[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
H.R. 984, ``THE CARIBBEAN AND CENTRAL AMERICAN RELIEF AND ECONOMIC
STABILIZATION ACT''
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TRADE
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
MARCH 23, 1999
__________
Serial 106-69
__________
Printed for the use of the Committee on Ways and Means
U.S. GOVERNMENT PRINTING OFFICE
66-685 CC WASHINGTON : 2000
_______________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC
20402
COMMITTEE ON WAYS AND MEANS
BILL ARCHER, Texas, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
BILL THOMAS, California FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
WALLY HERGER, California BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana JIM McDERMOTT, Washington
DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania KAREN L. THURMAN, Florida
WES WATKINS, Oklahoma LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
A.L. Singleton, Chief of Staff
Janice Mays, Minority Chief Counsel
______
Subcommittee on Trade
PHILIP M. CRANE, Illinois, Chairman
BILL THOMAS, California SANDER M. LEVIN, Michigan
E. CLAY SHAW, Jr., Florida CHARLES B. RANGEL, New York
AMO HOUGHTON, New York RICHARD E. NEAL, Massachusetts
DAVE CAMP, Michigan MICHAEL R. McNULTY, New York
JIM RAMSTAD, Minnesota WILLIAM J. JEFFERSON, Louisiana
JENNIFER DUNN, Washington XAVIER BECERRA, California
WALLY HERGER, California
JIM NUSSLE, Iowa
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
version. Because electronic submissions are used to prepare both
printed and electronic versions of the hearing record, the process of
converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
__________
Page
Advisory of March 11, 1999 announcing the hearing................ 2
WITNESSES
Office of the United States Trade Representative, Hon. Richard
Fisher, Deputy United States Trade Representative.............. 23
U.S. Department of State, Alan Larson, Assistant Secretary for
Economic and Business Affairs.................................. 30
______
American Apparel Manufacturers Association, Larry K. Martin, as
presented by Stephen Lamar..................................... 93
American Textile Manufacturers Institute, Carlos Moore........... 88
American Yarn Spinners Association, Jim H. Conner................ 86
Costa Rica, Republic of, His Excellency Jaime Daremblum,
Ambassador..................................................... 63
Dominican Republic, His Excellency Bernardo Vega, Ambassador..... 44
El Salvador, Republic of, His Excellency Rene A. Leon, Ambassador 60
Graham, Hon. Bob, a United States Senator from the State of
Florida........................................................ 7
Kolbe, Hon. Jim, a Representative in Congress from the State of
Arizona........................................................ 11
National Cotton Council of America, F. Ronald Rayner............. 83
National Retail Federation, Erik O. Autor........................ 98
Nicaragua, Republic of, His Excellency Francisco X. Aguirre-
Sacasa, Ambassador............................................. 55
Union of Needletrades, Industrial and Textile Employees, Jay
Mazur, as presented by Mark Levinson........................... 74
SUBMISSIONS FOR THE RECORD
American Apparel Alliance, New York, NY, Seth M. Bodner,
statement and attachments...................................... 105
Honduras, Republic of, J. Benjamin Zapata, statement and
attachments.................................................... 109
Nilit America Corporation, Greensboro, NC, Mac Cheek, statement.. 116
H.R. 984, ``THE CARIBBEAN AND CENTRAL AMERICAN RELIEF AND ECONOMIC
STABILIZATION ACT''
----------
TUESDAY, MARCH 23, 1999
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Trade,
Washington, D.C.
The Subcommittee met, pursuant to notice, at 1:10 p.m., in
room 1100, Longworth House Office Building, Hon. Philip M.
Crane (Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON TRADE
CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
March 11, 1999
No. TR-5
Crane Announces Hearing on
H.R. 984, the ``Caribbean and Central American
Relief and Economic Stabilization Act''
Congressman Philip M. Crane (R-IL), Chairman of the Subcommittee on
Trade of the Committee on Ways and Means, today announced that the
Subcommittee will hold a hearing on the trade provisions of H.R. 984,
the ``Caribbean and Central American Relief and Economic Stabilization
Act.'' The hearing will take place on Tuesday, March 23, 1999, in the
main Committee hearing room, 1100 Longworth House Office Building,
beginning at 1 p.m.
Oral testimony at this hearing will be heard from both invited and
public witnesses. However, any individual or organization not scheduled
for an oral appearance may submit a written statement for consideration
by the Committee or for inclusion in the printed record of the hearing.
BACKGROUND:
The Caribbean Basin Initiative (CBI) was established in 1983 by the
Caribbean Basin Economic Recovery Act (CBERA) (P.L. 98-67). CBERA
authorizes the President to grant duty-free treatment to the imports of
eligible articles from designated Caribbean Basin countries. Originally
proposed by President Reagan, the basic purpose of CBI was to respond
to political turmoil and economic crisis in the Caribbean and Central
America by encouraging the development of democratic governments and
healthy economies through the expansion of trade.
In addition to helping to promote peace and democracy in the
region, CBI has successfully served to expand U.S. exports. Prior to
enactment of CBI and during the first three years the program was in
effect, the United States ran a significant trade deficit with the
Caribbean Basin region. In the fourth year of the program, the trade
balance shifted in favor of the United States and has remained in
surplus since that time. The current annual surplus is $1.2 billion.
The region is one of the few in the world with which the United States
has enjoyed a sustained favorable balance of trade. U.S. exports grew
from $5.8 billion in 1983 to $17.8 billion in 1997.
Benefits under CBI are conditioned on countries continuing to meet
seven mandatory and ten discretionary conditions, including
intellectual property protection, investment protection, improved
market access for U.S. exports, and whether the country is taking steps
to afford internationally recognized worker rights.
H.R. 984 was introduced by Messrs. Crane, Kolbe, Rangel, and Matsui
to respond to the immediate and long-term needs of Caribbean and
Central American nations affected by the devastation caused by
Hurricane Georges in September 1998 and Hurricane Mitch in October
1998. The bill would authorize bilateral and multilateral assistance
for nations in the region. Title I of H.R. 984, the ``United States-
Caribbean Trade Partnership Act,'' offers additional incentives for
economic development in the region through enhancement of the CBI trade
program.
Approximately 68 percent of the value of imports from countries in
the Caribbean Basin currently enter-duty free under CBERA and other
preferential trade programs. However, a number of products, mainly
textile and apparel articles, are excluded from CBI duty-free treatment
all together. H.R. 984 amends the CBERA to provide trade benefits to
products currently excluded from eligibility for duty-free treatment
under the existing CBI program. Affecting about 32 percent of the
imports from the CBI region, the preferential duty and quota treatment
established by the bill, which is similar to the treatment accorded to
imports of these products from Mexico, would be in effect for a period
of five years.
In announcing the hearing, Chairman Crane stated: ``As an ardent
supporter of CBI, I think it is important that the Subcommittee review
the state of economic development in these neighboring countries,
particularly in light of the catastrophic damage done to housing and
economic infrastructure by the recent hurricanes. If left unaddressed,
the resulting economic dislocation being suffered in the region
threatens the future of democratic governments there.''
FOCUS OF THE HEARING:
The focus of the hearing will be to examine: (1) the success of the
Caribbean Basin Initiative, (2) the state of economic development in
the Caribbean Basin region following Hurricane Georges and Hurricane
Mitch, and (3) the benefits and costs to U.S. national security
interests, and to U.S. firms and workers, of enacting H.R. 984.
DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:
Requests to be heard at the hearing must be made by telephone to
Traci Altman or Pete Davila at (202) 225-1721 no later than the close
of business, Tuesday, March 16, 1999. The telephone request should be
followed by a formal written request to A.L. Singleton, Chief of Staff,
Committee on Ways and Means, U.S. House of Representatives, 1102
Longworth House Office Building, Washington, D.C. 20515. The staff of
the Subcommittee on Trade will notify by telephone those scheduled to
appear as soon as possible after the filing deadline. Any questions
concerning a scheduled appearance should be directed to the
Subcommittee on Trade staff at (202) 225-6649.
In view of the limited time available to hear witnesses, the
Subcommittee may not be able to accommodate all requests to be heard.
Those persons and organizations not scheduled for an oral appearance
are encouraged to submit written statements for the record of the
hearing. All persons requesting to be heard, whether they are scheduled
for oral testimony or not, will be notified as soon as possible after
the filing deadline.
Witnesses scheduled to present oral testimony are required to
summarize briefly their written statements in no more than five
minutes. THE FIVE-MINUTE RULE WILL BE STRICTLY ENFORCED. The full
written statement of each witness will be included in the printed
record, in accordance with House Rules.
