NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2005_H.R. 4200_THE AVIATION INDUSTRIAL BASE AND DEPARTMENT OF DEFENSE ROTORCRAFT INVESTMENT PROGRAMS

SPEAKERS       CONTENTS       INSERTS

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98–056
2005

[H.A.S.C. No. 108–22]

HEARING

ON

NATIONAL DEFENSE AUTHORIZATION ACT
FOR FISCAL YEAR 2005—H.R. 4200

AND

OVERSIGHT OF PREVIOUSLY AUTHORIZED PROGRAMS

BEFORE THE

COMMITTEE ON ARMED SERVICES
HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION
TACTICAL AIR AND LAND FORCES SUBCOMMITTEE HEARING

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ON
TITLE I—PROCUREMENT
TITLE II—RESEARCH, DEVELOPMENT, TEST, AND EVALUATION

HEARINGS HELD
MARCH 4, 2004






TACTICAL AIR AND LAND FORCES SUBCOMMITTEE

CURT WELDON, Pennsylvania, Chairman
JIM GIBBONS, Nevada
W. TODD AKIN, Missouri
JEB BRADLEY, New Hampshire
MICHAEL TURNER, Ohio
PHIL GINGREY, Georgia
TERRY EVERETT, Alabama
HOWARD ''BUCK'' McKEON, California
WALTER JONES, North Carolina
JIM RYUN, Kansas

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ROB SIMMONS, Connecticut
EDWARD SCHROCK, Virginia
RANDY FORBES, Virginia
JOEL HEFLEY, Colorado
JOE WILSON, South Carolina
FRANK LoBIONDO, New Jersey

NEIL ABERCROMBIE, Hawaii
IKE SKELTON, Missouri
JOHN SPRATT, South Carolina
SOLOMON ORTIZ, Texas
LANE EVANS, Illinois
JIM TURNER, Texas
ADAM SMITH, Washington
MIKE McINTYRE, North Carolina
ROBERT BRADY, Pennsylvania
JOHN LARSON, Connecticut
STEVE ISRAEL, New York
JIM COOPER, Tennessee
KENDRICK MEEK, Florida
RODNEY ALEXANDER, Louisiana

Douglas Roach, Professional Staff Member
Bob Lautrup, Professional Staff Member
JJ Gertler, Professional Staff Member

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John Sullivan, Professional Staff Member
Robert Simmons, Professional Staff Member
Bill Natter, Professional Staff Member
Jesse Tolleson, Research Assistant

C O N T E N T S

CHRONOLOGICAL LIST OF HEARINGS
2004

HEARING:

Thursday, March 4, 2004, Fiscal Year 2005 National Defense Authorization Act—The Aviation Industrial Base and Department of Defense Rotorcraft Investment Programs

APPENDIX:

Thursday, March 4, 2004

THURSDAY, MARCH 4, 2004

FISCAL YEAR 2005, NATIONAL DEFENSE AUTHORIZATION ACT—THE AVIATION INDUSTRIAL BASE AND DEPARTMENT OF DEFENSE ROTORCRAFT INVESTMENT PROGRAMS

STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

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    Abercrombie, Hon. Neil, a Representative from Hawaii, Ranking Member, Subcommittee on Tactical Air and Land Forces

    Weldon, Hon. Curt, a Representative from Pennsylvania, Chairman, Subcommittee on Tactical Air and Land Forces

WITNESSES

    Bogosian, Joseph H., Deputy Assistant Secretary for Transportation and Machinery, U.S. Department of Commerce

    Flater, M.E. Rhett, Executive Director, American Helicopter Society International

    Shaffer, Alan R., Director, Plans and Programs for the Director, Defense Research & Engineering, Office of the Secretary of Defense

    Thurman, Maj. Gen. James D., USA, Director, Army Aviation Task Force; Tom Laux, Program Executive Officer, (Air Anti-Submarine Warfare, Assault and Special Missions) Department of the Navy; Rear Adm. Andy Winns, USN, Deputy N78 Aviation Requirements for Helicopters, United States Navy and Brig. Gen. Samuel T. Helland, USMC, Assistant Deputy Commandant for Aviation, United States Marine Corps

APPENDIX

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PREPARED STATEMENTS:
[The Prepared Statements can be viewed in the hard copy.]

Bogosian, Joseph H.

Flater, M.E. Rhett

Laux, Thomas E., joint with Rear Adm. Anthony L. Winns and Brig. Gen. Samuel T. Helland

Patrick, Suzanne D., Deputy Under Secretary of Defense (Industrial Policy)

Shaffer, Alan R.

Thurman, Maj. Gen. James D.

Weldon, Hon. Curt

DOCUMENTS SUBMITTED FOR THE RECORD:
[The Documents submitted can be viewed in the hard copy.]

QUESTIONS AND ANSWERS SUBMITTED FOR THE RECORD:
[The Questions and Answers can be viewed in the hard copy.]

Mr. Abercrombie
Mr. LoBiondo

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Mr. Roach
Mr. Weldon

FISCAL YEAR 2005 NATIONAL DEFENSE AUTHORIZATION ACT—THE AVIATION INDUSTRIAL BASE AND DEPARTMENT OF DEFENSE ROTORCRAFT INVESTMENT PROGRAMS

House of Representatives,
Committee on Armed Services,
Tactical Air and Land Forces Subcommittee,
Washington, DC, Thursday, March 4, 2004.

The subcommittee met, pursuant to call, at 9:05 a.m., in room 2118, Rayburn House Office Building, Hon. Curt Weldon (chairman of the subcommittee) presiding.

OPENING STATEMENT OF HON. CURT WELDON, A REPRESENTATIVE FROM PENNSYLVANIA, CHAIRMAN, TACTICAL AIR AND LAND FORCES SUBCOMMITTEE

Mr. WELDON. The subcommittee will come to order. This morning, the Tactical Air and Land Forces Subcommittee meets to receive testimony from Government and industry witnesses on three important subjects. But before I go through the subjects and introduce the hearing, I want to acknowledge, first of all, someone in the audience who is a close personal friend and someone who has been in the lead on aviation safety in this country. And that is Dick Healing.

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    Dick, would you rise? Dick was the head of aviation safety for the Navy and did tremendous work in helping us deal with some of our most difficult problems in aviation. And he is now on the National Transportation Safety Board.

    So we welcome you and appreciate your involvement in this hearing.

    And second, I would like to just, for the record, mention that four members of this committee and three other members just got back from a delegation I led to Libya, the second delegation to Libya in 30 days, in what I would call one of the most historic events. And if I had to equate it, I would equate it with the downing of the Berlin Wall and the day that Boris Yeltsin stood on top of the tank outside of the Moscow White House and said that communism was dead. Because on our second day in Sirte, the capital city or the city where Qadhafi lives and where the Congress of Libya was meeting for their 27th anniversary session. Six hundred delegates from all over the country were assembled in the auditorium and 100 representatives of other countries, including all the African nations, the West, the Far East, and Europe. I represented the U.S. with our delegation and had a chance to address the assembled elected officials from Libya about the new course that Qadhafi has announced for his country.

    And 10 minutes later, Qadhafi spoke. And in a speech that most of us sat listening to with our mouths open, he totally and completely renounced the past 20 years of Libyan involvement in terrorism and documented each and every specific instance where Libya had been involved. From the Sandinistas to the Irish Republican Army, from the radical Palestinian groups to terrorist groups throughout the world and Africa, he documented that Libya played a very active role in everything from Pan-Am 103 to other incidents that occurred during that time period.

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    And his statement to the Libyan people, which was broadcast live over their television, was that he was announcing that they were wrong, that the only thing that had been accomplished during that time period was the isolation of Libya and its people. And the hurt that had occurred during that time period was more on the Libyan people than anyone else.

    And that was the reason why he came to a conclusion that Libya should not only totally and completely renounce terrorism and open up its doors for the U.S. and the world community to work together for transparent understanding of terrorism, but that Libya would immediately give up all of its weapons of mass destruction—which they have begun to do—and to rejoin the world community. And those other multinational groups that Libya had refused to belong to, he announced that they were joining. In fact, on our trip, they even talked of Libya's desire to become an observer at Helsinki to oversee the implementation of the Helsinki Final Act, which guarantees human rights.

    So what an amazing turnaround for a leader, identified perhaps as much as anyone else with terrorism in the world, to in front of his own people totally renounce terrorism and say that his country had been worse off because of what had occurred and encouraged everyone—including all the assembled Arab nations, the African nations, nations from the Far East; the leadership of the Chinese Congress was there from Beijing—to tell them that they should follow the direction that Libya was taking and rejoin the world community in peace.

    And then he in fact embraced America and said, ''If the Americans really hated us, when we kicked them off of our soil, when we shut down—'' I guess it was Wheelus Air Force Base in, what year was that? 1969. We had a major military base there and the Libyans shut it down and said ''Leave.''

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    He said, ''If they really wanted to, they could have stayed and they could have had a war with us and probably easily defeated us.'' ''But,'' he said, ''they did not do it. They left peacefully.'' And we left on amicable terms.

    And he said, ''So the Americans do not want to dominate us. They never have. And we are sure that, as a new aspiring democracy, if we are attacked, they will come to our aid.''

    So it truly was a landmark event. And I was happy that our committee, both Democrats and Republicans from this committee, were able to be there and share a part of this major new turnaround in the world, which was absolutely, unbelievably, overwhelmingly dramatic.

    And thank goodness we had a reporter there who documented all of this. We were able to get him in with us, Ken Kimmerman. And he has been reporting daily on these stories of what transpired.

    But the world needs to understand the significance of Muammar Qadhafi's complete turnaround. And I am glad this committee was a part of that.

    Our topic today is threefold: the views and implementing action, where appropriate, from representatives of the Departments of Defense and Commerce on the recommendations contained in the November 2002, ''Final Report of the Commission on the Aerospace Industry;'' second, the view of the American Helicopter Society International provided by its executive director on the health of the rotorcraft industrial base and the issues of primary interest to the rotorcraft industry; and three, the rotorcraft programs and the related fiscal year 2005 budget requests from witnesses from the Departments of the Army and Navy.

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    The Final Report of the Commission on the Future of the Aerospace Industry was submitted to the President and Congress in November of 2002. That report made some striking, broad conclusions in assessing the national aerospace industry. These conclusions include ''the critical underpinning of this Nation's aerospace industry are showing signs of faltering.''

    The Nation stands ''dangerously close to squandering the advantage bequeathed to us by prior generations. The Federal Government is dysfunctional when addressing 21st century issues from a long-term, national and global perspective.''

