The Vice President's Remarks at Economic Forum Trade Session

TIME: 9:45 a.m.

(Vice President Cheney enters the forum.)

AMBASSADOR ZOELLICK: Thank you, Jagdish. And, as you can see, all the cameras were not just the nice comments, it's because the vice president was coming. Ann, I think you wanted to --

MS. VENEMAN: Well, Mr. Vice President, thank you for joining us. I think we have heard some very interesting comments about the importance of trade, about the benefits to jobs as we have had discussions from a diverse group of industries today, both small businesses and larger businesses and people from all spectrums of those businesses in terms of the kinds of jobs. So we welcome you and offer for you to make some comments, if you would like to join in the conversation.

VICE PRESIDENT CHENEY: Well, thank you very much, Ann. Let me, on behalf of the President, thank all of you for coming, for giving us so much of your time this morning. I don't propose to make any remarks. I think these sessions are best if we come and listen. I think all too often people meet with Washington officials and you get to listen to us and we never get to listen to you. So I think the best policy this morning will be for me to sit here and soak up the wisdom that you have got to offer. And we'll have the opportunity later on to get together as a group with the President. And I look forward to that session as well. So, again, thanks for being here.

AMBASSADOR ZOELLICK: Thank you, Vice President. I --

(Applause.)

AMBASSADOR ZOELLICK: We have been working our way through some of the global economy with some big companies. But I had a little chance to talk with Margaret McEntire on the way in here, who's got a small business but has got some global approaches to it. So you want to comment?

MS. McENTIRE: I'm a farmer and rancher too. So I kind of fall into a little of everything. I have a small company started in my garage ten years ago and now I'm in 40 foreign countries. I am exporting candy and spoil-type supplies and I'm importing -- I'm importing all the candy and floral-type supplies and I'm exporting franchises around the world. This month into China, a small island of Macronesia, in Spain, and in Romania.

So I'm dealing with a lot of interesting things and there's some facts and figures. The International Franchise Association would tell you there are about 800 of us. We have under 100 employees, generally, in the United States. Out of those 800 franchise systems, 400 of them are doing international business. How? And the vast majority of these, like Candy Bouquet International that's in Little Rock, we have just a small amount of employees here but worldwide I have around 5,000. So trade is very important to me as well as my farming trade.

The industry's actually a -- hit a trillion dollars in 2000, one trillion dollars. I'm not sure what farming is. I don't have those statistics. I couldn't get them from the farmers.

Royalty and other international payments are made back to us. So you see that the revenue stream is going both directions with the importing of goods and then the exporting of franchising, and those goods again. It creates additional jobs on both ends and economic development for workers.

The expansion of franchising is small business. And, if you had noticed franchising in the last ten years, you saw strip centers with no -- nothing but mom-and-pop stores. And now you see every strip center with one or two franchise companies. It's a monstrous way to -- to do trade, as Jagdish was talking about. We can do it both ways with this type stuff. And we have only got 400 of these in the United States that are doing international trade now. But those numbers have grown about 1,000% since 1990, which is unbelievable. So when it comes to franchise rules and regulations and laws, please be careful with us and help us along the way.

As far as being a farmer in Arkansas and a rancher here in Texas, I'm involved with rice and soybeans. As Barbara was talking about, she's got the pigs and I have got some cows. And there's a lot of exporting of those particular products. I'm very interested in what's going on in Cuba and trying to lift some sanctions there.

I appreciate all of the inter-twining work of both political parties with the farm bill. I would like to thank all of you for helping us with that. That will help the delta areas of Arkansas for certain.

AMBASSADOR ZOELLICK: Thank you. Mr. Vice President, as you can see, we have welcomed a range of views of things we like and a little problem with too. Maria --

MS. McENTIRE: We're exporting candy and Jim's exporting airplanes, so...

AMBASSADOR ZOELLICK: Maria is another entrepreneur whose created a fantastic business but has not only served local markets but also abroad; is that right?

MS. DE LOURDES SOBRINO: Yes. Thank you very much. Good morning. Good morning it's a great honor to be here today and participate and represent the small-business community. I would like to share some of my obstacles that we face and offer an opinion on how private companies and public -- can help grow businesses and create more jobs.