In order to assure the most productive use of the limited amount of
time available to question witnesses, all witnesses scheduled to appear
before the Subcommittee are required to submit 200 copies, along with
an IBM compatible 3.5-inch diskette in WordPerfect 5.1 format, of their
prepared statement for review by Members prior to the hearing.
Testimony should arrive at the Subcommittee on Trade office, room 1104
Longworth House Office Building, no later than Friday, March 19, 1999.
Failure to do so may result in the witness being denied the opportunity
to testify in person.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Any person or organization wishing to submit a written statement
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch
diskette in WordPerfect 5.1 format, with their name, address, and
hearing date noted on a label, by the close of business, Tuesday, April
6, 1999, to A.L. Singleton, Chief of Staff, Committee on Ways and
Means, U.S. House of Representatives, 1102 Longworth House Office
Building, Washington, D.C. 20515. If those filing written statements
wish to have their statements distributed to the press and interested
public at the hearing, they may deliver 200 additional copies for this
purpose to the Subcommittee on Trade office, room 1104 Longworth House
Office Building, by close of business the day before the hearing.
FORMATTING REQUIREMENTS:
Each statement presented for printing to the Committee by a
witness, any written statement or exhibit submitted for the printed
record or any written comments in response to a request for written
comments must conform to the guidelines listed below. Any statement or
exhibit not in compliance with these guidelines will not be printed,
but will be maintained in the Committee files for review and use by the
Committee.
1. All statements and any accompanying exhibits for printing must
be submitted on an IBM compatible 3.5-inch diskette in WordPerfect 5.1
format, typed in single space and may not exceed a total of 10 pages
including attachments. Witnesses are advised that the Committee will
rely on electronic submissions for printing the official hearing
record.
2. Copies of whole documents submitted as exhibit material will not
be accepted for printing. Instead, exhibit material should be
referenced and quoted or paraphrased. All exhibit material not meeting
these specifications will be maintained in the Committee files for
review and use by the Committee.
3. A witness appearing at a public hearing, or submitting a
statement for the record of a public hearing, or submitting written
comments in response to a published request for comments by the
Committee, must include on his statement or submission a list of all
clients, persons, or organizations on whose behalf the witness appears.
4. A supplemental sheet must accompany each statement listing the
name, company, address, telephone and fax numbers where the witness or
the designated representative may be reached. This supplemental sheet
will not be included in the printed record.
The above restrictions and limitations apply only to material being
submitted for printing. Statements and exhibits or supplementary
material submitted solely for distribution to the Members, the press,
and the public during the course of a public hearing may be submitted
in other forms.
Note: All Committee advisories and news releases are available on
the World Wide Web at `HTTP://WWW.HOUSE.GOV/WAYS__MEANS/'.
The Committee seeks to make its facilities accessible to persons
with disabilities. If you are in need of special accommodations, please
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
business days notice is requested). Questions with regard to special
accommodation needs in general (including availability of Committee
materials in alternative formats) may be directed to the Committee as
noted above.
Chairman Crane. Will everyone please be seated? And welcome
to this hearing on the status of U.S. trade relations with the
Caribbean Basin region.
Our special focus today is on the damage suffered in the
region as a result of Hurricanes Mitch and Georges this past
fall, and on March 4, I joined with Mr. Rangel, Mr. Kolbe, Mr.
Matsui, and Mr. Jefferson in introducing H.R. 984, the
Caribbean and Central American Relief and Economic
Stabilization Act.
H.R. 984 is broad, authorizing legislation that responds to
the debilitating damage, economic dislocation, and severe human
suffering caused by hurricanes.
It promotes U.S. economic and regional security interests
by offering not only the necessary foreign assistance, but also
meaningful trade incentives designed to promote stability in
the region through the creation of long-term, enduring
opportunities for trade and investment.
Purchasing about 70 percent of their imports from the
United States or about $17.8 billion annually, Caribbean Basin
countries already represent a larger export market for U.S.
goods and services than China. H.R. 984 will accelerate the
growth in U.S. exports to CBI countries, particularly exports
of U.S. textile, apparel, cotton, and yarn products, by
building on the highly successful Caribbean Basin Initiative
which has tripled exports to the region since it was passed in
1983.
Economic dislocation and distress in these small countries
on our borders means only one thing for U.S. cities and towns:
declining export markets, mounting illegal immigration, and
intensified drug trafficking. The United States has poured $17
billion in foreign assistance into the Caribbean Basin region
since 1980 in order to stem the forces of civil war and
political instability in our own backyard.
As the House considers a supplemental appropriation for aid
to the CBI region, I urge my colleagues to recognize the
necessity of including a trade mechanism as part of the U.S.
response. This is what the countries have told us will help
them the most.
H.R. 984 is in our national interest, because it will
enhance the ability of these small nations to be good customers
and able partners in securing our common borders.
In closing, I want to welcome the witnesses and apologize
that we have only a few hours for today's hearing. Please
summarize your verbal comments, and your written documents for
the record if you wish.
We must stick closely to a 5-minute time limit for each
witness. And with that, I want to yield to the Ranking Member
of the full Committee and simultaneously the Ranking Member of
the Trade Subcommittee, Charlie Rangel and Sandy Levin.
Mr. Rangel. Well, thank you, my friend, Mr. Crane, as well
as Mr. Levin. I welcome the opportunity to listen to our
witnesses on H.R. 984. For the last 5 years, I have been a
strong supporter for this legislation to our true friends and
neighbors in this area and supported the President when he
promised to make certain that the trade legislation was brought
on parity with our agreement with Mexico under the North
American Free Trade Agreement.
Hurricane Mitch and Georges brought terrible destruction to
this region, a fact I witnessed when I visited the area. The
First Lady has visited the area--as have many Members of
Congress--and seen first-hand the terrible toll that it has
taken on our friends. Waiting is not an option for us. America
has to respond the same way we would with any neighbor who has
seen their house washed away--we owe it to ourselves to lend a
hand to them, and, more importantly, to keep our word.
In addition to the important CBI parity trade benefits,
this legislation would provide immediate foreign assistance for
Central American and Caribbean, including micro credit and
agriculture assistance, OPIC supports and other forms of
economic assistance. We have so many Americans that have roots
in this part of the world, even though they don't exercise the
same political influence. But I think, because America has
always enjoyed just doing the right thing, that we should
expedite this legislation, not only to ease the pain of the
hurricane, but to fulfill our trade obligations to our friends
in this part of the world that have been hit hard by the
advantages that we gave to our neighbors to the south in
Mexico, and I yield back to the Ranking Member of the
Subcommittee, Mr. Levin.
Mr. Levin. I thank you, and thank you, Mr. Chairman. And a
special welcome to our two congressional colleagues,
Distinguished Members to say the least.
We are today going to hear much about the devastation that
was wrought by Hurricanes Mitch and Georges. They dealt clearly
a severe blow to the people of this already, at times,
impoverished region.
And providing disaster assistance is one of the keys to
helping them with their recovery. But clearly, aid should not
be the only component of our assistance. In the long term, I
think we all agree the most valuable way we can assist this
region in promoting their own economic development and growth
is to also encourage trade.
It is important as we do that, that we are sensitive to the
impact on American businesses and workers. Economic integration
between developed and developing economies that usually have
very different capital and labor markets can have a profound
impact on all countries, including our own. And as developing
economies integrate more and more fully and deeply into the
global trading system, we must take steps to ensure the result
is to raise the living standards of all the people in those
nations, as well as a strengthening and not undermining of
living standards here in our own country.
These issues have long shadowed the debate over CBI
expansion. It has languished in Congress for nearly 5 years,
largely because we have been unwilling to address these issues
adequately. In the last session, the approaches taken by the
House and Senate, as we know, resulted in deadlock. In the
approach taken by the Administration, this session clearly
attempts to avoid recreating the deadlock of last year.
In the next few weeks, I hope that we will be able to sit
down with our colleagues in the Senate as well as with the
Administration to discuss these issues constructively and to
work out differences in the various versions of the
legislation. Early in this session, I urge my colleagues to
keep this approach in mind as we in Congress and the
Administration work to build a new consensus that will lead us
to a renewal of a bipartisan approach on the broader issues of
trade. And I hope that we can apply this approach to this bill.
Thank you, Mr. Chairman.
[The opening statement follows:]
Opening Statement of Hon. Sander M. Levin, a Representative in Congress
from the State of Michigan
Thank you, Mr. Chairman for convening today's hearing to discuss
expansion of the Caribbean Basin Initiative. As my colleagues have
stated, the devastation wrought by Hurricanes Mitch and Georges dealt a
severe blow to the people of this already poor region.
Providing disaster assistance to this region will be key to
assisting these nations with their recovery. Aid, however, should not
be the only component of our assistance.
In the long term, the most valuable way we can assist this region
is by promoting economic development and growth in these countries.