    And finally, ''The Nation is at risk in the future if the United States continues to proceed without a policy that supports aerospace capabilities.''

    The commission notes the number of aerospace suppliers has dropped from 70 in 1980 to five prime contractors today, 600,000 scientific and technical aerospace jobs have been lost in the last 13 years and the number of aerospace scientists has dropped from 145,000 in 1986 to fewer than 25,000 today.

    Further, the Aerospace Industries Association reports that U.S. market share of global commercial sales dropped from 72 to 52 percent between 1985 and 2000, aerospace profits are at their lowest level in 8 years and the aerospace trade surplus has experienced a 32 percent drop since its high of $41 billion in 1998.

    The commission report also concludes that U.S. aerospace companies are disadvantaged in the international marketplace due to foreign government market intervention in areas such as subsidies, tax policy, export financing and standards.

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    The Departments of Defense and Commerce, working through the interagency process, have had over a year to review and consider the report. We hope to hear from the representatives of the Departments of Defense and Commerce on whether they agree with these general conclusions and other specific conclusions and recommendations of the commission and if so, what has been done or is contemplated as corrective action. We also hope to hear from our rotorcraft industry association witness on his assessment of the commission's views and whether in his view adequate action is being taken to provide our aerospace industry an economic level playing field in international commerce.

    Our Department of the Army and Navy witnesses will update us on their rotorcraft programs. We are particularly interested in the details of the restructured Army aviation program, the joint V–22 program and the status of the V-XX program.

    We have two panels: the first, representing the Departments of Defense and Commerce and the American Helicopter Society International, to discuss the Commission on the Aerospace Industry report and the rotorcraft industrial base; and the second, representing the Department of the Army and the Department of the Navy, to discuss their rotorcraft programs.

    On the first panel, representing the Department of Defense, Mr. Al Shaffer, Director for Plans and Programs for the Director of the Defense Research and Engineering Office, Office of the Secretary of Defense; representing the Department of Commerce, Deputy Secretary Joseph Bogosian; and representing the American Helicopter Society International is the Executive Director, Mr. Rhett Flater.

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    Our second panel will be comprised of: Major General James Thurman, Director of the Army Aviation Task Force; Dr. Thomas Laux, Program Executive Officer, Air Anti-Submarine Warfare, Assault and Special Missions. Dr. Laux is accompanied by Rear Admiral Andy Winns, Deputy Aviation Requirements Officer for Helicopters, and Brigadier General Sam Helland, U.S. Marine Corps.

    Thank you to all of our witnesses for joining us. We look forward to your testimony.

    Before we begin, I would like to ask my good friend from Hawaii if he has any opening remarks. I know he was under the weather today. And I appreciate him coming out, in spite of not feeling well.

    Thank you, Mr. Abercrombie.

    [The prepared statement of Mr. Weldon can be viewed in the hard copy.]

STATEMENT OF HON. NEIL ABERCROMBIE, A REPRESENTATIVE FROM HAWAII, RANKING MEMBER, TACTICAL AIR AND LAND FORCES SUBCOMMITTEE

    Mr. ABERCROMBIE. Mr. Chairman, thank you very much. I wanted to make sure that I got here to greet your return.

    Mr. WELDON. Thank you.

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    Mr. ABERCROMBIE. I want to compliment you on your yet another chapter in the efforts that you have made on behalf of this Nation and certainly on behalf of the Congress, in making sure that the word ''oversight'' is taken literally. And we can always count on your expertise in that regard.

    And I regret the fact that I could not accompany you this time due to previous commitments. However, I do want to indicate that I believe that I can state with some authority that you were not, as a result of the cancellation of the Comanche, engaged in sales overseas. Okay. That was good.

    Mr. Chairman, if I could just make a couple of comments along that line before we begin because that obviously is an issue that we are going to have to deal with. The cancellation of any major military platform or the redirection usually—and in this instance, it is not different, I believe, Mr. Chairman—triggers these discussions about reallocations of funds, what the implications are going to be for industry because of the size and depth of the money commitment, the people commitment, the time commitment.

    There are serious and long-term consequences. I am sure our first panel—I compliment you, by the way, on the panels, Mr. Chairman—are aware of that as much or more than anybody else at the present time.

    And so I have just some points that I want to raise that I hope you will have in mind as the testimony takes place or as the questions evolve and the answers come forward. And perhaps you can even address these things in the course of events as you see fit.

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    Already, there is widespread speculation in the Congress and certainly in the press and elsewhere that because of the enormous consequences fiscally and otherwise for the various companies involved that—I am not going to say political considerations because that is too easy a dismissal of the seriousness of the issue—but that decisions are going to have to be made with respect to the future, up to an even including arguments over who is going to get or how the contracts will proceed with the Marine One helicopters. I got kidded earlier this morning about that, that we may have to get one for you, Mr. Chairman. With your trips, we may have to allocate one for Mr. Weldon.

    But it is a serious issue nonetheless. I want to make certain, Mr. Chairman—and I am sure our panel members who have this recommendation power and perhaps even decision authority—that we keep our competition going, that we are not just going to spread contracts out in order to try and make up for something. I am operating on the assumption, Mr. Chairman, that the decision on the Comanche was made for good and sufficient purposes with respect to the strategic interests of this country, number one, and decisions made on the basis of what the likely outcome was determined to be by those in authority and having the obligation to make that decision.

    What I do not want to see happen—and I am sure I reflect your views and that of the rest of the committee—is that we end up in a situation then where we have to figure out how to take care of everybody. I think we have to apply the same exacting standards to decisions as to what we do regarding helicopters now as we did in determining whether or not we had this cancellation take place.

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    I hope that we are not going to start from a premise that individual corporations need to be accommodated. As much as there is a human temptation to want to do that because of the anxiety or the difficulties that may be experienced by people, nonetheless, it seems to me, Mr. Chairman, that it is vitally important now that we retain our standards, that we retain our objectivity, that we move forward on a basis where the public can be sure that the decisions we are making here on the committee reflect the best judgment and the best information and the best perspective that we can get, both from our witnesses and from the testimony that comes to them as a result of these hearings.

    And I am going to be asking some questions along the line, I hope, that are pertinent to that. Thank you for giving me so much time. But I thought it was necessary to get that on the record.

    Because I know what your standards are. And I just want to make sure that everybody understands that that is the process that we are going to follow here.

    [The prepared statement of Mr. Abercrombie can be viewed in the hard copy.]

    Mr. WELDON. Thank you, Mr. Abercrombie. You are always eloquent.

    And I did not mention the Comanche. But as the chairman of this subcommittee, I could have focused this whole hearing on Comanche because the plant that was going to manufacture the Comanche is right next to my congressional district; in fact, the bulk of the employees there are constituents of mine.

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    And so if I took a parochial interest, that would have been a focus. But I understand the problem with that program.

    In fact, I was mentioning on the way over to Libya to some of my colleagues from this committee that, in my first term in Congress, my first meeting as a member of this committee was in Bill Dickinson's office, then the ranking Republican. And the topic was the Comanche.

    And as the Army sat in the room, Bill Dickinson said, ''Will you guys get your act together on the Comanche? We just do not know what you want.'' That was 18 years ago—18 years ago.

    After six restructurings of the program, we wonder why the program was cancelled. After $6 billion of investment, we wonder why.

    And I am not blaming anyone. I am blaming a system that needs to be looked at and needs to be more fully understood so that we do not repeat that in the future.

    And so that is my comment about the Comanche, that I understand why we ended up being where we were. And unfortunately, my constituent base took the bulk of the heat in terms of that cancellation. But that sometimes happens in this city because of tough decisions we have to make.

    So I thank you for your comments. And I welcome the opportunity for you to provide a special aircraft for me for future trips to other foreign, distant lands.

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    With that, I would like to proceed with the first panel——

    Mr. ABERCROMBIE. I guarantee, you will not find one that has a fuel supply that will get you all the way to Hawaii. [Laughter.]

    Mr. WELDON [continuing]. And then go into questions for that panel and then take testimony from the second panel, which will then be followed by questions.

    And Members are also being torn. There are a number of competing conferences and meetings that are taking place.

    So I do appreciate the Members that are here. I understand you have other commitments. But I appreciate as much time as you can spend for this very important hearing.

    All of the witnesses' prepared testimony will be accepted for the record without objection. And I can guarantee those in the audience and our witnesses, every Member of Congress is vitally interested in where we are in terms of aviation and specifically in terms of rotorcraft.

    So Mr. Shaffer, the floor is yours. And again, your statement is a part of the record.

STATEMENT OF ALAN R. SHAFFER, DIRECTOR, PLANS AND PROGRAMS FOR THE DIRECTOR, DEFENSE RESEARCH & ENGINEERING, OFFICE OF THE SECRETARY OF DEFENSE

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    Mr. SHAFFER. Thank you, Mr. Chairman, members of the committee. Thank you for the opportunity to appear before you today to provide an update on the progress made by the DOD research and engineering program in acting on the recommendations made in the Walker Commission Report. While the report had nine broad recommendations, I want to focus on the progress made by the DOD science and technology—or S&T—community in addressing this report.

    Before addressing specifics of our S&T program, I will provide the DOD position on the applicable recommendations.

    Recommendation 1: ''The U.S. should pioneer new frontiers in aerospace technology, commerce and exploration.'' The Department agrees that the aerospace industry is critical to maintaining U.S. military supremacy in the 21st century and has increased the investment in air platform and space platform science and technology by over 60 percent since the fiscal year 2002 budget request.

    Recommendation 2: ''Transform the U.S. air transportation system as a national priority.'' In the summer of 2003, the Secretary of Defense demonstrated his commitment to this effort by appointing Secretary Roche as the DOD lead in working with National Aeronautics and Space Administration (NASA) and the Departments of Transportation, Homeland Security and Commerce to establish an air transportation system joint program development office.

    Recommendation 3: ''The DOD, NASA and industry should partner in innovative air and space technologies, especially in the areas of propulsion and power.'' Over the past two years, under the leadership of Dr. Ron Sega, the Director of Defense Research and Engineering, the DOD and NASA established the National Aerospace Initiative Coordination Office to synchronize research for high speed and hypersonic flight, space access and space technologies.

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    Recommendation 4: ''The Nation should adopt a policy that invigorates the aerospace industrial base.'' This recommendation focused on acquisition policy. And the DOD continues to maintain stable science and technology funding for aviation and aerospace technology, which supports the DOD's recently revised acquisition process that encourages spiral development and technology insertion.

