level of investment we have to make to take part in that business, but also the importance of those standards and the international standards bodies to our business. They have a great deal of influence in terms of our competitiveness, our ability to compete and our costs.
Finally, the international marketplace, especially with the state of the current telecommunications business, tends to be the early adopters nowadays. So that when we have new products in the optical domain or in some of the new data processing demands, it's often international customers who are building out new networks in places like Malaysia or India or China that are leap-frogging to the next generation of technology because they don't have the embedded base to leverage that the local incumbent carriers do this in this country.

So very important that we focus on that world so that we continue to drive our technology on the leading edge because ultimately we're going to be bringing that technology back home and applying it here to the networks in this country.

If we go to the next page, the major opportunities we see, and these opportunities tend to be very, very large, the third-generation wireless networks that are going to be built around the world will be something on the order of a $10-billion industry in the next five years. It's a very, very small fraction of that now. And so it's important to us that we have a competitive offering in that space, but also, as I'll speak in a minute, that our complete offering, including our financing packages, is competitive in that space.
China is a very, very big, very, very fast-growing market. In China, they're adding the equivalent of a Bell South to their network every year. So it's a huge investment that's being made. It's being made all across the country, and it's being made both to build out their wire line and their wireless network.

It's an example of a place where in order to support their indigenous manufacturers, they're actually trying to create a new standard for Chinese mobility that will be different from what the rest of the world utilizes, and we need to be able to influence that standard as it gets developed.

Finally, the big opportunity around the world is what's called teledensity, and that's just places where they don't have telephone service. We're in an industry that looks like it's high-tech and leading edge when you look at it from Western Europe or the U.S., but the fact is that more than half of the world's population has yet to make its first phone call, and so there's a huge opportunity just building out those networks around the world over the next 10 to 15 years.

It took us 100 years to, around the world, to install the first 700 telephones. The next 700 million happened in three years, and so the acceleration in this industry is huge, but at the same time the price pressure in the industry has a lot of pressure on customers to be able to move the volumes they're moving at ever-decreasing revenue levels, and so a pressure on the industry and on our customers that obviously gets felt back to us.

The kinds of challenges that we face is competition from low-cost and particularly advanced, officially and unofficially supported competitors: Officially-supported competitors, like Nortel in Canada, getting support from EDC for letters of credit for things like performance bonds, for individual transactions in a way that makes them competitive in the marketplace; unofficial support in places like China for semi, quasi-governmental organizations like Dha Tan [ph]. Ra Wah and others.

And so a marketplace that we need help in trying to level so that we can compete on the basis of our technology, on the basis of our competencies, and on the basis of our capabilities.

Finally, the low-teledensity market obviously is a challenge for us in order to meet the price points that are required in these spaces. That's a challenge to us to get our costs in line, it's a challenge to us to streamline our operations, but as I said earlier, it also includes a financing element that we need help with, frankly, in order to be competitive with others who are getting that kind of help.

Go to the next page, and we have a large ecosystem that we support and that supports us. We have a series of contract manufacturers in the United States who do most of our manufacturing. We have a set of channel partners who resell our products into spaces where we don't support with our direct sales organization.

We partner with key large vendors on a multinational basis, people like Sun, IBM, Cisco, EMC, where we will jointly put an offer together, for example, with EMC for network-based storage and go to market together to sell that product into the international marketplace, and we have a large number, over 1,200 small business partners who provide subsystems, subassemblies and components that we then integrate into the actual systems that we provide to our customers.

So a large leverage every time we move one of these multi-million-dollar deals into a foreign national government PTT for not only ourselves, but the infrastructure that supports us as we put together our capabilities and our technologies.

Finally, just a few words on the importance of getting support to our business. First of all, we could use help in expanding our global market opportunity. Our company, by the way, was precluded from doing business internationally until 1985. As part of AT&T, we weren't allowed to export, and so we've been, for the last 15 to 16 years, trying to build a business literally up from zero.

Approximately, 15 percent of our business now is exported from the U.S. As I said earlier, about a third of our business in total is international. The marketplace looks just the reverse of that. The marketplace, the global market is one-third U.S. and two-thirds ex-U.S., and so we see a real opportunity for us, with help from others, to expand our position in the U.S. marketplace.