In turn, the path and strategies that have proven the most
successful are those that provide a framework to ensure that
development benefits the greatest number of people in the region.
It is also important that we are sensitive to the impact on
American businesses and workers. Economic integration between developed
and developing economies that usually have very different capital and
labor markets can have a profound impact on all countries. As
developing economies integrate more and more fully and deeply into the
global trading system, we must take steps to ensure that the result is
to raise the living standards of all the people in those nations, as
well as strengthening, rather than undermining, living standards here
in the United States.
These issues have long shadowed the debate over CBI expansion. CBI
expansion has languished in Congress for nearly five years, largely
because we have been unwilling to address these issues. In the last
session, the approaches taken by the House and Senate resulted in
deadlock; the approach taken by the Administration clearly attempts to
avoid re-creating deadlock this year. In the next few weeks, I hope
that we will be able to sit down with our colleagues in the Senate as
well as with the Administration to discuss these issues constructively
and to work out differences in the various versions of this
legislation.
Earlier in this session, I urged my colleagues to keep this
approach in mind as we in Congress and the Administration work to build
a new consensus that will lead us to a renewal of a bi-partisan
approach on the broader issues of trade. I hope that we can apply this
approach with this bill.
Chairman Crane. Thank you, Mr. Levin.
And now, I welcome our first two witnesses--our
distinguished Senator Bob Graham from Florida, and the
Honorable Jim Kolbe from Arizona. And if you gentlemen will
proceed, and as I indicated before, try and keep oral testimony
under five, and then all written testimony will be a part of
the permanent record.
STATEMENT OF HON. BOB GRAHAM, A UNITED STATES SENATOR FROM THE
STATE OF FLORIDA
Senator Graham. Thank you, Mr. Chairman. My good friend,
Congressman Kolbe, has deferred and asked me to go first. I
assume that is a positive step on his behalf.
I want to express my appreciation for the opportunity to
testify today on the Caribbean and Central American Relief and
Economic Stabilization Act, which you and so many of your
colleagues have introduced. As you suggested, Mr. Chairman, I
would like to file my full statement for the record and will
summarize it; and hope to stay within your time constraints.
Mr. Chairman, there are a number of reasons why we need to
move expeditiously with the passage of this legislation. The
first is humanitarian. I know Congressman Rangel has been into
the region since the devastation of last fall's hurricanes.
Congressman Becerra and I were in Central America within the
last 30 days as part of the President's visit to that region.
We know first hand the extent of devastation, loss of life,
destruction of infrastructure, destruction of jobs, and
economic opportunities. So we, as Americans, have a special
role as the closest neighbors of these devastated friends to
respond with assistance.
But this goes beyond humanitarian. It is also very much in
our own national interest, as, Mr. Chairman, you have just
said. We know what happens when the situation in the Caribbean
and Central America turns bleak. We have seen it in the past.
We have seen it in political instability--a decade of wars
fought in the region in the 1980's. We have seen it in terms of
flows of illegal immigrants. We have seen it in the use of the
island nations and Central American countries as new sites for
drug transportation.
We have also seen the positive that can happen when we
build strong economic relationship. As recently as 1983, the
United States had a trade deficit with the CBI countries, of
$700 million a year. Eight years after the enactment of the CBI
initiative, that $700 million deficit had gone to a $2 billion
surplus. On a per capita basis, we have the highest level of
trade surplus with the CBI countries that we do with any other
region in the world.
So we have both negatives to avoid and affirmatives to
expand by virtue of our relationships with the CBI countries.
But, Mr. Chairman, I want to focus on a new issue which I think
is extremely compelling and that is demonstrated by these two
shirts. This shirt is manufactured in China. It is made with
fabric that was woven in Chinese mills, of yarns spun in China
from cotton grown primarily in China and other parts of Asia.
This shirt costs approximately $4.75 to produce.
This shirt, identical to the Chinese shirt, was produced in
Nicaragua. It was made from fabric that was woven in United
States' mills, from yarn spun in the United States, from cotton
grown in the United States. This shirt costs $5.00 to produce.
Both of these shirts were imported into the United States for
sale at U.S. retail stores at a price of approximately $19.50.
That was the price which the market set for this particular
type of shirt.
You might ask, why is there any market for the Nicaraguan
shirt, when its cost of production is significantly lower than
the cost of production in China. Well, there are several
reasons.
First, transportation costs are less from the Caribbean
than they are from China.
Second, the proximity of the Caribbean to the United States
affords some benefit in terms of quick turnaround to respond to
changes in the style, desires of the U.S. customer.
But the most significant reason, the most significant
reason why there is a market for the higher cost of production
shirt from the CBI is the fact that China is under a quota
limit for its shirts. In fact, the quota limit for 1999 from
China is 2,336,946 dozen of shirts just like this.
Imports of the shirts manufactured in CBI countries are not
subject to quota limits. Mr. Chairman, I recognize I am going
beyond my 5 minutes. I can assure you I am close to the
conclusion of this analysis.
The significance of this point is that in the year 2005,
when the old multi-fiber agreements terminate as a result of
the Uruguay round of trade talks, there will be no more quota
limits on shirts that can be imported into the United States
from China. And the consequence of that is that this region of
the world faces the prospect of having the tens of thousands of
jobs that have been created through the CBI initiative eroded
as shirt and other apparel manufacturers move their production
from the CBI countries to the low-cost of production countries
in the Far East.
And when they move, not only are the jobs lost in the CBI
countries--lost, but all those jobs in the United States--
growing that cotton, spinning it, producing it into textile,
cutting it, shipping it to the Caribbean countries, and then
returning for final assembly in the United States--all of those
jobs are going to be lost.
Mr. Chairman, my thesis is that we had a 5-year window in
which we can help, through informed policy, such as you are
advocating, to increase the economic efficiency of the CBI
countries so that when the year 2005 comes, and there is no
longer a quota restraint on China and other Far Eastern
countries, that the CBI will be able to survive because it has
become more economically competitive than it is today.
The consequences of this are very significant for the
United States. It is estimated that if we pass the enhancements
that you have recommended that we will increase to 70 percent
from the current 50 percent the percentage of our cotton shirts
that come from the Caribbean. If we fail to pass the CBI
enhancements, the number is estimated to drop to 30 percent.
That will mean literally thousands and thousands of jobs in the
United States and an equal or greater number in our neighbors
in the Caribbean Basin.
So, Mr. President, for reasons of humanitarian
considerations, for reasons that relate to our own national
self-interest, as seen by past history, and by our national
self-interest as seen by the future economics of the apparel
industry, it is very much in America's interest to pass the
legislation that you have introduced, and I hope that this
Congress will see those interests and will move expeditiously.
Thank you, Mr. Chairman.
[The prepared statement follows:]
Statement of Hon. Bob Graham, a United States Senator from the State
of Florida
Good afternoon, Mr. Chairman, Mr. Rangel and Members of the
Committee. I am pleased to appear before you today to testify on the
Caribbean and Central American Relief and Economic Stabilization Act. I
am happy to see the House believes Central American relief, as well as
CBI enhancement, are essential priorities for the continued economic
health of our nation and our neighbors in Latin America and the
Caribbean. I thank you for holding this hearing.
There are several reasons why it is important that we quickly pass
this legislation in both the Senate and the House. The first is
humanitarian. I have made three trips to the region in the months since
the devastation of Hurricane Georges and Hurricane Mitch. I know that
many of you have also seen the destruction caused by these hurricanes.
They have caused a level of death and destruction not seen in this
hemisphere in over 200 years. You have all heard of the tremendous loss
of life, economic disruption, and human suffering caused by these
storms. As a neighbor, a friend, and a great nation, we have an
obligation to respond with assistance that will help the region to
recover as rapidly as possible.
A second reason to pass this legislation is that it is in our own
interest. Experience shows us that providing trade benefits to the
Caribbean basin is good for our economy. Following enactment of the
Caribbean Basin Initiative in 1983, our trade position with the region
improved from a deficit of $700 million in 1985 to a surplus of $2
billion in 1993. Between 1984 and 1992, U.S. exports to the region
nearly doubled, while total imports into the U.S. from the region grew
by only 10%. On a per capita basis, our surplus with the region has
consistently out paced our surplus with any other region of the world.
In fact, since 1995, U.S. exports to the CBI countries have increased
by approximately 22 percent.
Our interest in reducing the flow of illegal drugs and illegal
immigrants to the United States is also at stake. Without assistance to
restart the regional economy and make it possible for people to provide
for their families, these nations will be susceptible to the scourge of
drug traffickers. It will also increase the pressure for illegal
immigration.
