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The British, Belgian, German, and French Investment
insurance agencies have informed us that while they have not formally gone "off cover," they are unlikely to approve now applications for insurance coverage in the immediate future. These agencies stressed that they have not been subject to any laws or decreas prohibiting future activities, but that they
are taking a "wait and see" attitude.
The Canadians hava indicated that they have not suspended coverage for new projects and will process any new applications. The Australians are on cover in China, but ar. making offers conditional on a panding Australian Government decision concerning its future relations with China.
still awaiting a response from the Japanese.
I would be pleased to respond to your
STATEMENT OF NANCY FRAME Mr. SOLARZ. We will now proceed to hear from Ms. Frame who represents the Trade and Development Program.
Ms. FRAME. Thank you, Mr. Chairman.
I want to thank the chairmen of all three subcommittees for the opportunity to testify today. I am accompanied by Ms. Betsy Horsmon who has been our TDP China director.
I will briefly summarize the accomplishments to date of the TDP program in China, describe the current status of the program. In the course of my statement I will try to answer all the questions the committee presented to us.
The Trade and Development Program, established in 1980, assists in the economic development of developing and middle income countries and at the same time promotes the export of U.S. goods and services to these countries. In China TDP has been funding feasibility studies, trade-related training and other planning services that are related to major development projects which offer large potential export markets for U.S. firms.
TDP funded activities help position U.S. firms for follow-on contracts when these development projects are implemented. TDP funds also play an important role in assisting U.S. firms to establish a market presence in China and to again access to new longterm markets.
On a world-wide basis, the TDP budget has grown fairly rapidly from $5 million in fiscal year 1980 to $25 million in fiscal year 1989. The TDP China program also has grown. In 1983 we spent $500,000 in China. In the last fiscal year the level had increased to $6.7 million. Because of the tremendous potential market in China for U.S. goods and services, TDP has spent approximately 25 percent of its total budget in China during the last few years.
Our cumulative program since we began in China in 1980 totals now approximately $23 million. This expenditure has already resulted in direct U.S. exports of over $250 million.
Because major projects are generally implemented three to seven years after the study is complete, the value of U.S. exports generated by our activities is expected to increase substantially as more projects move from the planning stage to implementation.
TDP's program has assisted the Chinese government in planning high priority development projects throughout the country. We have funded 49 feasibility studies located in 15 provinces. We have funded studies in a variety of sectors. We have done environmental studies, studies on infrastructure, industrial projects, and transportation. We have also provided funding for technical seminars, reverse trade missions to the United States by Chinese specialists and trade-related training.
As an example of the trade-related training, in fiscal year 1988 TDP provided two grants of $500,000 and $750,000 to cover a portion of the training costs related to the development of a coal-fired power plant project in China. These two grants resulted in the award of two large contracts, Combustion Engineering of Connecticut, won a $100 million contract and Sargeant and Lundy of Illinois won a $101 million contract.
Another successful trade-related training project involved a $125,000 grant to train individuals in the Chinese coal industry on the continuous mining technique. As a result of that training the Chinese have begun to implement continuous mining in four underground coal mines in China. In order to do this they have placed an initial order of $10 million worth of equipment for these four mines.
You have asked whether other nations have a similar program to the TDP program. We are aware that other industrialized nations do have similar programs although they are not exactly identical. The specific data on the size of these programs is not generally available, and the data that we have been able to obtain is not easily reconciled because the programs are just not entirely comparable.
We do know, however, that the Canadians through CIDA have a $4 million annual budget for China and their programs are modeled after the TDP program. We also know the Japanese spend a good deal of money on feasibility studies and training projects through the Japanese International Cooperation Agency, JICA, which has a substantially larger budget than the TDP budget.
With regard to the current status of TDP projects in China, because of recent events, TDP has temporarily suspended all new obligations. We have also suspended implementation of the three projects which were obligated this year but for which contracts have not yet been awarded.
Mr. GEJDENSON (presiding]. What did you do with those, the three?
Ms. FRAME. They are temporarily in suspension. We are not moving forward with the Invitation for Bids for contracts for those studies. With regard to the studies now being undertaken, in which a U.S. firm has a contract with a Chinese entity, we have done nothing to abrogate those contracts at this time.
You asked if the United States were to discontinue the TDP program, what effect this would have. We believe that this action could in fact have an impact on Chinese development goals. The studies we fund are feasibility studies on basic infrastructure projects that are part of the Chinese five-year development program. We are also aware that it is likely that the Chinese would turn to other donors to fund the studies which TDP would otherwise have funded.
You asked about the impact on U.S. business. We have projected that approximately $70 in U.S. exports are generated over time for every dollar TDP spends on planning services and feasibility studies in China. We have opened long-term markets to U.S. firms and introduced U.S. technology and products to China. There has always been, and continues to be, strong support for the China program and the commercial benefits it provides.
Therefore, we believe that suspension of the TDP program in China would indeed have some negative impact on the U.S. business community. This concludes my remarks. I will be happy to answer questions.
[The prepared statement of Nancy D. Frame follows:]
The Trade and Development Program, an independent agency established in 1980, assists in the economic development of developing and middle-income countries and promotes the export of U.S. goods and services to these countries, in China, TDP funds feasibility studies, trade-related training and other planning services related to major development projects which offer large potential export markets for V.S. firms. TDP-funded activities help position U.S. firms for follow-on contracts when these development projects are Implemented. TDP funds also play an important role in assisting U.S. firms to establish a market presence in China and to gain access to new long-term markets.
On a worldwide basis, the TDP budget has grown from $5 million in fiscal year (FY) 1980 to $25 million in FY 1989.
The TDP China program has grown substantially in the last several years, from $517,000 in FY 1983 to $6.7 million in FY 1988. Because of the tremendous potential market in China for V.S. goods and services, the China program has accounted for approximately 25% of the worldwide TDP program. TDP's cumulative program in China since FY 1980, which totals approximately $23 million, has already resulted In direct U.S. exports of over $250 million. Because major projects are generally implemented 3-7 years after the feasibility study is complete, the value of U.S. exports generated by TDP-funded activities is expected to increase substantially as more of the recent projects move from the planning stage to implementation,
TDP's program in China has assisted the Chinese Government In planning high-priority development projects throughout the country. TDP has funded feasibllity studies or consultancles on 49 projects located in 15 provinces and three centrally-administered municipalities. TOP has funded environmental studies including a solid waste management study in Shanghai and a toxic waste management study In Shenyang; studies on Infrastructure and industrial projects including coal gasification, conversion of oll-fired power