We need to influence standards, as I said earlier, and make sure we have a level playing field here. We need, through all of these things, to increase our own global reach. We need to introduce product technology that's equivalent to what's needed in the global market and as a means of expanding our services capability.

We heard earlier about the importance of services. Services is about one-third, sorry, 20 percent of our business today. Our expectation is over the next five years it'll be 50 percent of our business, and so services is becoming a more and more important part of our business as our customers look to us to integrate, maintain, and in some cases actually operate their networks for them.

And then, finally, as I said earlier, we need help in leveling the playing field for finances and help from Ex-Im in that regard.

MS. GIBBS: Thank you. David Weber.
MR. WEBER: Thank you.On behalf of the Wells Fargo HSBC Trade Bank, it's a pleasure to speak to you today.

Although the company that my colleagues and I manage is owned by two very large banks--Wells Fargo and HSBC--the fact of the matter is, is that the Trade Bank is really a small financial institution. Our mission, however, is very focused. We strive to help our mostly small business and medium-size business customers compete successfully in the international global marketplace.

For this reason, you can imagine that we are passionate about the topic of this conference, "Navigating the World of U.S. Exports," and equally passionate about the critical role that the Ex-Im Bank plays in enabling our customers to effectively sell their products overseas.

Since my company's expertise is in small-and medium-sized business export finance, I thought I'd share with you some thoughts on the current state of the market. It should come as no surprise to this audience that small- and medium-sized businesses are the fastest growing and most dynamic part of our economy. Any way you choose to measure it, jobs, profits, share of GNP, small- and medium-size businesses are growing at materially faster rates in the economy as a whole.

Small business participation in exports has also broadened significantly, with the number of small business exporters having doubled over the last 10 years. Since this is a conference of trade practitioners, it seems like I'm preaching to the choir, but I'd like to make an emphatic statement. American small- and medium-sized businesses, pound for pound, can compete in the international market with any products produced globally.

Of course, the law of comparative advantage that we learned in Economics 101 hasn't been repealed, but in products that require innovation, creativity, flexibility, the American small business entrepreneur has demonstrated time and time again that we can produce world class products.

Selling overseas is not without some formidable challenges for the small business, however, perhaps the greatest of which is finding financing. Unlike large businesses which finance their operations in the unsecured capital or bank loan markets, small businesses typically need to pledge accounts receivable inventory or other assets as collateral to get a bank loan.

The simple fact of the matter is, is that foreign accounts receivable, inventory held overseas, and other assets associated with exports typically are ineligible to be used as collateral at most American banks. This places the small business person in a perverse position. The more successful the company's export initiative, the less their ability to get bank financing.

Compounding this issue is the fact that many industries, the ability to make an overseas sale is less a factor of product quality, price or service than the ability of the seller to offer term financing to the overseas buyer.

Small businesses, typically tight on capital, are frequently placed at a significant disadvantage to foreign competitors which are often subsidized by government ECAs and other formal and informal foreign government policies designed to encourage exports.

It would be inaccurate to be too dire about this, however. The fact of the matter is, is that by utilizing a number of private- and public-sector solutions, the small business exporter can obtain the requisite financing.

First of all, as the economy becomes more globalized, domestic commercial bankers like myself are becoming more familiar and comfortable with the asset composition of the small business exporter. One area that has developed significantly over the past few years is the willingness of domestic lenders to accept privately-insured foreign receivables as lendable collateral.

The leveraging of insured foreign accounts receivable, fairly recently considered an out-of-the-box alternative, is now in the mainstream repertoire of most middle-market commercial lenders. As globalization permeates the small business economy, I predict that middle-market bankers will become more adaptive managing the type of risks that are currently managed by niche trade finance professionals.

The private foreign credit insurance market is not a panacea for the exporter, however. The vagaries of reinsurance, global risk appetites and perceived market risk often limit the capacity of private insurers to take risks in certain countries, in certain situations. Additionally, few private insurers have the capacity to provide cover for term financing, a key competitive issue for exporters of capital goods.

When all else fails, the small business exporter turns to the Ex-Im Bank. Through the Working Capital Guarantee Program, various medium-term insurance and loan guarantee programs, Ex-Im Bank provides small businesses with the ability to compete in the international marketplace.