It is critical to the security of the U.S. and the countries within
the region that the people of the Caribbean Basin have real
opportunities in the legal economy so they are not forced to turn to
drug trafficking or illegal immigration to feed their families. There
is also a risk of renewed political instability if governments are
unable to respond to the needs of their citizens. The painful lessons
of the 1980s need not be repeated. We can and must act to prevent it.
Today I want to focus on another reason why passing Caribbean
relief legislation that includes CBI enhancement is absolutely
critical. That reason can best be demonstrated by looking at these two
shirts. This shirt is made in China. It is made with fabric that was
woven in Chinese mills of yarn spun in China from cotton grown
primarily in China or other parts of Asia. This shirt costs
approximately $4.75 to produce.
This (other shirt) shirt was made in the Caribbean basin. It is
made with fabric that was woven in U.S. mills from yarn spun in the
U.S., from cotton grown in the United States. It costs approximately
$5.00 to produce.
Both of these shirts were imported into the United States for sale
in U.S. retail stores. There is no significant difference between
either shirt, save the location where the shirts were manufactured and
the components utilized in the production process. Each shirt sells for
approximately $19.00 because that is the price the retail market in the
United States will bear.
You might ask why there is any market for the Caribbean made shirt
if the Chinese shirt can be produced at a lower cost. There are several
reasons why a market for the Caribbean made shirt exists:
Transportation costs between the Caribbean Basin and the
United States are less than the transportation costs between China and
the United States.
The proximity of the Caribbean Basin to U.S. means the
transit time for textile products manufactured in the region and
destined for sale in the U.S. is significantly less than the transit
time for Chinese textiles. This is particularly important to the
apparel industry where styles rapidly change.
But the most significant reason is, Chinese textile
imports into the U.S. are restricted by quotas. The 1999 import quota
for Chinese manufactured shirts like this one is 2,336,946 dozen per
year. Imports of the shirt manufactured in Nicaragua (as well as other
countries in the Caribbean Basin), with U.S. grown and processed
cotton, are not restricted by quotas.
The differences represented by these two shirts will become much
more apparent in 2005, a watershed year for the textile industry in the
U.S. and the Caribbean Basin.
In 2005, import quotas currently applicable to Chinese textile
products, originally imposed under the Multi-Fiber Agreement, now the
Agreement on Textiles and Clothing, will be completely phased out. At
that time, textile production in the Caribbean basin will be placed at
a distinct and growing disadvantage. Disinvestment in the region will
occur, reducing the incentive to use any material from U.S. textile
mills or cotton grown in the United States.
Mr. Chairman, that is why passing CBI enhancement legislation now
is critical to the U.S. textile and yarn industries, as well as to the
U.S. cotton growers. Only by providing some incentives for us to
develop strong relationships with apparel manufacturers in our
hemisphere will we have any chance to have a market for U.S. cotton and
textiles after the quotas are eliminated in 2005. Developing
relationships with the countries of the Caribbean Basin will promote
political stability in the region and benefit the U.S. economy.
The numbers are clear. According to the American Apparel
Manufacturers Association, without CBI enhancements, U.S. textiles and
agriculture will be adversely affected and the U.S. economy will
suffer. Currently, 50 percent of the apparel consumed in the U.S. is
manufactured with U.S. cotton. Industry estimates indicate this number
will increase to 70 percent with the enactment of CBI enhancements.
However, if we fail to produce CBI enhancement legislation, this number
drops to 30 percent. Currently, the average U.S. cotton content of
apparel products imported into the U.S. is 20 percent. By passing CBI
enhancement legislation, we anticipate U.S. cotton content will
increase to an average of 80 percent. Without these enhancements, U.S.
cotton content will continue to decline as apparel producers look to
reduce costs and move towards products made with cheaper labor and
cheaper materials.
The impact of the Agreement on Textiles and Clothing and year 2005
changes on man made fiber industries will be comparable to the cotton
situation. Without CBI enhancements, the U.S. man made fiber content of
imported apparel will continue to significantly decline. Without CBI
legislation and in the face of year 2005 quota reductions, producers of
man made fibers will be inclined to relocate their production
facilities in order to take advantage of lower wages and production
costs. If we begin to work to establish stronger relationships with the
nations of the Caribbean basin, we will be able to provide incentives
to sustain these industries in our own hemisphere.
Inherent in our CBI enhancement efforts are public and private
investment incentives that will increase productivity and the quality
of life within the region. We anticipate the textile industry will
provide investment capital targeted for the construction and
maintenance of schools, health and child care facilities, and
technology enhancements to increase the productivity of both workers
and existing manufacturing facilities. A well trained and healthy
workforce will be more productive and efficient as Caribbean basin
producers compete for shares of the international textile market.
It is also anticipated that, as a result of CBI enhancements,
industry with interests in the region will provide investment capital
for public infrastructure development. These funds will likely focus on
roads, drinking water, waste treatment and electricity. Frequent and
recurring interruptions in electric service are a significant problem
in the region. ``Brownouts'' cause production facilities to shut down,
significantly impacting their productivity. Investment from both the
public and private sectors, focusing on the construction of electrical
production facilities, will reduce service interruptions. As
interruptions in service are reduced and eliminated, textile facilities
will become more efficient and productive. Increased productivity will
result in higher wages for employees in the region and enhance the
competitive position of the Caribbean basin textile industry in
international commerce.
We have an unprecedented opportunity to strengthen our economic and
national security through the enhancement of our trade relationship
with our neighbors in the region. We must act prior to 2005 to build a
dynamic, formidable Western Hemisphere trade alliance that encourages
U.S. industry to invest in the region and to make commitments to
rebuilding the industrial infrastructure in the region. This alliance
will enhance the U.S. economy by promoting markets for U.S.
agricultural and textile products and promote incentives for U.S.
producers to maintain their operations in the United States and the
region.
Chairman Crane. Thank you, Senator.
Mr. Kolbe.
STATEMENT OF HON. JIM KOLBE, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF ARIZONA
Mr. Kolbe. Thank you very much, Mr. Chairman. I appreciate
this opportunity to testify and to be alongside my colleague
from Florida whose leadership in these issues needs no further
explanation from me, nor, I might add, Mr. Chairman, does your
leadership in this--your leadership, along with that of Members
who are up there--Charlie Rangel, Bill Jefferson, Bob Matsui--
in introducing what I think is extraordinarily important
legislation.
Let me put the Caribbean and Central American Relief and
Economic Stabilization Act--that's a mouthful, so we just call
it CCARES, in context.
A decade ago, you had a region that was paralyzed by
economic stagnation and ideological division. It was fear and
uncertainty that gripped the region. There was conflict. The
nations searched for an economic and political paradigm which
would free them from the chains of poverty and oppression. And
most of the rest of the world stood by fairly helplessly. At
best, we could influence change on the margins.
But today, we see a very different world. For the first
time in 175 years of independence, the nations of Central
America are at peace. For the first time, democracy is
flourishing in Central America. And, until the devastation
wrought by Hurricanes Mitch and Georges--and Javier Becerra and
I were down in November on that region. We were advancing it
for you for your latest trip there with the Vice President's
wife. But before those hurricanes hit, the Caribbean and the
Central American economies enjoyed strong economic growth,
based on free market principles. So it was, indeed, a success
story.
But, of course, as we know, that wasn't the end of the
story. Almost overnight, Hurricanes Mitch and Georges wiped out
a decade of economic progress. Honduras alone lost 60 percent
of its infrastructure. Nicaragua lost a quarter of its GDP.
Hurricane Georges caused more than a billion dollars in damage.
And so once again, the nations of the world are striving to
find a way back toward economic growth.
And that is why this legislation really is so important.
Yes, we can and we should provide humanitarian relief, foreign
aid debt relief, but what these countries really need is long-
term economic growth, and that is what this legislation is
about--extending duty-free treatment to the remaining 30
percent of the imports from the region that aren't covered by
other preferential trade regimes. It gives them greater access
to the largest market in the world so that they can really move
along the road to recovery.
For us, nothing could really be better. Our historic ties
to the region are deep. They are longstanding. And when they
prosper, we prosper. When they falter, we feel the pain through
increased immigration and drug trafficking.
And let us not forget our stake in continued democratic
growth in the region and the consequences of inaction on our
part. It was, in large part, the political fallout from the
1972 killer earthquake in Nicaragua that helped sweep the
Sandinistas into power. We cannot let us not let a decade of
progress disappear. We cannot repeat the mistakes of the past.