    Recommendation 5: ''The Federal Government should establish a national aerospace policy and promote aerospace by creating a governmentwide management strategy. The National Science and Technology Council is establishing an aerospace science and technology subcommittee with representation from all cabinet level agencies to address intergovernmental issues.

    Recommendation 8: ''The Nation should immediately reverse the decline in science and technology trained U.S. aerospace workforce.'' The decline of the science and engineering workforce, including the aerospace workforce, is an issue of concern to the DOD. U.S. science and engineer production as a whole is declining, while the production of scientists and engineers in the rest of the world is growing.

    In order for the S&T aerospace workforce to grow, we believe at least two things must happen. There should be exciting projects to spark interest. And there should be incentives for young people to enter a scientific field.

    In the DOD and NASA, there are cutting edge aviation projects to attract young researchers. Projects such as the Air Force/Defense Advanced Research Projects Agency (DARPA) Mach 7 single engine demonstration missile and the Mach 12 Army hydrogen-based missile demonstration are both world-class and exciting.

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    Over the past year, the DOD has increased both the total number of and annual stipends for graduate science and engineering fellowship programs. Since aerospace engineering is a key investment area for the DOD, the aviation industry should benefit.

    We are continuing to examine our future workforce needs to ensure that we will have the best technical talent available for national security research and development (R&D).

    The final recommendation of the commission report advised the Federal Government to significantly increase its investment in basic aerospace research. As mentioned previously, we have increased investment in aviation and space-related research by over 60 percent since the fiscal year 2002 budget request, with a shift in content.

    Whether supporting the National Aerospace Initiative or in support of the Army's Future Combat Systems, the Department has a number of efforts that could lead to generational enhancement in aviation. Additionally, the National Aerospace Initiative has adopted some existing programs that continue to develop cutting edge technologies.

    Under the National Aerospace Initiative, several projects should dramatically enhance aerospace capabilities. The integrated high performance turbine engine technology program has increased the operating parameters of the turbine engine to support next generation military and civilian engines for both fixed wing and rotary wing platforms.

    While the versatile and affordable advanced turbine engines—VAATE—program has focused on the affordability and manufacture of follow-on turbine engines, the Navy HyFly and RATTLRS programs will fly a Mach 6 ramjet and Mach 4 turbine for missile application.

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    There is similar innovation in the Future Combat Systems of the Army. The Army and DARPA are collaborating on two unmanned rotorcraft demonstrations: the Unmanned Combat Aviation Rotorcraft (UCAR) and the A–160 Hummingbird. Both are pressing the rest of the world at integrating rotorcraft, communications and material sciences.

    The list could be much longer. But in general, the DOD S&T program in aviation is one of growth and exciting possibilities for both air and space capabilities.

    The Department is opening new regimes of speed, autonomous operations, power and airframes needed to move forward with industry into the next golden age of flight.

    In closing, thank you for the opportunity to address the committee on the DOD S&T program's response to the Walker Commission Report. Aerospace research and systems have been and will continue to be at the forefront of the DOD's needs.

    I would also like to point out that the Deputy Under Secretary of Defense for Industrial Policy has additionally submitted a statement for the record that addresses some of the industrial policy issues in the Walker Commission Report.

    I look forward to answering your questions on the DOD S&T aviation program. Thank you.

    [The prepared statement of Mr. Shaffer can be viewed in the hard copy.]

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    Mr. WELDON. Thank you very much for your testimony.

    Mr. Bogosian.

STATEMENT OF JOSEPH H. BOGOSIAN, DEPUTY ASSISTANT SECRETARY FOR TRANSPORTATION AND MACHINERY, U.S. DEPARTMENT OF COMERCE

    Mr. BOGOSIAN. Good morning, Mr. Chairman, Congressman Abercrombie and distinguished members of the committee. On behalf of the U.S. Department of Commerce, thank you for the opportunity to share our views today. In my capacity at the Department, I focus on civil aerospace competitiveness issues.

    Mr. Chairman, in a snapshot of the past 5 years, just over 80 percent of U.S. helicopter production served military needs.

    Mr. WELDON. Hold the microphone a little closer? Thank you.

    Mr. BOGOSIAN. And in that context, the Commerce Department has helped the commercial portion of the industry competitiveness and advocacy issues. I was asked to provide a high-altitude context for this hearing by discussing some of the larger industrial issues confronting all U.S. manufacturers and then some aerospace-specific global competitiveness issues.

    I would like to start by reviewing some critical factors regarding the U.S. manufacturing sector as a whole. From June 2000 through January 2004, U.S. manufacturing jobs decreased by 17 percent.

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    U.S. manufacturing was further struck by the bursting of the technology bubble, accounting for the biggest stock market crash since the Great Depression, and the corporate accounting scandals. Aerospace manufacturing in particular was additionally hit by the SARS epidemic and the tragedy of September 11th.

    The President acted decisively on national and economic priorities and his actions strengthened job creation. And his policies are working.

    The U.S. economy grew at an 8.2 percent clip in the third quarter of 2003, the strongest growth in 20 years, and continued at an over four percent growth rate in the most recent quarter, while the unemployment rate was beaten back to 5.6 percent, below the average of each of the decades of the 1970's, 1980's and 1990's.

    Mr. ABERCROMBIE. Mr. Chairman, excuse me, I am not quite sure what this has to do with our hearing. Can we get to the meat of the hearing, please? I can get that on Fox. I do not need that. Let's go.

    Mr. BOGOSIAN. Sure. That is as a baseline because we are responding at the Department of Commerce to the overall challenges of U.S. manufacturing. All manufacturers are being——

    Mr. ABERCROMBIE. I expect you would. Let us get to the meat of the hearing.

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    Mr. WELDON. The gentleman may proceed.

    Mr. BOGOSIAN. Thank you. Actions at the Federal, state and local levels of government on our manufacturing policy recommendations will directly help the U.S. aerospace industry. Aerospace generates hundreds of thousands of high technology, high paying jobs and, as America's largest net exporter of manufactured goods, helping to address our trade imbalance by more than any other industry sector.

    In 2003, the industry recorded a trade surplus of about $27 billion. A strong aerospace industry is crucial to U.S. economic and national security and for continued technological innovation and advancement.

    Europe is focused on military and civil aerospace strategies in its Vision 2020 report, the STAR–21 report and their six framework research programs. European governments have a direct financial interest in the well-being of their companies because they either own significant but decreasing shares of the companies, have contributed subsidiaries or have exposure through loans.

    These practices do not exist in the United States and thereby create an imbalance in the competition between U.S. and European companies.

    In the rotorcraft industry, the French-German Eurocopter and the Italian-British firm AgustaWestland are the world's first and third largest producers, respectively. Eurocopter, according to the company, captured 45 percent of new civil and military helicopters ordered globally in 2003, contrasting sharply with Bell, Sikorsky and Boeing, which captured only 14 percent, 10 percent and three percent respectively.

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    Eurocopter also claims to hold a 48 percent share of the U.S. civil helicopter market, which includes civil defense procurement. Many of the issues confronting the U.S. aerospace industry were addressed by the Aerospace Commission report that Mr. Shaffer referred to.

    The Commerce Department is participating actively in the Administration's initiatives on issues identified by this report. We are working with the Federal Aviation Administration (FAA) in the area of modernizing the U.S. air traffic management system. And a number of offices in the Commerce Department are contributing economic and analytical expertise to that effort.

    In the area of workforce development—and Mr. Chairman, I know you have taken a leadership role on this through the Congressional Caucus—Commerce is working with the Department of Labor and an industry committee to address the industry's needs in this area.

    In the area of export licensing, Commerce is working with the Departments of Defense and State to balance national security and economic security needs and keep sensitive equipment out of the hands of terrorists and rogue nations, while strengthening trade ties with our allies.

    In the area of aeronautical R&D, my staff is working with an interagency group to review federally funded R&D and facilitate its dissemination to the private sector. Commerce is most involved in the concerns for free and fair trade in aerospace products. To an extent not seen in many industries, governments are a significant factor in the aerospace marketplace as customers and as stakeholders.

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    Roughly 72 percent of total U.S. aerospace industry output is procured by Federal, local and foreign governments. For many governments, including those of Europe, aerospace manufacturing is a strategic industry.

    In terms of global markets, the governments of non-U.S. aerospace manufacturers intervene in the marketplace in various ways to support their domestic producers. This intervention can involve subsidies to produce new products, the creation of technical standards that favor domestic products, the offering of incentives to aircraft purchasers to boost the sale of domestic products and tax and export financing programs that assist their producers in reaching markets abroad.

    Given these actions, the Commerce Department is focused on the critical issues impacting the competitiveness of our aerospace industry. Similarly, U.S. industry is challenged to work closely with the U.S. Government to help address issues that arise.

    One of the key responsibilities to meet this challenge is monitoring foreign government policies and pursuing appropriate action to promote a strong U.S. aerospace industry. We are already working on a number of our manufacturing initiative policy recommendations, including negotiating the elimination of trade distorting subsidies, promoting global use of U.S. technical standards, reviewing dual-use export controls and developing a new Office of Investigations and Compliance and an Unfair Trade Practices Task Force to help enforce trade agreements and combat unfair trade practices.

    These recommendations are contained in a report we released in January, ''Manufacturing in America.'' It is available at manufacturing.gov. And it takes a holistic view on the challenges affecting all manufacturers and makes policy recommendations of steps that are highly critical to address manufacturers' needs.

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    We are taking the steps necessary to maintain the strength of the U.S. industry in global competition. Thank you. I look forward to the dialogue today and beyond.

    [The prepared statement of Mr. Bogosian can be viewed in the hard copy.]

    Mr. WELDON. Thank you, Mr. Bogosian.

    Mr. Flater.

STATEMENT OF M.E. RHETT FLATER, EXECUTIVE DIRECTOR, AMERICAN HELICOPTER SOCIETY INTERNATIONAL

    Mr. FLATER. Mr. Chairman, Mr. Abercrombie and members of the committee, my name is Rhett Flater. I am the Executive Director of the American Helicopter Society.

    Since much of my testimony today relates to national defense, I would like to just add that I am a former Marine Corps aviator and a helicopter pilot. And I served in Vietnam during 1967 and 1968.

    I am appearing today before you to discuss the state of the United States rotorcraft industrial base. But more specifically, I want to comment on the U.S. Army's recent decision to terminate the Comanche and the impact that that decision is going to have on this industrial base.