When the market demands a medium-term or longer tenure, the Ex-Im Bank programs are more or less the only financing alternative. More often than not, Ex-Im Bank support is the difference between our customer making a sale overseas or not.

My company's experience with Ex-Im's professional staff has been very favorable. Particularly with our smaller, less-sophisticated customers, we have found that folks at Ex-Im bend over backwards to help our clients through the process.

In summary, the small and medium businesses have a number of viable alternatives to obtain export financing to gross sales, create jobs, and as a side benefit, even help the country's trade deficits. The Export-Import Bank is the linchpin which enables much of this activity to happen.
Thank you.

MS. GIBBS: Nat Kumar?

MR. KUMAR: Thank you for asking me here today. I represent one company, Cornet Technology, one of many we heard today that is a small business.

Twenty-five percent of our sales is overseas. Fifty percent of our marketplace is overseas. We, Cornet Technology, in the switching and video products marketplace, cannot survive by just selling in this country. One of our businesses, which was a telecommunications business, "tanked" three years ago and hasn't revived yet, but our opportunities overseas has helped us stay alive and grow.

We, as a small business have one big advantage, either we sell or we perish. That's an incentive that the large businesses don't have.

When our telecommunications portion of our business went South, we immediately embarked on an intensive R&D program, I mean, a pretty intensive R&D program to get us back into the video business.
Now, with 9/11, the SARS today, I know those of you who have invested in the airlines and others probably have suffered. But to us business and opportunity, both in this country and overseas, we are growing thanks to this innovative nature of a small business to be nimble enough to change its market position overnight that we have been able to grow our business 30 percent a year for the past three years and profitably.

We, as a small business, have one disadvantage. We can't have, how do they say it, cash run rate or negative cash flow. Bankers that I work with, unlike my colleague here--or like my colleague here--would probably pull our loans if we had a negative cash flow. We are at the mercy of many factors, but the least of which is our own initiative. That's all we have as a small business.

For us, the Ex-Im Bank has been a godsend. Without it, we would not have sold overseas, period. It is not a question of like, dislike, nice to have, but it's a mandatory requirement for us to finance our sales overseas. None of the local banking channels would have allowed that till now. The only recourse to us was Ex-Im loan guarantee.

Now, I know you are told that $50 million was the minimum. We are a small business. We have $1 million or $2 million, and that's good enough for us--as a revolving line of credit for us to sell overseas.

Our customers and our competition overseas, primarily in Western Europe and Japan, have recourses to their governments that we do not have. But here one great strength that we do have is our workforce in this country. We manufacture everything we sell just across the river in Virginia.

People have come to me and said, How about moving it to Mexico or Singapore or China or India or whatever? I can assure you the products that we make, with the technological content it has, is best manufactured in the United States. The labor content is very minimal. So our cost advantage is not that much of a problem.

However, to us what had been a problem was an appreciating dollar. That, today, thank goodness, has been alleviated somewhat. Our competition is mostly in Germany. We've been able to compete with them effectively in our businesses and have been successful.

We are running at about a $40-million run rate today, which means 25 percent of that would not be there, which means out of 150 employees in Virginia, we probably would not have 50 employees, except for the Ex-Im Bank.

That is the story of a small business. Thank you.

MS. GIBBS: Well, gentlemen, I've really appreciated the insights that we've gotten from your individual comments. Now, I'd like to ask you some broader questions. In covering the markets, as I do, I know that we focus a lot on big businesses and the headlines have been pretty bleak for the past three years.
But in listening to all of your talk about the service industry and its growth--in fact, I know that small businesses have been doing the hiring when we see the big headlines of 10,000 lost there, 10,000 lost there, and in listening to Nat just saying 10-percent growth for every year the past three years, when we've been in a bear market, what am I missing or what is the general population missing in terms of looking at this glass as half empty versus half full?

The state of the economy, Tom, and international outlook, and then down the line, what do you see and where are we going?

MR. DONOHUE: Well, that's a very good question, and for many, many months we've been suffering the pains of great fundamentals. We've had low interest rates, low inflation. We've had relatively low unemployment for a recession that we were in. We have had, you know, a very attractive base on which to build, and yet we've been suffering, particularly in large companies, from the "wait until" attitude, driven by the problems we had with corporate governance, by the problems that we had following 9/11, which really, as Bill indicated, just clobbered his industry, but the problems we had with the hunt for the terrorists and then we had gone into the question of the Iraqi War, and it's been "wait until."