Let me just emphasize on one other thing here that has
already been mentioned by Senator Graham, and that is this
question of textiles. The heart of every political debate that
we have about trade for Central America always seems to center
around this issue. But even as we debate this, even as the
debate rages in this country, we seem to forget that in 6 short
years, no protection regime based on quotas will make any
difference. And that is because, as Senator Graham has said,
the multi-fiber agreement eliminates all national-based quotas
by the year 2005. So the consequence, as he has pointed out so
ably to you and I think by illustrating this way with the
shirts, is going to be a shift in production to the lowest cost
producers. And that would be likely to be Asia. And that is not
in our best interest. It is far better to keep the production
in this region, where our fabric, cotton, yarn and other
inputs, are generated and integrated into the production
process. Passing CCARES will enhance the competitive position
of our neighbors vis-a-vis other regions of the world. By doing
so, we enhance the competitiveness of our own region.
Mr. Chairman, this is a win-win bill. Whether we like it or
not, we live in global economy. As a result, U.S. textile
production is moving. It is going to move somewhere. There is
nothing we can do about that. But we can enhance the
competitive position of our neighbors to the south and help
ourselves at the same time. It helps eliminate poverty and drug
trafficking in this region. It helps stop the flow of
immigration by providing opportunities at home for thousands of
workers in Central America. And it helps us expand economic
opportunities in our own country.
In conclusion, let me just read a couple sentences from a
letter I just received today from Haiti Advocacy. It is a non-
profit, NGO organization that assists the people of Haiti. In
this letter, they wrote these words:
CCARES enables the economies of the region to grow by removing
onerous tariffs and trade barriers to their products. It is shameful
that the United States of America should maintain trade barriers
against some of the poorest countries in the hemisphere. Trade relief
for the poor is not just a commercial issue, but a humanitarian one
that resonates deeply with the American people. Haiti Advocacy has
received over 3,000 letters from its correspondents throughout the
country, asking their representatives to eliminate trade barriers to
the region.
Mr. Chairman, I will include with my testimony a list of
over 200 organizations, from Erie, Pennsylvania, to Miami,
Florida, to Gering, Nebraska, all asking for some kind of trade
relief for the people of Central America and the Caribbean.
There is broad support for this legislation, and I commend you
for your work in bringing it to the Congress. And I urge the
Committee, the Subcommittee, and all of our colleagues to
support this bill and bring it speedily to a conclusion and to
the President's desk. Thank you.
[The prepared statement and material follow:]
Statement of Hon. Jim Kolbe, a Representative in Congress from the
State of Arizona
Mr. Chairman, thank you for the opportunity to testify today.
The Caribbean and Central American Relief and Economic
Stabilization Act, or CCARES, is an important and visionary legislative
initiative. I commend your leadership, and the leadership of
Representatives Charlie Rangel, Robert Matsui, and Bill Jefferson, in
sponsoring this legislation and holding hearings today to help
illuminate the plight of our Central American and Caribbean neighbors.
Mr. Chairman, we could not lessen the winds or stop the waters that
wrought devastation on our Caribbean and Central American neighbors
last year. We could only watch helplessly as natural fury destroyed
small but burgeoning economies throughout the Caribbean Basin. We could
grieve for the loss of life and lament the material losses. And when
the fury subsided, we did as Americans do, we extended our hand. Our
government, working in harmony with secular charities, church groups
and international organizations, took swift and vigorous action to
blanket the cold and shelter the homeless. We should be justifiably
proud of our response.
Now is time for us to show that our reaction goes beyond sympathy
and charity. It is time for us to take nature's fury and declare it a
catalyst. A catalyst to offer the smaller, protected economies of the
Caribbean region an opportunity to participate with the United States
in the magic of a free-trade economy.
Lets put CCARES in context. A decade ago, Central America was
paralyzed by economic stagnation and ideological division. Fear and
uncertainty gripped the region, as nations searched for an economic and
political paradigm which would free them from the chains of poverty and
oppression. The most powerful nation on earth, the United States, stood
powerless. At best, we could influence change on the margins. We could
provide tools and economic opportunities, such as the Caribbean Basin
Economic Recovery Act, but the real choices had to be made by the
people of Central America themselves.
Today, we see a very different world. For the first time in the 175
years of independence, the nations of Central America are at peace. For
the first time, democracy flourishes. And, until the devastation
wrought by Hurricanes Mitch and Georges, the Caribbean and Central
American economies enjoyed economic growth, based upon free market
principles. This is indeed a success story.
But it is just part of the story. Almost overnight, Hurricanes
Mitch and Georges wiped out a decade of economic progress. Honduras
alone lost 60 percent of its infrastructure. Nicaragua lost a quarter
of is GDP. Hurricane Georges caused more than a billion dollars in
damage. Once again, the nations of the region must strive to find their
way back to economic growth.
That is why this legislation is so important. We can, and should,
provide foreign aid and debt relief. But these nations need long-term
economic growth. The legislation extends duty-free treatment to the
remaining thirty percent of the imports from the region not already
covered by other preferential trade regimes. It gives them greater
access to the largest market in the world, so they may begin the long
road to recovery.
For the United States nothing could be better. Our historic ties to
the region are long and deep. When they prosper, we prosper. When they
falter, we feel the pain through increased immigration and drug
trafficking. And let us not forget our stake in continued democratic
growth in the region and the consequences of inaction. It was in large
part the political fallout from the 1972 killer earthquake in Nicaragua
that helped sweep the Sandinistas into power. We cannot repeat the
mistakes of the past. We cannot let a decade of progress disappear.
Let me just address the question of textile production in the
United States. The multi-fiber agreement eliminates all national-based
quotas by the year 2005. The likely consequence will be a shift of
production to the lowest cost producers. Most likely, this will be
Asia. Clearly, this is not in the best interest of the United States.
It is far better to keep production in the region, where our fabric,
cotton, yarn and other inputs are integrated into the production
process. Passing CCARES will enhance the competitive position of our
neighbors vis-a-vis other regions of the world. By doing so, it
enhances the competitiveness of our own producers.
Mr. Chairman, this is a win-win bill. Whether we like it or not we
live in a global economy. As a result, U.S. textile production is
moving. There is nothing we can do about that. But we can enhance the
competitive position of our neighbors to the south. This helps us. It
helps us eliminate poverty and drug trafficking in the region through
market-led economic growth. It helps us stop the flow of immigration by
providing opportunities at home for thousands of workers in Central
America and the Caribbean. And it helps us expand economic opportunity
at home. The more the countries of the region grow, the wealthier they
become. And the wealthier they become, the better able they are to buy
our cars, computers, and candy. In the end, we all win.
I urge my colleagues to support this bill. Help the people of
Central America and the Caribbean help themselves.
Thank you.
Haiti Advocacy, Inc.
Washington, DC 20003
March 23, 1999
The Honorable Jim Kolbe
2266 Rayburn House Office Building
Washington D.C. 20515
Re: The Caribbean and Central America Relief and Economic Stabilization
Act (H.R. 984)
Dear Congressman Kolbe:
Thank you for co-sponsoring the Caribbean and Central America
Relief and Economic Stabilization Act (H.R. 984 or ``CCARES''). As you
know, Hurricanes Mitch and Georges piled catastrophe atop poverty and
misfortune besetting our neighbors in this hemisphere. Nevertheless,
their commitment to democratization and reform has not wavered. As the
people of region struggle with the challenges of moving forward, they
deserve our help.
CCARES responds to this challenge with generous foreign assistance
but, more importantly, it enables the economies of the region to grow
by removing onerous tariffs and trade barriers to their products. It is
shameful that the United States of America should maintain trade
barriers against some of the poorest countries in the hemisphere. I
trust that Congress will overcome special interest protectionism and
corporate welfare lobbies in order to remove these obstacles.
Trade relief for the poor is not just a commercial issue but a
humanitarian one that resonates deeply with the American people. Haiti
Advocacy has received over 3000 letters from its correspondents
throughout the country asking their representatives to eliminate trade
barriers to the region. As you can see by the attached list, the
organizational affiliations of these correspondents span a wide range
of more than 200 religious congregations and civic organizations.
Nationals of the region who are working in the United States and
sending money to help their families back home are also shouldering a
great deal of the burden of economic relief to the area. Many
originally fled their homelands during periods of widespread violence
and political instability. Measures to normalize their immigration
status would round out the comprehensive package of CCARES.
Thank you very much for taking a stand for people who have
sacrificed so much!