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    Let me say first that ours is a relatively small industry. Bell Helicopter, Boeing Integrated Defense Systems and Sikorsky Aircraft's combined sales in 2003 were less than $6.4 billion. They employ 25,000 people in or near Fort Worth, Texas, Philadelphia, Pennsylvania, Mesa, Arizona and Stratford and Bridgeport, Connecticut.

    But in the terms of our industry's importance to this Nation's national security, I want to say upfront that helicopters, with the ability to take off and land vertically in remote environments, are critical assets in fighting asymmetric modern wars. And I would say that when the V–22 Osprey is introduced, that will be equally true of tiltrotor technology.

    These are the only vehicles capable of providing a practical and affordable solution to military needs for utility transport, for cargo, for combat search and rescue, reconnaissance, surveillance and close-in attack. They are critical to 21st century military transformation efforts, which are focused on developing lighter and more mobile and more lethal and more agile military combat capabilities.

    This industrial base consists of these primes that I just mentioned. But I would be remiss if I did not mention the engine companies that support us: GE Aircraft Engines up in Lynn, Massachusetts; Honeywell, formerly AlliedSignal, which is out in Phoenix; Rolls-Royce, formerly known as Allison, which is up in Indianapolis.

    And suppliers: like Kaman Corporation, up in Bloomfield, Connecticut; Hamilton Sundstrand in Windsor Locks, Connecticut; Goodrich down at Charlotte, North Carolina; Lord Corporation, Erie, Pennsylvania; Smiths Industries in Grand Rapids.

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    And of course, then the big systems integrator houses that are so vital to our future since, to tell you the truth, more than 50 percent of the value of most helicopters these days are systems, a remarkable departure from the practice back when I was in Vietnam, where 95 percent of the content of my CH–46 Sea Knight Helicopter was actually the airframe and the engine. Today, it is more than 50 percent systems. So we depend on Lockheed Martin in Owego and Orlando and BAE Systems in Vermont and Northrop Grumman in Baltimore and Honeywell and others.

    Let me go back in history just a short ways and tell you that during the 1960 to 1980 timeframe, some time ago, the United States government used to invest really large sums in basic rotorcraft research. And they did this through vehicles like the Army—NASA Joint Agreement on Rotorcraft Research Collaboration.

    Investments in engine technology during the 1970's produced something called the T700 engine which powers the Black Hawk and the Apache. And this engine was so far ahead of its time that it gave the United States military medium lift capabilities unmatched by any other countries for many, many years.

    And this is a very critical point in testimony today. The once strong technical base for rotorcraft declined during the 1990's as government investment dwindled. Now here is an example. And I have distributed a chart that I hope you have with you.

    [The information referred to can be viewed in the hard copy.]

    Mr. FLATER. The Army's 1984 investment in aviation science and technology was $251 million in 2004 dollars. Now 20 years later, when the Army is every bit as needful of vertical takeoff and landing aircraft as it ever was back in 1984, that has declined to only $115 million or more than 55 percent.

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    I would like to give you another example, a broader measurement of aviation expenditures. The Army RDT&E budget for aviation in 1984 was $7.9 billion. In 2003, it had declined to $2.3 billion or a factor of three.

    Now with NASA's determination in 2002 not to invest further in rotorcraft R&D, government's total investment has been reduced by half. NASA has restored funding to the level of $15 million in 2004, but this is a really small fraction of what it used to be.

    Now I am not criticizing Sean O'Keefe or Fred Gregory or Dr. Vic Lebacqz. I think they are outstanding leaders over at NASA. They are doing the best they can. But their resources are just too limited.

    Now compounding this problem is that NASA is in the process of closing really important infrastructure for the design and development of new aerospace products. I will give you an example. The National Full Scale Aerodynamics Complex, known as the NFAC, this is the 40x80 foot and the 80x120 foot subsonic wind tunnels located out at Moffett Field at Ames.

    These were closed on May 16, 2003. We cannot get into them anymore.

    And yet, we are wholly dependent in this industry on access to full scale testing. And so is the fixed wing industry.

    In addition, this Nation's only crash safety complex down at Langley was closed September 30 of 2003. And so we have a scenario today where NASA, because of its serious financial problems, is locking down the very infrastructure that this entire aerospace industry must have in order to be competitive in world markets.

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    It is the same infrastructure that this industry needs to have to be responsible to you, Mr. Chairman, for your national security needs and your responsibilities.

    Now I think this point has already been made by Mr. Bogosian, so I am going to move through it very quickly. But while the United States is reducing its investment in rotorcraft research and test and evaluation infrastructure, just the opposite is happening in other countries.

    The European Union has doubled its investment in aeronautics. All that testimony is in my written testimony. I do not need to go through it in great detail.

    But I would tell you that you have in Europe some pretty tough competition, really good companies: Eurocopter and AgustaWestland. And these companies are out there competing in world markets and making just gigantic investments in science and technology, in research and development.

    And they are competing. And they are beginning to win contests against our products abroad.

    And I am going to tell you, sir, that part of the reason is we are not making the infrastructure investments and we are not making the science and technology investments that these countries are making.

    I think I have touched on this, so I will just mention it briefly, but the long-term cooperative efforts between NASA and the Department of Defense in helicopter research, especially the 1969 Army—NASA joint agreement, these efforts are just in terrible turmoil right now.

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    If this trend is going to continue that we are seeing today, I think the United States Defense Department—and it pains me to say this—may eventually become dependent on non-U.S. suppliers for its future mobility requirements.

    Now if that happens, I will be honest with you, the Department is probably going to get a pretty good product from Europe. But the jobs of more than 26,000 people at Bell, Boeing and Sikorsky, not to mention a greater number who work as subcontractors, are going to be at risk.

    And there is no reason why, without a proper investment, we cannot be a world leader in this field. We have the core competencies. We have the history. We have the products in the field today.

    I would like to just direct a couple of remarks to the termination of the Comanche and what that is going to do for us. This is a program, as you know, that was conceived about 20 years ago. And I will be honest with you too, it has been performing really well in recent tests.

    But the Army has decided that we are dealing with a different world environment today. And maybe stealth and low observables are not quite so important as they used to be back in the 1980's.

    And so it is also decided that they have to transform Army aviation and reinject some new life into it and move out pretty quickly. And the only way they are going to be able to do it is to cancel the Comanche.

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    This is a grievous blow to my industry. But let me tell you, my companies—Bell, Boeing, Sikorsky and the rest of the industrial base—stand arm-to-arm in lockstep with the Army on this decision. It is a very, very tough decision for all sides.

    But they are doing the right thing. And we support what the Army is about to do.

    Now we understand that, as part of the high level decision process that was made by the Army, including briefings to the President and the Defense Secretary, that the termination of the Comanche is going to enable the reallocation of the $14.6 billion that was going to be spent for the Comanche into other Army aviation efforts thru the fiscal year 2004 and 2011 timeframe.

    And these funds will be used to underwrite procurement of additional helicopters—Chinooks, Apaches, Black Hawks—the transitioning of some Comanche technologies like fly-by-wire and common cockpits—you know, this is good stuff—the purchase of some light utility aircraft that the Army badly needs and about 368 or so armed recon aircraft. These will be off-the-shelf procurements. I do not expect that they are going to be competed and researched and all that kind of thing.

    Mr. ABERCROMBIE. I did not hear the last statement you made.

    Mr. FLATER. These are going to probably be off-the-shelf procurements, Mr. Abercrombie. And by that, what I am trying to say is these are not going to be protracted acquisitions.

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    I suspect that the Army is going to call up the manufacturers and say, ''What do you have that meets this requirement?'' And they are going to tender. And they will make a down-select based on that.

    So whether this happens—and I am talking here about the reinvestment of the $14.6 billion and the importance of that to Army aviation—whether it is allowed to happen in this very difficult election year will depend on the continued support of the Administration and the Department of Defense. But more important, it is going to depend on the will of this Congress.

    And I am here to tell you today that the society strongly endorses the Army's plan. And it urges Congress to fence off the entire $14.6 billion investment which would have been made in Comanche.

    Let me just mention a statement made by my chairman, who is Dr. Robert G. Loewy down at Georgia Tech. He is the Dean of Aerospace Engineering there.

    He wrote to me the other day and he said, ''Rhett, if there are sound reasons for man in space as part of our program of exploration, there must be still more reasons for manned airborne systems, considering the limitless abilities of an enemy to adapt to whatever technologies we develop. Experienced warfighters know that flexibility and our ability to respond is always essential.''

    I just want to commend to you the editorial that appeared earlier this week in Aviation Week and Space Technology, where they said, ''The decision to terminate Comanche is a high-stakes gamble on the Pentagon's part. And riding on the roll of the dice will be the future of the United States helicopter industry.''

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    ''While the Pentagon's plan calls for a slew of programs, most are upgrades or refurbishments. These alone will not provide the engineering challenge to keep a robust helicopter industry alive.''

    ''The United States, in recent years, has shown little support for its helicopter industrial base. To minimize the risk to the investor base, a new development should be started quickly. And the Army needs an intra-theater transport to move future combat systems and equipment.''

    So looming on the horizon is a requirement for heavy lift, something that can carry the Future Combat System, something that can——

    Mr. ABERCROMBIE. I am terribly sorry.

    Mr. FLATER. Yes, sir?

    Mr. ABERCROMBIE. You said the Army needs what kind of investment? I could not hear you.

    Mr. FLATER. I apologize. The Army needs a very heavy lift transport that can carry this Future Combat System that the new Army is going to revolve around and depend upon. And we do not have a helicopter today, made in America, that can perform this task.

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    So this is looming out there. And that is another reason why I believe we should be making a significant investment in science and technology.

    So our industry stands by you. We are responsive. We have can-do senior managers and proven management teams. And I think we are ready to respond to national security needs as they come along here.

    A couple of recommendations: first, Congress and this committee should support the Army's plan to plan to redirect the approximately $14.6 billion originally slated for Comanche to meet current and future Army transformation needs.

    Second, the DOD and NASA should be directed to make further investments in basic research—6.1, 6.2, 6.3. Third, given the importance of transforming the U.S. military to become more mobile and more agile—a requirement in fighting 21st century wars—the DOD should fund private industry to design, develop and fly a series of innovative vertical take-off and landing (VTOL) prototype aircraft, possibly heavy lift.

    And fourth, this committee should pay heed to implementing the recommendations of the Commission on the Future of the U.S. Aerospace Industry.

    Mr. Chairman, Mr. Abercrombie, members of the committee, I really appreciate your permitting me to talk for so long and appreciate your attention this morning. Thank you very much, sir.

    [The prepared statement of Mr. Flater can be viewed in the hard copy.]