As you know, I have been blessed living in the United States and I'm living my American dream. Over 20 years ago, I immigrated from Mexico with a heart full of dreams to succeed in the United States. Soon upon my arrival as a consumer, I was surprised to learn that I couldn't find the ready-to-eat gelatin desserts very traditional in Mexico. Now we're talking about gelatins. Okay.

(Laughter.)

MS. DE LOURDES SOBRINO: So with the entrepreneurial spirit and equipped with my modest recipe, I had the opportunity to start Lulu's Desert Corporation, a very small company. I used to fill 300 cups of gelatin a day sold -- on consignment basis, I really started this business. Without knowing it, I created a new category in the refrigerated deli section under supermarkets in America.

Then I was very fortunate in 1989. I received my first SBA loan. With this loan I was able to go from a mom-and-pop operation into a medium manufacturing plant. Now I have to say, I'm a proud owner of a 64,000 square-foot plant manufacturing in the city of -- California. I was able to purchase this facility from Baskin-Robins two years ago and they have given me great credit terms. I currently employ over 100 people and distribute our company products around the country. They are sold in both the Hispanic market and general markets. We also export to Mexico and other countries.

Obviously, this achievement gives me great satisfaction, but I could not have done it without my hard-working team of employees, associated brokers, suppliers, distributors, financial institutions, and, of course, the support of our loyal customers that believe in my company.

We have a great future, of course, but we have great challenges too. Some of the obstacles that I believe small businesses like mine have, regardless of the steps followed are -- I'm going to concentrate on two today. First, the business motto that most retailers use is funded in large percentage by slotting allowance charges to manufacturers. And this makes it a little bit difficult (sic) our business. What this means is, a marketing money that manufactures need to pay in advance to the retailer in order to do business.

I understand this is very important, however, it make (sic) sometimes difficult, if not impossible, for small businesses owners to be able to finance the cash-flow needs that these charge causes in a fast-growing small company like mine.

For example, if I had the opportunity to sell our assorted gelatin desserts with our premium baked flan products in supermarkets -- in about ten supermarket chains at about $20,000 charges on slotting allowance per item, and if I have ten items of group per chain, I would -- it would certainly be a great opportunity for us. However, for my company to be able to place these products, I require an up-front disbursement of about $2 million in slotting charges.

First, imagine how many years I'd need to wait in order to start making some profit. Secondly, this represents almost an impossible goal to achieve; because it is impossible for a small company like mine to finance this type of cash-flow requirements. The result is we can't grow (sic) fast as we can.

I would recommend that we work together. The intent is to launch industry standards of excellence for creating profitable partnerships between key industry-sector corporations, financial institutions, and minority businesses to be able to come out with a solution to this issue.

The next issue that I would like to talk today is about international trade. And I'm very, very excited, first of all, of what's happening with the trade promotion authority. And I congratulate this administration on working on this approval. And this in turn will boost the local economies in all 50 states, provide jobs for millions of Americans whose work depend on exports.

I would like to say also that timing for women and minority entrepreneurs to get out of their own -- transition from local, regional, or niche market players to global market players has never been better. I would like to encourage the small manufacturers to change their mentality and to make a more global outlook. Exporting products can add more revenues to small businesses. I have done it for many years and it works.

Yes, I have made a lot of mistakes. I don't know it all. I tried to do it myself. However, there are many programs out there willing to assist. For instance, the US commercial service, from the department of commerce, the New Port office in California found me and they offered their products and expertise. Market research technitians are good and export/import bank (sic) can assist companies with an assurance to guarantee the collection of your goods.

My recommendation in export development is the -- that practical education to small businesses be provided in the field and be conducted by industry experts. Educating companies on the export process can be help boost their skills and create jobs. The small and mid-sized businesses can find a niche to exporting.

Also, in order to grow a business, the next single greatest challenge to minority and women in business is the lack of access to capital. Largely because of the lack of access to financing in general and specifically to equity capital, the small companies are still mistakenly viewed as high-risk investments. Access to capital is the number one traditional barrier to ensuring growth and success among all small businesses.

One more thing that I would like to mention is that Lulu's Desserts has just signed an agreement with the Indiana soybean industry. We're going to introduce our first soybean product and gelatin dessert. And we're going to start a new market in the health food industry.

So this is a great honor to be here. And I would like to say that small businesses are working very, very hard to support President Bush. And thank you for being here. Munchas Gracias, Mr. Vice President.

VICE PRESIDENT CHENEY: Thank you.