Yours,
Merrill Smith
Director
Organizational Affiliations of Endorsers of Elimination of Trade
Barriers to
Central America and the Caribbean
(as of March 20, 1999)
Adrian Dominican Sisters, Garner NC
Adjunct Faculty Association of NYSUT Local #4896, Suffern NY
Alliance of Love/Alliance d'Amour, Topsham ME
American Friends Service Committee, Immigrant Rights Project, Newark NJ
American Immaculate Heart of Mary Province, Inc., Missionhurst
C.I.C.M., Arlington VA
Annarundel Peace Action, Annapolis MD
Apostolado Hispano de Berks County, Reading PA
Archer, Senatus & Associes, Boston MA
Arts of Haiti Research Project, Ithaca NY
Associated Catholic Charities, Oklahoma City OK
Ayuda, Inc., Washington DC
Baltimore Action for Justice in the Americas, Baltimore MD
Becker & Poliakoff, P.A., Miami FL
Benedictine Sisters of Erie, Erie PA
Benedictine Sisters of Virginia, Bristow VA
Beyond Borders, Philadelphia PA
Bienveillance Barber Shop, Hempstead NY
Blessed Sacrement Catholic Church, Oakland City IN
Casa Multicultural, Raleigh NC
Casa Reina, Gallup NM
Catholic Center, Diocese of Bridgeport, Bridgeport CT
Catholic Diocese of Richmond, Richmond VA
Catholic Family Services, Inc., Lubbock TX
Catholic Social Services, Tucson AZ
Catholics for Justice-Latin American Task Force, Shawnee Mission KS
Center One, Ft. Lauderdale FL
Center for Constitutional Rights, New York NY
Centro Romero, Chicago IL
Chicago Metropolitan Sanctuary Alliance, Chicago IL
Children's Home Society, Miami FL
Church of St. Francis, Rochester MN
Church of St. Francis Xavier, South Weymouth MA
Coalition Against U.S. Intervention, New Haven CT
Community Alliance for Youth Action, Washington DC
Congregation of the Holy Ghost Provincialate, Bethel Park PA
Congregation of Sisters of the Immaculate Heart of Mary, Roosevelt NY
D.H.M. Christian Church, Indianapolis IN
E.W. Vedrine Creole Project, Dorchester MA
East Bay Sanctuary Covenant, Berkeley CA
Ecumenical Program on Central America and the Caribbean, Washington DC
Eglise Ste. Camilus, Rockville MD
Elizabeth House, Bernhards Bay NY
Episcopal Diocese of North Carolina, Raleigh NC
Ethical Culture Society, Brooklyn NY
Evangelical Lutheran Church in America, Deleware-Maryland Synod,
Baltimore MD
Evangelical Lutheran Church in America, Southeastern Iowa Synod, Iowa
City IA
Evangelical Lutheran Church in America, Southwestern Pennsylvania
Synod, Pittsbugh PA
Farm Workers Association of Florida, Apopka FL
Federation of Communities, Big Stone Gap VA
First United Methodist Church of Coral Gables, Coral Gables FL
Florida Coalition for Peace and Justice, Jacksonville FL
Florida Immigrant Advocacy Center, Ft. Pierce FL
Florida Immigrant Advocacy Center, Miami FL
Florida Fair For All, Apoka FL
Fonkoze USA, Philadelphia PA
Foundation for International Community Assistance, Washington DC
Friends of Haiti, Oakland CA
Friends of the People of Haiti, Moline IL
Georges William Enterprises, Miami FL
Grassroots International, Boston MA
Great Lakes Asian Center for Theology and Strategies, Evanston IL
Greater Boston Legal Services, Boston MA
Haiti Advocacy, Inc., Washington DC
Haiti Communications Project, Cambridge MA
Haiti Outreach Project, Grand Rapids MI
Haiti Parish Twinning Program, Nashville TN
Haiti Solidarity Network of the Northeast, Newark NJ
Haiti Solidarity Group, Bowling Green OH
Haitian American Alliance, New York NY
Haitian American Tribune, Somerville MA
Haitian Studies Association, Valley Cottage NY
Helping Other People Everywhere, St. John's Church, Grafton ND
Holy Cross Church, Fort Branch IN
Holy Rosary Church, Alliance NE
Holy Spirit Church, Memphis TN
Holy Trinity Church, Peachtree City GA
Immaculate Heart of Mary, Monroe MI
Institute for Deep Ecology, Santa Rosa CA
Interfaith Coalition for Immigrant Rights, San Francisco CA
Interfaith Community Services, New York NY
Interhemispheric Resource Center, Albuquerque NM
International Human Rights Law Group, Washington DC
International Institute of Erie, Pennsylvania, Inc., Erie PA
Irish Immigration Center, Boston MA
John XXIII Center, Hartford City IN
Jubilee Partners, Comer GA
Kenny Scharf Studios, North Miami FL
Laura Korkin & Associates, P.C., Boulder CO
Law Offices of Allan Ebert & Associates, Washington DC
Law Offices of Alan S. Gordon, P.A., Charlotte NC
Liturgical Conference, Silver Spring MD
Loretto Community Latin America/Caribbean Committee, Englewood CO
Lutheran Family Services in the Carolinas, Greensboro NC
Lutheran Peace Fellowship, New York NY
Marianist Community, Baltimore MD
Maryknoll Fathers & Brothers, East Walpole MA
Maryknoll Sisters, Concord CA
Maryknoll Sisters, San Diego CA
Matrix Theater Company, Monroe MI
Medical Mission Sisters, Washington DC
Medical Mission Sisters, Philadelphia PA
Mennonite Central Committee, Miami FL
Michigan Committee for a Democratic Haiti, Southfield MI
Michigan Human Rights Committee, Detroit MI
National Lawyers Guild/National Immigration Project, Boston MA
National Minority Supplier Development Council, New York NY
National Safe Kids Campaign/APF in Haiti, Washington DC
Nebraska Association of Farmworkers, Gering NE
New England American Friends Service Committee, Cambridge MA
New England Haitian Chamber of Commerce, Mattapan MA
New Jersey-Haiti Partners of the Americas, South Orange NJ
Norfolk Catholic Worker, Norfolk VA
Oaks Project, Colma CA
Oblate Conference, Washington DC
Ocean of Glory Community-Crofton, Gambrills MD
Office of the Americas, Los Angeles CA
Our Lady of Grace Church, Chelsea MA
Our Lady of Hope Church, Coal Township PA
Our Lady of the Lake Church, Hendersonville TN
Partners of the Americas, Rockland Community College, Suffern NY
Partners with Haiti, Barrington RI
Pax Christi, Bristow VA
Pax Christi New Jersey, Highland Park NJ
Pax Christi New Jersey, Morristown NJ
Pax Christi New York North Country, Clifton Park NY
Pax Christi Norfolk/Catholic Worker, Norfolk VA
Pax Christi Radford, Radford VA
Pax Christi St. Louis, St. Louis MO
Pax Christi USA-Haiti Task Force, Clifton Park NY
Pax Christi USA-Haiti Task Force, Huddleston VA
Peace Action, Washington DC
Peace and Justice Commission, Countryside IL
Peace and National Priorities Center, Orchard Lake MI
Pexi Overseas, Miami FL
Proyecto Adelante, Dallas TX
Radio Soleil d'Haiti, Brooklyn NY
Rainbow Express, Worcester MA
Refugee and Immigration Services, Catholic Diocese of Richmond,
Richmond VA
Refugee and Immigration Services, Norfolk VA
Rehn & Fore, CPA, East Setauket NY
Religious of Jesus and Mary, Mt. Ranier MD
Sacred Heart Church, San Antonio TX
Sacred Heart Rectory, Brockton MA
St. Alphonse Rectory, San Leandro CA
St. Bernard Church, Louisville KY
St. Cecilia Church, Glen Carbon IL
St. Francis Xavier's Parish, South Weymouth MA
St. George Church, West Falls NY
St. Henry Church, Saint Henry OH
St. Ignatius Loyola Church, Denver CO
St. John the Evangelist Church, Evansville IN
St. John's Church, Grafton ND
St. Joseph the Worker, Berkeley CA
St. Joseph's Church, York, PA
St. Joseph's Proto Cathedral, Bardstown KY
St. Jude Catholic Church, Christiansburg VA
St. Leo Church, Detroit MI
St. Martin Church, Chrisney IN
St. Martin de Porres Church, New Haven CT
St. Martin de Porres House, Hartford CT
St. Mary's Church, Anderson IN
St. Mary's Church, Evansville IL
St. Mary's Church, Greensboro NC
St. Michael Church, Remus MI
St. Patrick Church, Kokomo IN
St. Patrick Parish, Cedar Falls IA
St. Peter Catholic Church, Linton IN
St. Peter Church, South Beloit IL
St. Peter Claves, Philadelphia PA
St. Pius X Catholic Church, Conyers GA
St. Rose Convent, La Crosse WI
St. Simon's Church, Ludington MI
St. Theresa Church, Evansville IN
St. Thomas Church, Alpharetta GA
St. Thomas the Apostle, Naperville IL
Save Pine Bush, Albany NY
Seattle Voices for Haiti, Bainbridge Island WA
Seifert Law Offices, Olympia WA
Sisters of Charity, Chicago IL
Sisters of Charity, Detroit MI
Sisters of Charity of Nazareth, Nazareth KY
Sisters of the Holy Cross, Area III, Austin TX
Sisters of the Holy Cross, Nashua NH
Sisters of Mercy of the Americas, Burlington VT
Sisters of Mercy of the Americas, Regional Community of Connecticut,
West Hartford CT
Sisters of St. Benedict, Piedmont OK
Sisters of St. Francis, Assisi Heights, Rochester MN
Sisters of St. Joseph, Springfield MA
Sisters of St. Joseph, St. Louis MO
Sisters of St. Joseph of Peace, Bellvue WA
SNJM Justice-Peace Committee, Santa Clara CA
Social Justice Ministry, Catholic Diocese of Syracuse, Syracuse NY
Society of the Precious Blood, Carthagena OH
South Texas Immigration Council, Harlingen TX
Southern Arizona Legal Aid, Inc., Tucson AZ
TapTap Restaurant, Miami Beach FL
Thomas Merton Center, Pittsburgh PA
Transfiguration Catholic Church, Marietta GA
Transfiguration of Our Lord, Goshen KY
La Troupe Makandal, Inc., Brooklyn NY
True, Walsh & Miller, Ithaca NY
Tulsa Pax Christi, Tulsa OK
Tuscon Ecumenical Council Legal Assistance Project, Tucson AZ
Unitarian Universalist Service Committee, Cambridge MA
Unitarian Universalist Service Committee, Somerville MA
United Faculty of Florida, Miami FL
U.S.-Africa Free Enterprise Education Foundation, Inc., Tampa FL
Washington City Church of the Brethren Soup Kitchen, Washington DC
Wayland United Methodist Church, Wayland MI
Witness for Peace-Mid-Atlantic Board, Willow Grove PA
Women's Commission, International Rescue Committee, New York NY
Chairman Crane. Thank you, Mr. Kolbe, and I want to commend
both of you for your leadership on this issue. Both of you
traveled to the Caribbean Basin region since the hurricanes,
and you have witnessed first-hand the devastation there. How
much infrastructure has been lost?