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    Mr. WELDON. Thank you, Mr. Flater. We thank each of you for your statements. And as I said, they are all entered into the record.

    We will begin with some questions. And I have a couple to start off.

    First of all, I am not as optimistic as I thought I heard coming from our Administration witnesses. I tend to share the feelings of Mr. Flater. And I am gravely concerned.

    I am gravely concerned because what had been an industrial base of four major helicopter manufacturers shrunk to three with Boeing's acquisition of McDonnell Douglas. And I am going to ask each of you to respond to this, your best guess.

    My best guess is we are going to end up with two because the amount of funding for rotorcraft, both in the research and the acquisition area, is not enough to support three large companies. Now that is going to be a decision based on the business interests of those companies.

    But I can tell you—and you all know this as well as I do, and certainly you do, Mr. Flater—that there has been significant discussion about a further shrinkage of our industrial base in this area.

    And that is extremely troubling because that means more jobs that we lose in America. And I am going to guarantee you, Mr. Flater, that as the chairman of this subcommittee, one of my top priorities is to make sure that that money being saved from Comanche is not siphoned off for every other program under the sun.

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    And I can just see the saliva flowing out of the mouths of some people who see that as a bill payer for other priorities. And we have to make sure that that money, which has been allocated and we have been guaranteed further commitments as to what the specifics of that will be, that we are going to be looking at that extremely close.

    A couple of questions. I guess, first of all for our friend, Mr. Shaffer, you mentioned that the agency is establishing, I believe, the commission that was called for in the report at this current time. Was that not your statement you made, ''is establishing?'' The S&T subcommittee is establishing?

    Mr. SHAFFER. Under the National Science and Technology Commission, yes, sir.

    Mr. WELDON. Right.

    Mr. SHAFFER. Formally, the subcommittee is going to be under both the Committee on Homeland and National Security and Committee on Technology. The charter has been written. There has been a preliminary meeting of the principals on this particular committee.

    It is just for science and technology. It is out of Dr. Jack Marburger's office in the Office of Science and Technology (OSTP). But there is the interagency or intergovernmental committee being formed to address the issues on aviation S&T.

    Mr. WELDON. Why did it take 14 months to do this?

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    Mr. SHAFFER. Sir, I have no answer for that. I cannot tell you why it took 14 months.

    Mr. WELDON. That is a question somebody has to answer.

    Mr. SHAFFER. Sure.

    Mr. WELDON. I mean, our industry is in peril right now. As someone who represents a district right next to a major manufacturer and has seen this, I mean, to wait 14 months while the pencil pushers decide to finally follow through on a recommendation that you are now agreeing needed to be done to me is a little bit ridiculous.

    And I would hope you would take the message back that we are happy they are establishing that now. But where have we been for the last 1.5 years while the European community has been knocking our socks off and while we are getting closer and closer to the verge of having another rotorcraft or another aircraft manufacturer leave the shores of this country?

    A question for Mr. Bogosian. You mentioned issues of ownership and subsidies and loans by the foreign governments.

    What specifically are they? Because I can tell you I am a good friend of our allies. But I want to know the specifics of where the French and where the Germans are subsidizing. Whether it is AgustaWestland or whether it is Eurocopter, I want to know that.

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    Because if they are doing that unfairly, I want to go after them. But we cannot do it with just generalized statements—and I am not saying this at you personally—of ownership, subsidies and loans. What are those subsidies? And what are those loans?

    And the Europeans have just taken market access against us for certain actions that we have not done—according to the World Trade Organization, if I am not mistaken—and actually have imposed some. Well, let's play the same game back with the Europeans. But we have to have the specifics so that we in Congress can respond. So can you clarify that a little bit more about exactly what are the European and other countries doing in this area to allow these companies to grow so dramatically?

    Mr. BOGOSIAN. Sure. Taking a step back to your question, the fact that the European Union was being formed, I think, was an action-forcing for European countries to take a fresh look at all of their R&D expenditures and take a fresh look at what priorities did they have to set, in terms of their industry support, through the European Union.

    So take the best of what the different member states have been doing, consolidate them and come up with a very strong, unified proposal—program—to help their aerospace industry. They did this back in January of 2000 with their Vision 2020 statement.

    They set it out clearly. They said, ''Our goal is to become the uncontested world leader in aeronautics by 2020.''

    They followed up with the STAR–21 report, which is very similar to our Aerospace Commission report in its content. And then now they have announced the Sixth Framework, is what they call it, which proposes $15 billion for European Commission-sponsored research activities during 2003 to 2006.

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    There is a shift away from funding specific projects toward supporting generic activities and a change in philosophy from the Fifth Framework, which emphasized economic and social returns, to the Sixth Framework, which again focuses on building a European research area.

    So that is in terms of the institutional changes that they made and the goals that they set for themselves and the strategies to follow.

    In the meantime, there are issues like $4 billion of launch aid for the A–380. Now there is launch aid and we are also using our airport improvement monies to make the changes at our airports that support the A–380.

    Right now, we are fighting the battle with Rolls-Royce because Rolls-Royce historically, in their development of engines, has received royalty-based loans from the British government. These are paid back based on the company's assessment of its royalties from the specific product development program that they got the loans for.

    So right now, we are fighting on that front to say, ''All right. We know the 77 competition is about to come up. And Boeing is going to have to make decisions for the 77. You have to stop giving these sweetheart government loans to a fully functioning, mature aerospace company.''

    So at the Department of Commerce, what we noticed—what the Secretary noticed—was we came in and, I think, for about a little over 30 years, maybe 25 years, the focus on domestic competitiveness went away. There was a reorganization in the 1970's. There used to be a domestic industry office and an international industry office.

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    Somehow, along the way, that became the International Trade Administration. And therefore, the staff's mission at the Department of Commerce became: look at international trade barriers.

    So what the Secretary asked is: well, what about competitiveness as a key challenge, which is a much bigger set than the subset of just international trade barriers. So with the reorganization that we are undertaking right now, which was appropriated for in the Omnibus Bill, we are creating offices like the Industry Analysis Office, which I think this is an office which could really help on the subjects that we are talking about today.

    Business economists would staff that Industry Analysis Office. And they would basically cost out policy issues and regulatory issues.

    They would provide a cost-benefit analysis so that if you are considering legislation and you want to know the impact on business between Option A versus Option B in writing that legislation, that office will be able to provide you the research you need to make your decisions.

    Same thing with regulations. The Office of Management and Budget (OMB) in our report has been tasked to create an inventory of all existing regulations.

    This is by way of: what can the U.S. Government do right now to take cost away? Our businesses, our manufacturers, tell us there is the international side of the ledger and there is the domestic side of the ledger.

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    Domestically, the government imposes costs on our manufacturers and makes them less competitive. So not only are they facing the challenges that they are facing from Europe with their research focus, but they are also facing challenges from us through rising health care costs, which is something that all manufacturers have really focused on, litigation costs, energy costs and regulatory costs.

    So I think it is a very cohesive, holistic way that we have to approach the challenges that we are facing from Europe. There is the R&D side of the ledger. There is the international side of the ledger. And then there is the cost side of the ledger.

    So we really have to focus on our manufacturers' needs.

    Mr. WELDON. Well, first of all, it is rather shocking that we have not had this capability within Commerce to actually understand what the Europeans have been doing specifically to knock our socks off in some of these competitive situations. That is a shock to me that we have not already had that. And I appreciate the fact that that is being stood up now.

    But I want to say, as someone who works closely with our allies and has supported their involvement in programs like Joint Strike Fighter, where the Brits and the Italians and the Australians have come up and wanted to get in early on. But as someone who advocates free trade, I am sick and tired of having the European community, through whatever means, both the upfront R&D and the subsidization through other means, make it impossible for our companies to compete.

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    I mean, I have even heard horror stories where the French will tell their military, ''You cannot buy American products. You must buy French.''

    Well, we want to know about that. We want to know the specifics. Because if we know the specifics, then we will take action.

    We do not have to play the game of kissing up to our European allies if they are unfairly making the playing field such that our companies in no way can compete. And that leads me, Mr. Flater, to your comments.

    And in this area of research, I think administrations, both Democrat and Republican, both should be embarrassed because we have paid lip service to this issue. We cut the R&D 6.1 through 6.3 account lines by 25 percent all through the 1990's. And it has not gotten any better in the 2000s. And I do not care who is making the case.

    It is like we have fought the battle. I am also on the Science Committee where, as you know, I am the second ranking Republican on the committee.

    And we have fought the battle because NASA requested zero money—zero money—for research. Yet they have the mandate.

    In fact, Mr. Flater, you are aware I proposed legislation to take it away from NASA. And only because Sean O'Keefe, being a decent, good guy went to the Army and said, ''We will use $15 million of your money.''

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    But my staff support tells me that that is really not $15 million. When you apply the overhead taxes of NASA, it comes out to about $8 million.

    What a joke. I mean, why aren't we being honest? We are not increasing the R&D investment in these areas. We are going the opposite way.

    So we are losing on the R&D side. The Europeans are beating our socks off because they are making heavy investments in R&D and we are not doing beans about it in the next several years' budget. And I am going to ask you to respond, whether you agree or not.

    And on the other side, we do not understand the subsidies they are providing. So our industries are losing all over the place.

    No wonder they are doing joint ventures with Agusta. No wonder they are doing joint ventures with the Europeans. I would too.

    If our government does not respond, go over there and join with them. You will get a better deal. You can benefit with their subsidies, benefit from their research and then come back and we will just do the high-tech stuff in America and no longer manufacture.

    Mr. Flater, what are your observations?

    Mr. ABERCROMBIE. Mr. Chairman, before he answers, I just want to assure Mr. Flater that I bet he is really glad that you are actually agreeing with him.

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    Mr. FLATER. I was just going to say, Mr. Abercrombie, to the chairman, I was going to say, ''Mr. Chairman, you said it better than I can say it.'' And I endorse what you have said 100 percent.

    Mr. ABERCROMBIE. I say that to him all the time, Mr. Flater. [Laughter.]

    Mr. FLATER. But that was the substance of my testimony, Mr. Chairman. And I again want to point out, if you look at either NASA or the Army or the Department of Defense, we are dying for lack of investment in research and development.

    The investment that was made in 1984—and I have given you those numbers—was about triple the investment that is being made today. And we wonder why we are losing our industrial base.

    And what I am saying, I think that the Department of Defense and NASA, the Administration, Congress, this committee needs to take a close look at this issue. And Mr. Chairman, thank you for supporting this.