AMBASSADOR ZOELLICK: Every time I talk to Maria, it makes me a little hungry.

(Laughter.)

AMBASSADOR ZOELLICK: She promised samples for all of us. So now we have covered some desserts and farming and manufacturing. And we have somebody here from the software industry I want to come to. But I want to talk to you a little bit, again, on the import side. And Leytrice Henson has been working for Proctor & Gamble on this. Do you want to comment on this?

MS. HENSON: Yes, Proctor & Gamble markets in over 250 -- as a matter of fact, I think, 240 countries.

AMBASSADOR ZOELLICK: Microphone.

MS. HENSON: I'll start over. Proctor & Gamble markets over 250 grains in over 140 countries. As a matter of fact, we have on-ground operations over in about 70 countries. Nearly half of our employees -- half of our employees, which we have 106,000 employees, about 50,000 are those US based. Now we see the trend is about half of us are involved in some aspect of global workings of the company.

As we look at what has happened to us in terms of our revenue, over the last 12 years, we have seen about a 75% increase in revenues due to our call it exposure to international markets. And about 55% of our total revenues are generated outside the United States.

So as we look at it at Proctor & Gamble, it is important that our leadership in globalization, that we stay out in front. Because our competitors are not waiting for us. Whether they're internal competitors or external competitors, if we don't stay out in front of it, we're actually going to lose the game. So it's very important that we play on this field.

AMBASSADOR ZOELLICK: As a number of people have mentioned too, whether you're a big operation or a small one, one of the benefits of trade is lower-priced goods for families.

MS. HENSON: Right.

AMBASSADOR ZOELLICK: And we all worked hard in terms of tax cuts, but if you actually look at the benefit for the average American family of four, under the North American Free Trade Agreement, due to lower prices for goods coming in and add to the income is about $1,300 to $2,000 a year for a family or four. And, frankly, the global round we just discussed, if we could just cut those global barriers one-third, we'd add another $2,500 to that. So that's real savings for people around the world.

I wanted to come to Mr. Bentley to talk a little bit about the software. You started your company in the 80's and you have been global pretty much early on.

MR. BENTLEY: Bentley Systems provides engineering software for physical infrastructure, the roadways, and the plants, utility networks, and so forth. After being founded by my four brothers in the 80's, we have grown to be the largest company in the world dedicated to that. I think the most successful. We added 1,000 employees of our -- over the past seven years and half of those are high-paying job in the US. And we continue to grow even in these times. That's because half of our revenues are from overseas. And I might say this year, it's the larger half, if you like. And that's actually characteristic of our industry. Packaged software is an unsung tremendous trade surplus tangent for the US economy. In fact, our preliminary figures are that our packaged software industries trade surplus alone has grown from about $13 billion of surplus in '97 to about $24 billion in 2000, the latest year for which there's any figures. And that's larger even than agriculture. That's just an example of the significance of that and hear a credit for the favorable trade regime that softwares enjoy thanks to the work of Ambassador Zoellick and his predecessors.

China is already the 5th largest market for our company, for new licenses of our software in just three or four years. It's grown to that significance. Now while we have enjoyed a favorable trade regime in software, of course, the digital economy has evolved. We never can rest. By now, for our company, almost all of our software is downloaded. There is no physical deliverable. And there are new tariff threats on that new means of delivery. And I know that the administration will do what it can to continue the lead in having the digital economy be an example of growth through moderation in tariffs and regulation in general.

In fact, beyond the -- kind of the larger picture of benefit to trade in our company and our industry, I congratulate the administration for starting to get the word out on the benefits. And today's the start of two-way trade for the US at large. And, especially, as we face other parts of the world where despair that can be overcome with the seeds -- I don't believe -- of our US thinking can start to make global progress there. I, in particular, think that this is a great time even from the technology industry, where expectations have been brought to reality. A great time to recognize that investment precedes returns and a great time to rally around trade as a means for all of our industries to revitalize our growth and the industry -- software.

AMBASSADOR ZOELLICK: Thank you. I understand, Mr. Vice President, you have got a couple of other sessions. So you better go to those. I want to thank you. You're welcome to stay, if you'd like, since you're the boss.

VICE PRESIDENT CHENEY: No, I'm not the boss.

(Laughter.)

VICE PRESIDENT CHENEY: But I look forward to seeing y'all again, hopefully, together. Thanks again for being here this morning.

(Vice President Cheney exits the forum.)