Senator Graham. Well, in the case of Honduras, between 200
and 300 bridges, which served as the network to bind one region
of the country to the next. A substantial percentage of their
schools; their health care facilities; significant damage to
their road system. For a long time, their seaports were
substantially degraded and unable to be the point of entry of
the goods that were necessary to start the relief effort.
Mr. Kolbe. I would just add at least 100 percent of their
banana production in Honduras has been wiped out for at least
the next year, and a smaller proportion for the years
thereafter. But it will take at least a year and a half for the
banana crop to come back.
Senator Graham. And because of the loss of roads and
bridges, those agricultural areas that are still in production
are having difficulty getting their crops to the market.
Chairman Crane. As you know, we have had differences with
our two bodies in trying to address legislation that would
provide not only relief and help to those developing republics,
but simultaneously would be beneficial to consumers here, and I
know that there are differences that are still outstanding
between the House and the Senate. I am aware that the President
has transmitted a CBI proposal to Congress, although no Member
on the House side has introduced it. Have you reviewed the new
Administration proposal?
Mr. Kolbe. Mr. Chairman, I have read the summary of his
proposal, and I think your bill, our bill, is much better. It
is much more expansive. I mean, I think the key thing, again,
is this textile issue. And I think you have got to not
absolutely restrict it to fabrics that are grown in the United
States or made in the United States. The natural course will be
that we will have more of it if we do that. But that should not
be the issue. We should not be hung up on that.
Senator Graham. Clearly, apparel is the focal issue. In
Honduras, for instance, where there are approximately 100,000
people employed in industries that benefit by the CBI, over 95
percent of them are employed in the apparel assembly industry.
That is the significant target if the goal is to provide some
early economic relief through diversification from the high
levels of previous reliance on agriculture in Honduras and
other countries.
I think this issue of 2005 has fundamentally change the
argument. The issue to me is what do we need to do in our
national self-interest in the next 5 years in order to increase
the relative competitive position of the CBI countries in--
specifically in apparel vis-a-vis the Far East. Because if we
don't use this 5 years in a constructive way to narrow that
competitive disadvantage, 10 years from now we won't have
anything to talk about, because all the shirts are going to be
produced in the Far East and not only will those almost 100,000
people in Honduras be out of a job, but a lot of American
cotton farmers, a lot of American textile workers will also be
out of a job.
Chairman Crane. On three different Presidential trips, the
Administration has promised the CBI region that it would work
to try and develop CBI enhancement legislation. Based upon what
you have seen thus far coming from the White House, do you
think they are acting seriously on this issue?
Senator Graham. Mr. Chairman, I was with the President in
Honduras, Nicaragua, and Salvador, and he certainly made strong
statements in each of those countries of his commitment to the
goal of the United States not only providing humanitarian
relief, but also assisting in the form of economic relief which
CBI enhancement would provide. So I think the President is
personally committed, has directed his people at the U.S. Trade
Representative's Offices and those who deal with the Congress
to give this a high priority.
Chairman Crane. Well, Senator, did you read his proposal
that he has sent to Congress? I am curious as to whether you
think it bridges the gap between House and Senate differences?
Senator Graham. In all candor, Mr. Chairman, I have not
read the President's proposal. My feeling is that what we need
to do is to get some bill passed here in this distinguished
body, some bill passed in the Senate, and then let us get to
conference. And if we in conference can focus on this question
of what kind of bill will use this next 5 years most
efficiently in order to help us survive economically in the
apparel industry in the western hemisphere and specifically in
North America and the Caribbean after the year 2005. I think we
can come out with a very constructive result.
Mr. Kolbe. Mr. Chairman, if I might just add, in my view
the President's proposal doesn't really help to bridge the gap
between the two bills. The House bill is over here. The Senate
bill is over here, and the President's bill is just off over
there to the side a little bit.
I do believe the President is committed to this thing, but
he really needs to put his shoulder to the wheel and that of
everybody at USTR and in the White House on this, and work up
here on Capitol Hill to get a piece of legislation that the two
sides can agree on. And I think the President really needs to
get involved in doing that.
Chairman Crane. Thank you. Mr. Levin.
Mr. Levin. I thank you very much, and I very much agree
that we need to work on this and see if we can bring it to a
conclusion. Senator Graham, let me suggest an alternative
approach to our passing a bill here, and then your passing bill
there, and then see if the twains can meet in conference.
There is a substantial difference in the textile apparel
provisions between the House and the Senate. In a word, to my
friend, Jim Kolbe, the Senate bill doesn't accept your
statement toward the end of your testimony, U.S. textile is
moving. There is nothing we can do about that. The Senate bill
suggests there is something we can do about it, and that is
that there be requirements for the materials that are used we
know what is in the Senate bill. And it is a serious position.
And essentially what the President--I think, I haven't talked
to him directly about it--I think the decision was to introduce
or to present a bill that would suggest that we break the
deadlock on this by coming out closer to the Senate provision
than the House provision. And the fact that quotas will be
eliminated in 5 years, it doesn't mean tariffs will be.
And I think essentially, Senator Graham, that what the
President's approach does is to adopt your suggestion that
these are 5 critical years, and that we have to develop strong
relationships between the producers of the materials here and
other facets of it, and those who are essentially putting it
together elsewhere in the Caribbean. And I think you argue
strongly, and I think quite persuasively, that these are 5
critical years.
Now, we can try to resolve--there are other issues in the
CBI bill, but this, I think you will agree, is the most
sensitive one. And I don't think we can resolve it by being
insensitive to a sensitive issue. And I just want to suggest, I
don't pretend to have any crystal ball on this or anything
close to it, as the Chairman of the Subcommittee and I
discussed a few months ago, an alternative strategy would be
for us to see if we could have some discussions on this piece
of the bill and perhaps others before it goes through here,
because otherwise, I think, it might involve itself in a major
battle, a major confrontation that would not necessarily help
the eventual disposition, the eventual resolution of this bill.
We clearly need to help Central American countries develop
economically. They are showing they can evolve democratically,
a dramatic contrast from a long time ago, when my father used
to go to Central America, and it was in those days counselor
general from a totally unknown country in Michigan--that was
the Republic of Honduras. It was a pure dictatorship. They have
evolved into democracies.
We have all kinds of reasons to try to be helpful, and I
just want to throw out the suggestion that instead of just kind
of playing, doing our thing here, and then doing your thing
there, that we see if we can have some constructive discussions
beforehand, because the two of you sit there united in your
feeling we have to act, but with some differences as to what
the content would be. And I don't think we will resolve the
issue by trying to blur it or trying to evade it or finesse it.
We need to meet it, I think, head on. And my own judgment is
the sooner the better. I don't know if you want to comment on
that, Senator or Mr. Kolbe, just to suggest.