    Mr. WELDON. Mr. Flater, do you envision that, if we continue on this trend, that there will be a further consolidation of the U.S. manufacturing base?

    Mr. FLATER. Undoubtedly, this will inevitably happen. Now I am one of these people that have been saying for the last several years, there will probably be a contraction from three to two.

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    I was around when we went from five to four and four to three. And yet, I have been wrong. And frankly, the three major companies, they want to buy each other. I guess they are eternal optimists, perhaps.

    But the real point is that this industry is not going to be competitive within 10 years if someone does not get out there and make the needed investments and if we do not save NASA's critical RDT&E infrastructure. If that happens, in 10 years, this industry will be severely marginalized in world markets.

    And when you call them up over there at Bell, Boeing and Sikorsky and say, ''Give us a hand. We need a new product,'' they are not going to be quite as responsive as they might otherwise be.

    Thank you, Mr. Chairman.

    Mr. WELDON. The thing we have to keep underscoring, this is not about free markets. This is not about being protectionist. We are not advocating that.

    What we are saying is that when our companies are allowed to compete fairly, when their competitors in Europe are not allowed to subsidize unfairly—whether it is through loans or through special financing arrangements or governmental ownership, whatever it is—when our companies can compete, they can win.

    But it is our government, the advocate of free and fair trade, that in the end is handicapping our very companies. And that is what has to stop because our companies cannot win in this situation. And the Europeans are going to continue to beat our socks off.

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    Mr. Abercrombie.

    Mr. ABERCROMBIE. Thank you, Mr. Chairman. I continue to be very happy about the fact that I have never been or never will be a free trader. [Laughter.]

    I want to say too to everybody that Mr. Weldon and myself are very intense a lot of times. I just want you to know it is never personal. It is relentless, but it is never personal.

    To me, it is just globalization. Mr. Bogosian, I give you credit, you have a tough job, at least talking to me right now because I have no sympathy for you at all—again, not personally. I have lots of sympathy for you.

    But what I mean by that is that you are not going to hear me complaining about what Europe is doing. Hell, they have a United Europe.

    We keep telling them they have the United States of Europe now. They are putting all their stuff together. And they are going to try and do the best they can. I am not going to weep tears over that.

    The question is what we do, not what they do. And as for whether the government invests or it does not invest, I mean, are we not going to take—in fact, Mr. Flater makes it very clear. By the way, I appreciate your testimony, Mr. Flater, in this.

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    Mr. Flater makes very clear in his testimony that we are—I believe you call it ''migration'' of Comanche technology is going to go into other helicopters, right? It is not as if we spent all this money on the Comanche and then we threw it in an ash heap someplace.

    There are all kinds of technical aspects, from manufacturing aspects to actual individual technology advances that are transferable or are able to be migrated to other helicopters. And we invested in that. That was the taxpayers' money.

    And I do not think you are going to score many points, Mr. Bogosian, by saying that health care costs are causing us not to have better helicopter competition. I mean, the last time I looked, even the Europeans have universal health care. So I do not think we can reach into that one.

    And if it is regulations, that is just a standard dodge. So I do not think we are going to score any points with ourselves or anybody else on that.

    Nobody is going to weep any tears for the United States about unfair competition, particularly when you talk, at one point in your testimony, about strengthening our ties with our allies. I mean, you cannot have it both ways.

    Now me, as I say, I am not a free trader; never have been. I do not know what the concept means. I have never seen it anywhere in the world. It certainly does not exist in the United States, except theoretically.

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    So in that context then, it seems to me what I would like to focus on then is what, in fact, are we going to do now? Let me explain it this way: has the Administration made a position?

    And maybe Mr. Shaffer can answer this. Are we going to continue to have as a policy this—I guess it was synergy when it started, Mr. Chairman—but this collaboration between NASA and the Department of Defense? Or is the Department of Defense going to take over its own integrated—what I would call an integrated research, testing and procurement system?

    Because if you are going to keep doing it with NASA, you are dreaming. I do not care whether Sean O'Keefe is a saint come to Earth. He has an institutional obligation to NASA. And their interests are antithetical to what you want to accomplish.

    I want to be—what is the opposite of a free trader? I do not know. I am a troglodyte. I am looking at Charlie in the back of the room. He knows what I am. I am a troglodyte in this.

    I think the Department of Defense ought to operate to advance the strategic interests of the United States. And you invest what needs to be invested, based on the judgment of the Congress, to advance that.

    I do not see how you can have NASA and the Army, let alone the other services, do this. If you want to integrate in the services to do testing, like wind tunnels and so on, with the Air Force and the Army or whatever it is, and the Marines, vis--vis helicopters and that, that is okay because that is what we have the joint chiefs for.

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    I realize I have gone on at some length to try to establish that. But the reason is that the chairman has put forward a fundamental issue here as to whether or not we have to reorient what we do with respect to research and development in aid and assistance of advancing helicopter capacity in this country.

    Before we ever get to the free trade idea, we have to decide: are we going to be able to build the helicopters and be able to do it in the first place? So is the Administration position that—and I was not quite sure, Mr. Shaffer, from your recommendations—is the Administration position to continue the existing arrangement between NASA and the Department of Defense with respect to these issues that have been elucidated so far?

    Mr. SHAFFER. Yes, sir. Certainly for the short term, because of the infrastructure that has been built up at the three NASA facilities.

    Mr. ABERCROMBIE. Why can't we transfer them to the DOD?

    Mr. SHAFFER. I have not seen the full up costing. But the estimate is to regenerate or recreate those test facilities on DOD locations——

    Mr. ABERCROMBIE. Excuse me, Mr. Shaffer. You mentioned the word ''regenerate'' because they are closed?

    Mr. SHAFFER. They are closed or they are not—large wind tunnels are not something that you can just pick up and move. So we would have to build a new wind tunnel at another location.

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    Mr. ABERCROMBIE. Why?

    Mr. SHAFFER. The estimate——

    Mr. ABERCROMBIE. Wait, wait, wait, wait.

    Mr. SHAFFER. Yes, sir?

    Mr. ABERCROMBIE. Help me. Help me here. Why? Why would I have to transfer them? Just transfer who owns them?

    Mr. SHAFFER. Okay. That is a different issue. I thought you were asking should the Department of Defense take the mission and move it. The other estimates of cost, if we were to lease the NASA facilities, the estimates would cost around the order of $55 to $60 million a year just to operate those particular facilities.

    Mr. ABERCROMBIE. We have $400 billion in the Defense Department.

    Mr. SHAFFER. Yes, sir. Yes, sir. And that is something, there was an agreement last, I believe it was April, between General Kern, the commander of Army Materiel Command, and NASA to leave the current facilities open, to use it and then to come up with a plan of action how we are going to deal with the NASA unilateral action to close.

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    It will take some shifting and some reallocation of resources. There is no doubt, from a research and science and technology perspective, that we need the large wind tunnel.

    NASA Ames does have the only full scale wind tunnel in the Nation. It is a special wind tunnel that has special properties for rotorcraft. That is something the Department absolutely needs as part of its overall research and development program for the future of rotorcraft.

    I cannot tell you how we are going to get there. But we do recognize the fact that we have to have it.

    We have a 20-plus year agreement with NASA. We would like NASA to honor that commitment. But one way or the other, I do not see the future of military rotorcraft going forward without a full scale wind tunnel.

    Mr. ABERCROMBIE. Well, you have been kind on this time, Mr. Chairman, just a moment or two. You heard my opening statement, Mr. Shaffer—and maybe Mr. Bogosian too, but probably less, it is less in your area—but what about now?

    And you have mentioned this yourself. Because of the Comanche closing and we have this question of the V-XX or I ought to call it Marine One, can you give assurances here on the record now that we are not going to change our procurement policies with respect to standards and so on?

    I know there is a lot of emotion involved in this. There is a lot of anxiety as to who is going to get the contracts and how they are going to work and all the rest of it.

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    If we follow what Mr. Flater spoke of and what the chairman has indicated is his—and I assure you is my—desire as well to fence off this money or do what needs to be done to make sure that the money does not migrate like some of the technology. That does not obviate, in my judgment, the necessity then of applying standards with respect to the decisionmaking as to who gets what contracts, if we take the politics out of it.

    Mr. SHAFFER. Yes, sir. You asked if I could guarantee with assurances. What I would like to do is tell you——

    Mr. ABERCROMBIE. A guarantee, I do not ask you to do that.

    Mr. SHAFFER. Yes, sir. Yes, sir. What I would like to do is tell you the direction from Acting Under Secretary Wynne to the decision to terminate the Comanche. Secretary Wynne told the Army that they had to come back within 90 days to provide an implementation plan for the overall Army aviation modernization.

    Now that is a very important date because that is from the time of that letter to the time that the Army has to report their modernization plan. That gives us time to make sure that the budgets are aligned and we do have the proper research and development and balanced program within the Army and the department for the 2006 budget submission, in addition to the 2005 budget amendment.

    So I think it is very important that Secretary Wynne has directed the Army to come back with a plan—a detailed plan—for overall aviation modernization. And as far as the details of that plan, I think the Army is still working that out. General Thurman is on the second panel. He may be able to address it.

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    Mr. ABERCROMBIE. In other words, just for the record now, what you are saying is that—and I made a reference specifically to V-XX because I think that is a case in point. I could name others. In fact, Mr. Flater has named a whole series of things in his testimony that needs to be addressed.

    You are going to apply the same standards. You are going to pick the best helicopters. You are not necessarily going to say we have to take care of somebody. It is going to be tempting.

    Mr. SHAFFER. Yes, sir. Yes, sir. And I want to be careful because——

    Mr. ABERCROMBIE. Yes, you do.

    Mr. SHAFFER. Yes. Yes. The Department absolutely is committed to getting the very best technology out into the hands of the warfighter. But the overall Army aviation modernization plan will include some of the modernization of the current fleet, to include force protection of the current aviation fleet.

    Mr. ABERCROMBIE. And I will finish with this. Excuse me, Mr. Chairman. You have been very kind. And I apologize to the other Members on this.

    You see, if you would have said to me, ''We are going to make sure that an American company gets this and there is going to be competition. We will make our investments and so on and so forth,'' you would not hurt my feelings.

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    But if we are talking about getting the best—and let me tell you, the Europeans are building a better helicopter—then you are going to have to deal with it, regardless of the reasons why they are doing it. Now I do not think that is the case. I think we can do that here.