Wait until we see who gets elected. Wait until we see who runs the SEC. Wait until we see what happens to the war. Wait and see, wait and see, wait and see, and you can't blame the boards of directors and the CEOs because it's not been a fertile environment, but we've got to get off that pedestal and get on with making some significant investments.

My worry about the economy, however, I have to hitchhike on Bill's points. This SARS issue has stopped--I mean, I understand Cafe Pacific is going to close down this week, you know, for some period of time. I understand Toronto is talking about a virtual lock-down on their city. We've got a serious problem there.

The war is over soon, but we're going to have all of the aftermaths of that. We're just sitting around waiting to get going. It is a great time to get going, but my view is you're probably going to be in the first quarter at, you know, 1.5 or 2 percent, if we're lucky, the second quarter. It'll be the fourth quarter before we start to grow.

But my overall worry, you have to get to 3.5 percent, in an economy that has productivity as high as we have it, which is the best in the world, before you're going to start hiring new people.

So the bottom line is we ought to do the president's stimulus package. It's hard with $500 billion to stimulate a 12-trillion-dollar economy, but we ought to get on with it because of the mentality that things are changing, opportunities are there for small business and expensing in lower rates, they all pay their taxes as individuals, and we can get a "goose" to this economy, and we will get something out of the dividend issue if we pass all or part of it. It'll drive up the market.

We need somebody to get going and things will start to go. We've just had month after month after month of great fundamentals, and that's not hiring anybody.

MS. GIBBS: Bill Marriott, comments on that?

MR. MARRIOTT: Tom is right on. Business malaise, the bunker mentality that most CEOs have today, they're not investing, they're not traveling, they're not hiring, they're just pulling in, and maybe the weakened dollar will begin to help exports. Exports have got to grow if we're going to get this economy going. We are importing a lot more than we're exporting, and we've got to pull up and increase our exports. And everybody in this room is interested in doing more of that. The Ex-Im Bank is a big driver of exports.
And the one area I think that we have a great opportunity as a nation is to increase our exports. We, hopefully, will see more international travelers come into this country this year as a result of really the weakened dollar. But Tom is right, we are wait and see, wait and see, wait and see. We've got to get off that.

MR. DONOHUE: You know, a billion dollars' worth of exports creates 20,000 American jobs. I don't care what service, technology, hard manufacturing, on average, 20,000 American jobs.

MS. GIBBS: Bill O'Shea, I'm going to ask you because I've heard a lot of people say we need to first see jobs before we see a recovery. Other people are saying business investment leads. Where do you stand, in an industry that is fighting with overcapacity?

MR. O'SHEA: Well, if you look at our industry, and by the way, I agree with the comments on the economic situation, but our industry is actually in a little bit more negative situation right now.

The major service providers--our customers, both here and in Western Europe--have gotten themselves into a situation where they've overbuilt capacity for a number of years and, at the same time, have taken on debt loads that they're having trouble servicing right now, and so they're really focused right now just on improving their free cash flow and not making investments, which obviously makes it a problem for us, since it's our products and services that they invest in.

Our industry, from 2001 to 2002, declined 15 percent on a global basis, 48 percent in the U.S. As I said earlier, 65/66 percent of our business is U.S. based. So we're feeling a lot of pressure in our customers' willingness and ability to invest.

At the same time, on the other side of it, we're in an industry that has to continue to invest in order to stay competitive, and so both ourselves and our competitors continue to invest in advancing technology in the face of a softened marketplace, and so at some point there's going to have to be a catalyst that moves our customers into buying more, and the only thing we see on the horizon right now is economic improvement. There's no killer application, no miracle technology, nothing that's going to just jump-start the global communications industry.

The brightest spot happened in the Far East, particularly China, Korea, India and some of the ASEAN countries. The same kind of threat that Bill is talking about is, as I said earlier, a threat to us. It hasn't hit us yet because the lead times in our equipment are such that what's needed out there for the next quarter or so is already staged out there. But we ought to be building business now for the next quarter and the quarter after that, and that gets more difficult when senior executives aren't traveling.

And so we see in our industry, at least our particular part of it, probably 12 to 18 months of continued pressure on the industry, not much forward movement and really just focusing on grabbing the business we can, focusing on growing our international business and getting our costs in line with the reality of the market.

MS. GIBBS: David, how about you, your joint venture between two really big financial powerhouses focusing on small- to medium-size businesses in the Midwest and West, how does globalization affect those businesses?

MR. WEBER: I think, if you go back 20/25 years ago, the great majority of companies in the United States would have been doing business internationally would have been the Fortune 50, the Fortune 100, maybe a little bit longer.

MS. GIBBS: Yes.

MR. WEBER: And today, whether it be on the import side or the export side, almost every small business has been involved with globalization, in one form or another. And my colleague here sort of personifies the small businessman that's really looking from a global perspective.

So, as the market, as competition comes, the ability to do business globally is very important. I think that there's been somewhat of a lag in the American financial institutions to adjust to the globalization and the composition of the small business, and that's where, in my view, Ex-Im comes in as a real critical component because it's very difficult, as my colleague here articulated, to get loans for these kind of activities, even though they're profitable, good business, good for the country, you know, just about everything is positive about them, but still the U.S. financial institutions, particularly in the middle and lower market, really haven't adapted yet to be able to adjust for these. So it's very critical for us.
I do have to associate with my partner, since I have colleagues in the audience, I have to affirm the statement that if we don't make sales, we perish too. I don't want to be disassociated from that.

MS. GIBBS: Well, Nat, you brought up a very interesting point in saying that some of the traditional methods wouldn't have passed the scrutiny test. Talk about thinking outside the box and how important that is, in this type of environment, going to the big picture.

MR. KUMAR: Well, you see, we have been blessed in this country with a large marketplace for anything. Any manufacturer has a really large marketplace for their product right here in this country. So it's not unreasonable to expect an entrepreneur, a businessman, to say I'm content with this.
But the problems of the globalization is if you do not--business is vulnerable--if you do not take that business outside the shores somebody else will come and eat your marketplace. So, for us, it is just a question of where we decide to compete, within the shores of this country or somewhere else outside, and the farther we go outside, the better off we are in protecting our home base. That's where we are.
My fear is not from, in our own niche market, it's not from our traditional competition, which is in Western Europe and Japan, as much as the two powerhouses, I expect, over the next 20 years, China and India. And we are gearing up to compete with them today by establishing bases in those countries to service our products to sell in those countries today. That's the only way I know how I can protect my little base from being eroded by overseas competition.

None of this, and I say this very openly, none of this is quite possible going to the local banking. The local banks, we have a disadvantage as a small business going to a local bank. Our asset base is not large. So as my colleague said, we have to collateralize our receivables, and overseas receivables are suspect--even though to us it's not, it's still good money. But without Ex-Im's guarantee of that overseas receivables, we won't get the financing to do our job for the economy. Every million dollars that we export means five jobs in this country.

You asked earlier how about the recession or the job losses. A large business lays off 10,000 people, that's headline news the next day. Five thousand small businesses hire two people each, it's not headline news. That happens all the time. We have added 50 people in the last two years to our workforce. We are a small business.
Thanks.

MS. GIBBS: Bill Marriott, you mentioned the fact that tourism, being the number two industry in the world, does not have any senior administration that focuses strictly on that. Besides having someone to really kind of watch the store there, what else do you think the U.S. Government can do to help small businesses and increase exports?

MR. MARRIOTT: Well, I think opening new markets is very, very important, and look what happened in China. I mean, all of us I think sitting up here today think that China is probably the hottest growth market in the world. We don't know what SARS is going to do, but someday SARS is going to be fixed. And China has got it in terms of a huge market domestically. We look on the Chinese traveler as China, 35 to 40 million people left China last year and went abroad. Chinese tourists. Five years ago, this was just not even thought about. So, here, the U.S. Government has made a tremendous effort, with the World Trade Organization, in opening up China, which is obviously, if you're going to open up a market, let's go open up the biggest one in the world, but I think that kind of thing is the thing the federal government can continue to push.

And as Tom said, these bilateral trade negotiations with Chile and places like that increase the American presence in these countries and welcome American imports to those countries and American exports from this country.

MS. GIBBS: Tom, follow up with that a bit because not only did we have the 9/11 scare that really put a pall on any type of international flows, but also now the most recent--I almost used a French word--problem, "contretemps"--I will use it--between France and Germany, does that mean that maybe our focus will be on the Latin American and Central American market instead of Europe?