    In fact, I am a little worried that we may be getting—I want to make sure that the companies that you may be dealing with in the United States are not necessarily going to get a contract and the next thing I see happening is that they have done a little bit of this transfer technology and a little bit of this outsourcing and a little bit of this globalization and free trade operation. And all of a sudden, we are building these things in Europe.

    And as you said, Mr. Bogosian, they have health care over there. Even despite that, they may want to build it over there anyway.

    I want to see it built in the United States. And I want to see the competition within the United States go to the company that has the best helicopter. And if we have to invest our funds in that, I would like to see that happen.

    That is the reason I am asking the question. I am really concerned that we are going to end up doing this. And the next thing, we see it being built in Europe.

    Mr. SHAFFER. I understand the question. And the commitment from the Department S&T program is to deliver the best possible technologies from our laboratories, from our product centers, to protect our young forces that we put out in the field.

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    Mr. ABERCROMBIE. Thank you very much.

    Mr. SHAFFER. Yes, sir.

    Mr. ABERCROMBIE. Thank you, Mr. Chairman. Thank the other Members.

    Mr. WELDON. Thank you.

    Mr. Israel.

    Mr. ISRAEL. Thank you, Mr. Chairman. I would like to pick up on what the chairman and the ranking member have been addressing with respect to level playing fields and competitive disadvantages. And sometimes it works the other way.

    One of the findings of the Commission on the Future of the U.S. Aerospace Industry was that we should be reviewing export licensing processes and technology transfer restrictions. I was in India early in January. And there is obviously an acute anxiety in our country about outsourcing.

    And the Indian officials that we met with were very defensive about outsourcing. But one of the things that the Indian defense minister said to us was that they would love to be able to do business with America's defense industry.

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    Right now, they are buying 70 percent of their defense products and technologies from Russia, which may be appropriate. But they said that they would love to explore co-production opportunities with the United States, would love to consider procuring from the U.S.

    Only—in their words, not mine, in their words—antiquated technology transfer restrictions and export license restrictions prevent them from doing that. So let me just throw out this jump ball. And any one of you can answer.

    Do they make a point? Should we be reviewing some of those export restrictions, technology transfers, to help the U.S. aerospace industry find new markets, including markets in India, which we all know is now the world's largest democracy and, as I said before, is procuring 70 percent of its defense technologies from Russia?

    Mr. WELDON. Will the gentleman yield on that?

    Mr. ISRAEL. I would love to.

    Mr. WELDON. Because that is an excellent question. And I would add, Mr. Bogosian, to the question of the gentleman, specifically talk about Boeing's attempt to sell Chinooks to China for the last 10 years and what you are doing about that.

    You want to talk about free and fair? We have the largest imbalance of trade with China. Yet China wants to buy these aircraft.

    And yet, my understanding is we are not selling them to them. So that adds to what the gentleman is saying. So talk about that also.

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    Mr. BOGOSIAN. Sure. I just want to assure everyone that there are recommendations in the manufacturing report beyond health care. And one of them is about export controls.

    This is a very important issue. And the Commerce Department really gets crossed wires sometimes because it is seen as, well, you must be the one just focusing on the commercial interests and you could care less about national security. That is not so.

    We work with our companies to make sure we understand exactly what their problems are with regard to export licensing. If there is export licenses that are just taking far too long for the nature of the license application into the State Department, let's say, we will work with our State Department colleagues and make sure that they understand what the company's intent is and try to help the company and the State Department come to some sort of understanding so that the export licensing process could be less burdensome than it could be.

    We have all heard about nightmare stories about the same company putting in an export license request into the State Department. Somehow, it gets lost in the paperwork, so they have to put in a second request. And the two requests come back out with different answers.

    We are working right now on this issue. We are working with our companies. We are working with the State Department and within Bureau of Industry and Security (BIS) in terms of dual-use technology, in order to make sure that—how do we meet the economic interests while balancing the national security interests?

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    It is a challenge we do have each and every day. And we try to do our best in terms of how can we help all the parties understand and get through the process with less pain than they otherwise do.

    Mr. ISRAEL. Other than the occasional bureaucratic foul-up or red tape that may not be necessary, is anyone taking a look and reviewing all of the different export controls and licensing restrictions that were formulated in a different era and relations between the United States and India and trying to figure out what may not be necessary anymore?

    And second, if you would respond specifically to the chairman's question about China.

    Mr. BOGOSIAN. With regard to your question, Mr. Israel, I would like to follow up with you after this hearing and discuss with you further on this issue.

    Mr. Chairman, I am sorry, if you could——

    Mr. WELDON. Well, it gets to the heart of what Mr. Israel is saying, and that is that we want to have free and fair competition. We complain about the subsidies of other governments in producing similar products that we cannot compete with.

    But there is another fact here and that is the ability of our companies to sell technology overseas. Now I sat on the Cox Committee that for aeven months looked at technology that we sent to China.

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    And you want to see something that will blow your socks off, it was everything from state separation technology to Bernard Schwartz's Loral technology, we gave the Chinese. But we cannot sell them helicopters because the Commerce Department says it is a sensitive technology.

    Well, cut me a break. The high-speed supercomputers we sold to China are at their military research facilities designing miniature nukes. If that is not sensitive, I do not know what is.

    So you are stopping helicopters. But back in the 1990's, we sold high end supercomputers. And we sold and transferred state separation technology.

    The whole basis of the Cox Committee was to look at the specific technologies that we—the Commerce and the State Department—gave to the Chinese that damaged our security. The vote was nine to zero that technology that we gave to China was not stolen; it was given to them.

    And yet we have a product like helicopters that is still on the munitions list, that we sell to companies that the Boeing Company cannot sell to China. What is the reason why that still is languishing, while Boeing cannot compete in the marketplace because of these other subsidies from overseas, yet they cannot get into a marketplace where maybe they can legitimately sell helicopters?

    Mr. Flater, you may want to add to this.

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    Mr. BOGOSIAN. Mr. Chairman, this is a very important issue that we are working on and I would very much like to meet with the committee afterwards discuss.

    Mr. WELDON. Is it classified?

    Mr. BOGOSIAN. Yes.

    Mr. WELDON. Rhett, do you want to add to this?

    Mr. FLATER. I just want to emphasize that the point that Mr. Israel is making—that you, Mr. Chairman, are making—is a very important point to our industry. We are inhibited from selling to many markets overseas.

    I know of a shipment of Sikorsky Aircraft that went to China many years ago that are shut down. They were there in China for search and rescue purposes for the Chinese people, to work their mountains, their hot, heavy, high kind of search and rescue requirements.

    Those aircraft are shut down. Sikorsky could not legally ship any parts or support to them.

    So yes, Mr. Chairman and Mr. Israel, we are indeed denied markets because of the nature of our export licensing requirements that I believe are creatures of another era, perhaps. And I do endorse your suggestion that the government take a second look.

    Mr. WELDON. None of us want to sell sensitive technology overseas. We debated whether to sell Aegis technology to the Japanese. And we did it under a very tightly controlled process so they would not have the end capability of that.

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    I cannot for the life of me understand why we cannot sell helicopters. It just defies my—and this has been going on for years.

    Mr. Israel, you raised a very valid point. Do you have some other points you want to raise?

    The gentleman from Connecticut is recognized, Mr. Larson.

    Mr. LARSON. Thank you very much, Mr. Chairman and Congressman Abercrombie, for this hearing. Let me say that I completely embrace and share the comments of our chair and ranking Member.

    And I have enormous respect for our chairman, who has been the salient voice on this committee and throughout the Congress with respect to serving both on the Science and Armed Services Committee and his almost myopic focus on the industrial base, especially as it relates to aerospace, here in this Nation and the lack of funding therein. And also, his passion and understanding of just how vitally important these core industries are to this country, not only from a national security point, but from a humanistic standpoint, in terms of the jobs and technological know-how that are being, in fact, lost and, in many respects, as is the case I think that is before us today, perhaps lost forever if we do not right this ship and turn it around soon.

    Mr. ABERCROMBIE. Mr. Chairman, would the gentleman yield for a moment?

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    Mr. WELDON. Sure.

    Mr. ABERCROMBIE. I just wanted to indicate that you will notice that, again and again, the only time you get complimented as chairman, it generally comes from the Democratic side.

    Mr. WELDON. I am in deep trouble then, I guess. [Laughter.]

    No, you are my good friends. And I appreciate those comments.

    Mr. LARSON. The people that are in deep trouble are the ones that do not heed his advice. And unfortunately, in that case, it means that it is the American worker that ultimately suffers.

    And we could debate ad infinitum the ramifications of globalization, but it seems pretty clear to me as someone who has served on both science and armed services over the last six years, that while the efforts with respect to globalization and free trade may be noble, we are running headlong into nationalism.

    And the nationalistic tendencies of the European Union and all the other countries that we face do not square with the United States Congress. That is why this committee, through its chairman, Duncan Hunter, is also focused on a ''Buy American'' initiative.

    And in many respects, I can understand and see how that flies in the face of commerce and free trade. But truly, back in our districts—and Mr. Flater mentioned Sikorsky. He mentioned Kaman. He mentioned Hamilton Standard.

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    And add to that the numerous small businesses that those once-large companies outsourced initially in their own states and across this Nation. And now those small companies see being outsourced further abroad.

    Now people call that globalization. In my district, they call it a pink slip. It is unemployment.

    And this chairman will fight with his dying breath to make sure that this money is fenced off, to make sure that this money does not get gobbled up. But my experience also has been, in this committee, with that kind of money available and with other interests that exist, even in spite of his best efforts, by the time this gets to the conference committee, that money will be gone.

    And yes, Mr. Flater, you said that everybody was supportive and locked arms behind the Army with regard to the Comanche because it was the right thing to do. Let me tell you from my perspective, the silence is deafening.

    Would it be that they were also going to lock their arms together to make sure that that amount of money gets fenced off and then is appropriately invested in next generation development, American-made, American-engineered, with American labor. You know, I could lock arms with them on that fact.

    But I have been around here only a short time, but long enough to know the reality of what is going on here. And the silence is deafening because when your largest customer tells you, ''This is the way it is,'' that is the way it is.

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    So now we face this problem with our industrial base, our manufacturing base. And what troubles me deeply is that in 90 days, I will be waiting with breathless anticipation for everyone to be locking arms about the investment that is going to take place in American-made, American manufactured and American engineered rotorcraft and investing back in this industry.

    Somehow, however, I am a little suspicious. I am little suspicious because I have already heard of the calls going in—and as Mr. Weldon pointed out—from our valued allies talking about their needs and their overarching concerns in this global economy and how we need to reach out and make sure that we continue to have valued allies across the world.