And the problem with SARS, we've just seen the tip of the iceberg now, will that also take some of the focus away from the Asia-Pacific region?

MR. DONOHUE: Leaving aside the geopolitical issues for just a minute, the United States should focus on the Western Hemisphere to create a Free Trade Agreement of the Americas so that we can fundamentally put together an Americas cartel to compete with the growing cartels around the world.

Now, I'm not supposed to use that word, but I thought, for here, we might think about it. And when you look at what's happening in the EU, with their expansion, and with their efforts to expand or to support the business relationships of all of their member companies at the expense of the United States, if that's what's required for them to be competitive, when you look at the challenges that we're going to have in the two or three sectors of Asia--Japan, China and Southeast Asia--we're well-served to build a very strong trading relationship in the Americas, and I think that should be on the top of the list.

Bill is fundamentally right that the great markets of the future are in Asia, and that's where the customers are going to be, but you want to do that from strength.

Second, I think people ought to recognize, with all of the anger, and frustration, and disappointment around who helped and who didn't on the Iraqi situation, those are going to be geopolitical issues. They're not going to be very much in the whole issue of trade. Trade is run, private investment, direct foreign investment goes, the money goes where it's safe, where it's welcome and where it can be profitable, and both ways.

And so I think you're going to find trade overtaking the geopolitical problems, but nobody should make a mistake and think that we weren't disappointed in the French or the Canadians and that we weren't angry about some of the things the Canadians said about our president and everything, but that's a part of the game, and we'll handle that.

And if they worry a little bit about trade, that's fine, but the fundamentals are trade is going to go on because you go where markets are, you go where cash is, you go where products are.

MS. GIBBS: Thank you.
Bill O'Shea, let me turn to you. Do you see any difference in the way U.S. Government supports businesses versus other governments? We've seen talk of the quasi of unofficial, officially supported. You mentioned Nortel. Can you address that a little bit more?

MR. O'SHEA: Yes, I don't think there's any question that right now, in at least our industry, there's an uneven playing field. I use the example of financing with Nortel. The Canadian EDC just supported a $750-million line of credit for Nortel. This is in an industry where liquidity is a real issue today. The question all customers have is whether or not you're going to be around, and so having that kind of a vehicle gives them a clear advantage in certain situations.

Other national banks have a much more aggressive policy, a much more holistic policy than we do as regards not only individual transactions, but market window kinds of working capital financing and other vehicles. Canada, for example, has a program specifically targeted at funding anything that will drive small business volume in Canada. And so, yeah, there's a definite playing field difference.

The other thing I would say to the earlier point on the EU is, although we don't find anything you can specifically complain about, in Europe, in our industry, we find our customers and our competitors--our European competitors--jointly lobbying the EU for support for the telecom industry.

Now, on the face of it, there's nothing wrong with that, but none of the ex-European players are taking part in those conversations, and so it's pretty easy to guess where those funds are going to flow once those funds are starting to be allocated.

So I think there are trade policies around the world. China, clearly, has a number of policies that we would like to see changed, but our competitors, from the Europeans, Canadians, people in the Far East, regularly have advantages because of what their governments are doing to position the growth of their industry.

MS. GIBBS: Tom, did you have a comment on that?

MR. DONOHUE: Yes. I want to say that I understand the point Bill is making, and I represent all of these companies, and we need to be very aggressive in competing with those problems, but first we have to be very honest with ourselves. We have agricultural subsidies of high significance, we have tax arrangements that encourage investment in research & development. We do a lot of things in the United States, from our government, to help our companies, and I could get, you know, it's right from defense on through telecommunications. It's just that we don't do the overt, market-opening.

Our government is not comfortable with saying, "Let me go get the people from Bell Labs and let me help them get that contract," although we're doing better. They're training ambassadors now to be aggressive on the commercial sense. We ought to understand what benefits we're getting, and then we ought to go compete with the other guys. We ought to figure out what it takes to beat them and beat them.

MS. GIBBS: Well, that's got to be the last word on it. Thank you very much.
Tom Donohue, Bill Marriott, Bill O'Shea, David Weber and Nat Kumar, thank you for an incredible panel this morning.