    And while they value their workforce and will deny in competitive situations American companies from going forward, we stand silent over here in this country. Well, this is one committee that will not sleep.

    And we have the voice of an ardent and strong chairman of this subcommittee and the chairman of this committee. And all of us will be locking arms around this issue and watching, so that we can further prevent the outsourcing of American jobs overseas.

    I wish I could lock arms with you, Mr. Flater, and all the others. But there are no assurances—but I would like to hear them—that in 90 days, that we will be seeing a proposal emanating from the Army that focuses on the next generation, the next large sum of money in research and development that all of you have so eloquently said is needed.

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    And where will it go? And as Mr. Abercrombie said, how will it be competed? And who ultimately will receive that money?

    Care to respond? I am happy to hear it.

    Mr. FLATER. I share your view entirely. My customer has made a very tough choice, Mr. Larson. And it is my job to support my customer.

    And the reason I am here today is I am frightened to death about this $14.6 billion. And I think you are making my point. We have to fence this money off somehow or this industry is going to not be responsive the next time you call.

    Mr. WELDON. Will the gentleman yield?

    Mr. LARSON. Yes.

    Mr. WELDON. The Army is going to be appearing on the next panel. So you will have a chance to put that question as to when and how exactly we can expect to see a total and complete delineation of those dollars.

    Mr. LARSON. And minimally, as well, from the Department of Commerce, I would like to see, you know, we are always concerned about the companies—rightfully so. What about the displaced worker? What about that core competency that, once gone, we cannot replace?

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    They can replace it over in Europe because they are reinvesting there and they are keeping that core competency there, because their Vision 2020, as you point out, is to be globally dominant. And they recognize that when you are wed to quarterly returns and shareholder satisfaction here in this country, unless this government steps up and makes the investment, it is not going to happen.

    Mr. WELDON. I thank the distinguished gentleman.

    Mr. Abercrombie.

    Mr. ABERCROMBIE. Could I just have a follow-up question on that?

    Mr. WELDON. Sure, if Mr. Turner agrees.

    Mr. ABERCROMBIE. This is such an important question. And I am sorry, Mr. Bogosian, but I think it kind of falls on you more than on Mr. Shaffer on this question.

    What is the Administration's policy? Because after all, the Army is still going to reflect the Secretary of Defense and the Secretary of Defense is going to reflect the Administration policy.

    Whatever plan comes forward here, can we have an assurance on the record here now that it is going to go to American companies that are not going to ship the jobs overseas with respect to whatever development takes place or whatever procurement game plan comes forward? Because you are going to have a tough time keeping $14.6 billion if any member here thinks that that money is going to migrate to jobs overseas.

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    I am talking about companies in this country producing helicopters shifting jobs or purchases or procurement overseas.

    Mr. BOGOSIAN. What I would like to do, Mr. Abercrombie, is, if I could, make sure that I answer your question precisely. So if I can——

    Mr. ABERCROMBIE. Fair enough. Appreciate that. But I would like to have an answer on the record on that, Mr. Chairman, because our decisions are going to be made down the line.

    Mr. WELDON. I agree.

    Mr. ABERCROMBIE. Thank you. I appreciate that.

    Mr. WELDON. Mr. Turner.

    Mr. TURNER OF TEXAS. Thank you, Mr. Chairman. And I want to commend the chairman. I was here for your opening remarks where you gave your report on your visit to Libya. And I want to say—and I think every Member of the House shares this sentiment—and that is we have the greatest respect and regard for the efforts that you have made, Mr. Chairman, over the years in reaching out to some of the most critical and sensitive parts of the world.

    I had the opportunity to go with you a few years ago to Russia on what was my first trip, but was one of many that you have taken over the years. Your interest in trying to reach out and deal with the sensitive problem in North Korea and now Libya reflects the continuation of the kind of leadership that I think all of us respect and that the American people greatly appreciate.

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    Mr. WELDON. I thank you very much for those comments.

    Mr. TURNER OF TEXAS. I think I share the concerns that have been expressed here. But it is a very complex issue to deal with. And I think what we need to do is not only commit our resources to advance research and development to protect the rotorcraft industry in our own country and our own industrial base, but we also have to be sure that we provide the kind of tax incentives to be sure that we keep as many jobs at home as we can.

    But I do not think we can fool ourselves into thinking that it is ever going to be a perfect world or that one company or another has an advantage with regard to making investments in our country. Because we are dealing with all of our major suppliers—whether it is Sikorsky or Bell or Boeing or any other that may be out there—with multinational corporations who have multinational interests who are, in fact, hoping to make sales multinationally. And so it is a very difficult and complex process, which I think causes us to be sure that we reaffirm our commitment to the established acquisition process that we have.

    You know, for example, when we look at our balance of trade on military hardware with countries like Italy, we know that we sell a whole lot to Italy and to the United Kingdom. So in many ways, these international participants, by them having a role in some of these projects, provide a source of purchases that these companies that we want to preserve would not otherwise have.

    So I do think that we need to look very hard at continuing our investment in this field and our commitment and our appropriations. But I also know that we have to maintain, in all of our purchases, a clear commitment to a fair acquisition process that ensures that we get the very best product at the best price for the American taxpayer.

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    But Mr. Chairman, I think that rather than ask a question, I will wait perhaps until the next panel.

    Mr. WELDON. I thank the distinguished gentleman. I do not want to prolong this, but I have to do a quick follow-up.

    Mr. Bogosian, I cannot let the Department of Commerce off the hook here. Your answer on the sale of helicopters to China was, ''It is a classified issue.'' And I will let you get off the hook, but I am going to tell you that is not the answer.

    The reason why the sale of helicopters to China was cancelled was because of Tienanmen Square. That was in 1989. When the sale was going forward and the Department of Commerce decided, because of Tienanmen Square, they would stop the sale of helicopters.

    That was not over a classified issue. Now we can blame the Clinton Administration for not changing in the 1990's. We are not dealing with the Clinton Administration. Why have we not dealt with that issue?

    If it is a security issue or intelligence issue, separate from what it was in Tienanmen Square, then we ought to tell the manufacturers, ''You have to take out this capability or that capability and then sell it overseas.''

    But to say and hide here and say, ''Well, it is a classified issue,'' that was not the reason that sale was denied in the first place.

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    Mr. BOGOSIAN. Right. Mr. Chairman, when I said classified I was talking about in terms of more to the question that Mr. Israel was asking, not to your question. I am sorry.

    Mr. WELDON. I am asking about the helicopters to China. And I think it is outrageous that we still in Commerce have not dealt with this issue. It was cancelled because of Tienanmen Square. That is long since over.

    If there is another reason, tell us what it is.

    Mr. BOGOSIAN. I will be sure that BIS—the Bureau of Industry and Security—gets you an answer because it is their jurisdiction. That is what they handle.

    Mr. WELDON. Mr. Shaffer, do you agree with Rhett Flater's numbers that the 6.1 through 6.3 accounts have been decreased dramatically over the past decade and continue to go down today?

    Mr. SHAFFER. Mr. Chairman, I cannot verify or vouch for his numbers going back to 1984. I would like to get with Mr. Flater and understand where his numbers come from.

    Mr. WELDON. Would you give us, for the record, a summary of all S&T aviation accounts, just in the last 4 years since 2000, and what the trend has been? And Rhett, would you interact with the Administration on those numbers? Do you have them available for all accounts?

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    Mr. FLATER. I have actually the numbers from an Army aviation budget dating back to 1984. And I have used the normal factor to bring them up into 2004 dollars.

    Mr. WELDON. I have that. But you did not go beyond the Army?

    Mr. FLATER. Yes, sir.

    Mr. SHAFFER. Sir? Mr. Chairman, I do have, as a matter of fact, the numbers as taken from the Defense Technology Area Plan. This is how we go ahead and make sure that we do not have unintended redundancies in the S&T program.

    In 2002, the department-wide request—in just 6.2 and 6.3 dollars; 6.1 does not vary all that much—for air platforms was $443 million. In 2005, that same request is $691 million.

    Mr. WELDON. In research?

    Mr. SHAFFER. In science and technology. Yes, sir. That is 6.2 and 6.3 accounts. Within the air platform area, the two sectors that have grown that much or have grown the most in that period—and this is only for a four-year snapshot—were in fact rotorcraft and high speed propulsion.

    Now I will say that the rotorcraft technology S&T investment was a little down in 2002. But overall, the rotorcraft investment for science and technology over the past three to 4 years has come up.

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    And in fact, in just the Army, their investment in science and technology in the 2003 budget request was $70 million. In the 2005 budget request, it is about $112 million. So the Army has increased.

    The Defense Advanced Research Projects Agency (DARPA) has matched a lot of the increase in the Army for two demonstrations—the A–160 Hummingbird and the UCAR, Unmanned Combat Aviation Rotorcraft.

    Mr. WELDON. So you are including unmanned aerial vehicles (UAVs) in that?

    Mr. SHAFFER. I include rotorcraft UAVs. Yes, sir. But they are still rotary wing platforms. They can hover.

    Mr. WELDON. We are going to have a hearing on UAVs in two weeks. But you include that in your number.

    Mr. SHAFFER. But they are rotorcraft aircraft, sir.

    Mr. WELDON. No, I agree with that. I have trouble with those numbers. Maybe I am wrong and maybe what I have been hearing is all wrong.

    What is your response?

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    Mr. FLATER. I think I stand by my numbers. And I believe that in recent years, there has been a significant additional investment in rotary wing and fixed wing unmanned aerial vehicles that has crowded out significant investments for manned rotary wing vehicles.

    Mr. WELDON. So then what we need to do——

    Mr. FLATER. There is a significant difference between——

    Mr. WELDON. What we need to do is separate out—and I agree with that point—manned rotorcraft versus UAVs because the focus of this hearing is primarily on manned rotorcraft platforms. We will do a separate hearing on UAVs. And to mix the two together and try to take credit for something that really is not addressing what we are talking about, in terms of the industrial base, is a little—it is not a distortion, but it does not really get at the issue that we are trying to get at, which is what is happening to our rotorcraft, manned rotorcraft industrial base.

    So I would appreciate those figures. And I would like you to look at them when they are submitted so we can have the benefit of your analysis.

    I mean, that is clearly not the impression. After seeing what National Aeronautics and Space Administration (NASA) has done and the way that we had to force, both in this committee and the Science Committee, NASA to put any money at all in, which in the end came from the Army. It did not come out of NASA's hide.

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In fact, I still would ask you the question, Rhett. Do you think we should move that function away from NASA or leave it the