Senator Graham. Mr. Congressman, to tell you the truth, I
have been introducing CBI enhancement legislation almost since
I have been in the Senate. I will take any train that will get
us to the destination of passage of a bill that will make a
significant difference, particularly will allow us to be
competitive after the year 2005. And your suggestion of maybe
using the next few weeks, and I agree with you--the emphasis
ought to be on the few to see if an agreement can be reached
that both houses and the White House would agree will be the
basis of our moving forward. I would like to buy a ticket on
that train.
Mr. Kolbe. Mr. Levin, I would just say that I don't think
there is any real fundamental disagreement at all on any of
this among us here. We all want to get a bill passed. We are
trying to strategize as to how we can do that. And if
negotiations before we pass a bill on either side can help us
do that, that is great. My only plea would be to downtown--to
the White House to please get involved in that process. I think
they can help us do that, and I just--and I am not trying to be
critical, because I have worked with the Administration on this
legislation and other trade legislation, as you know, but I
just don't think they have been really engaged yet on this. We
need their help. We are not going to do it unless we get their
help.
Mr. Levin. I think your constructive feeling about that,
however you describe their role up to this point, I think is
very useful, and I hope we can proceed on that basis. Thank
you, Mr. Chair.
Chairman Crane. Mr. Houghton.
Mr. Houghton. Well, Mr. Chairman, just very briefly.
Clearly, our region is taking on a different hue. We need some
legislation. We are not going to resolve the difference between
the House and the Senate here. I agree with Senator Graham that
almost any train is worth it, to hop on it, and we ought to do
it. And I support the legislation which ultimately will come
out of this Committee. Thank you.
Chairman Crane. Mr. Rangel.
Mr. Rangel. Thank you, Mr. Chairman. Thank both of you for
your interest over the years. It seems like the equitable thing
to do is after we have gone into a treaty agreement with our
friends in this region that if, indeed, the NAFTA agreement
gave them a disadvantage, that we would try to place them on
parity. But I suspect that your offices, like mine, have
received some opposition to this bill, indicating that No. 1,
excuse me--that there has been no loss of trade with the
Caribbean countries as a result of NAFTA, and No. 2, that this
bill will cause an increase in the loss of American jobs if
enacted into law.
Could I hear comments from both of you on that subject?
Mr. Kolbe. I'll begin this time. I have frankly not had a
lot of letters or calls from people on this. This has been a
fairly low-key issue, at least in my area. But I just would
reject, Mr. Rangel, the argument that we are going to lose jobs
as a result of it. I think the point that we need to keep
making over and over again is that in 2005, all of these
protections come off, and you will have no ability to control
where it comes from. If we can now, in these interim years,
give this kind of relief to Central America, it will help
stimulate the investment in those countries that will make it
possible for more of the jobs to be saved in this country, as
we do make the fabric or the yarn or the thread here in this
country.
So I do think that we can save jobs.
Senator Graham. Mr. Congressman, in reference to the first
question, I think the statistics which I would like to secure
and submit for the record are quite persuasive that since the
adoption of NAFTA, which has given to Mexico an eight to 10
percent differential in the cost of importing apparel products
into the United States, that there has been a significant
slowing of the investment in the CBI region and a commensurate
rapid acceleration of investment in Mexico.
Second, in terms of jobs, I think we have got to look
through the front windshield, not through the rear view mirror.
And the front windshield looks out 5 years to what are the I
think almost inevitable consequences if we do nothing, and that
is that there will be such a competitive disadvantage between
the Caribbean Basin and the Far East with no quota restrictions
on importations of apparel from the Far East that there will be
a strong incentive to relocate jobs from Honduras to
Bangladesh, and that when that happens not only will the jobs
be lost in Honduras, but all of the support industries, from
the farmer to the textile worker in the United States will have
their jobs and income affected.
Mr. Rangel. And I suppose we should take in consideration
the balance of trade with the increase imports coming from the
United States into these neighboring countries. And that
tradition has been over the years.
Mr. Kolbe. Mr. Rangel, could I--staff just handed me these
figures. Since the introduction, since the implementation of
NAFTA, there has been a 548 percent growth of apparel from
Mexico into the United States. As a percentage of total exports
to the United States--the CBI has always had more than Mexico.
But Mexico's exports to the United States as a percent of CBI's
exports to the United States have grown from 28 percent in 1993
to 75 percent in 1998. So I think the clear effects of NAFTA
can be seen from that.
Mr. Rangel. Thank you.
Chairman Crane. Ms. Dunn.
Ms. Dunn. Thank you, Mr. Chairman. I want to tell you two
gentlemen that I do agree and support your bill. But I want to
ask you a couple of questions.
If we don't extend enhanced CBI benefits to the Caribbean
Basin, aren't we, in some way, undermining democratic
governments that have been established in this region by
further undermining their economic stability?
Senator Graham. Absolutely, Madam Congresswoman. I think
one of the, one of the disturbing questions about the western
hemisphere is the fact that the two oldest democracies on the
continent of South America are Colombia and Venezuela. And if
you would ask most informed observers today which are the
nations that are in the most difficulty, it would be Colombia
and Venezuela.
To me, one of the lessons from that is that it is not
enough to have an election which are important to democracy and
one of those is an economic system that will give people a
sense of participation and hope in a more prosperous future for
themselves and their families. And that is exactly the
challenge before these new democracies throughout the
hemisphere, but particularly those democracies which so
recently were engaged in violent civil conflict, such as
Guatemala, Salvador, Nicaragua. And building that economic base
probably as much as any single factor will determine whether
they continue on the path of democracy or revert back to the
instability of civil violence.
Mr. Kolbe. My one word answer is yes. It would.
Ms. Dunn. Thank you. Also since passage of CBI, United
States exports to the region have tripled to about $18.5
billion. Would enactment of your bill, H.R. 984, ensure that
United States exports to the region would remain at high
levels?
Mr. Kolbe. Ms. Dunn, I think my answer to that would be
yes. I mean--none of us can predict with absolute certainty and
certainly all of us have I think made errors in some
predictions we have made about trends of trade after the
adoption of GATT, the Uruguay Round of GATT, or after the
adoption of NAFTA; and so I would be hesitant about making
these--those predictions with absolute certainty. But I think
the answer is yes, it does help to assure that the United
States can continue to export the kind of infrastructure that
supports the manufacturing and export industries in those
countries. So I think we will benefit from it and will keep our
export levels higher.
Senator Graham. My answer is yes.
Ms. Dunn. Thank you very much, Mr. Chairman.
Chairman Crane. Mr. Becerra.
Mr. Becerra. Thank you, Mr. Chairman. And I really have no
question other than to comment to say thank you to the two
gentlemen for their work on this issue, and especially for
their efforts to go into the regions affected by the recent
hurricanes and to propose constructive legislation to try to
resolve the matters. I agree with what both gentlemen have said
on the issue of trying to get something to the table so we can
get the President to sign something. Hopefully, it will be a
good compromise that everyone can live with, and I am hoping
that I will be one of those who gets to support it as well.
Thank you, Mr. Chairman.
Chairman Crane. Thank you, and I want to thank you
gentlemen again, not only for your participation today, but
your ongoing involvement in this issue, and look forward to
hopefully to a successful conclusion this year.
Senator Graham. Thank you so much.
Mr. Kolbe. Thank you very much, Mr. Chairman.
Chairman Crane. And now I would like to ask our second
panel to take seats. The Honorable Richard Fisher, Deputy USTR,
and the Honorable Alan Larson, Assistant Secretary for Economic
and Business Affairs.
And, gentlemen, after you have taken your seats, please
proceed in the order I introduced you, and, as I indicated
before, try to keep your oral presentations around 5 minutes.
Any printed statements will be made a part of the official
record.
And with that, we will start with you, Mr. Fisher.
STATEMENT OF HON. RICHARD FISHER, DEPUTY UNITED STATES TRADE
REPRESENTATIVE
Mr. Fisher. Thank you, Mr. Chairman. My colleague,
Assistant Secretary Larson, and I are here to answer
Congressman Kolbe's plea and to begin the process of moving
down the track that Senator Graham had mentioned. I would like
to start by offering my thanks to you and to the Subcommittee
for your consistent support of our mission to open markets,
expand trade, and enforce trade laws and trade agreements. We
very much appreciate our close working relationship with this
Committee and the Subcommittee, and we hope to continue it well
into the future.
Mr. Chairman, we in the Administration share the concerns
you and others in Congress and the panelists that appeared
before us have expressed regarding the need to support our
neighbors in Central America and the Caribbean in the aftermath
of last year's devastating hurricanes.
This is, of course, a humanitarian imperative, as mentioned
by everyone who has commented on this process so far. It is
also a matter of our national interest. As the Congresswoman
implied in her question just now, strong, expanding economies
and the ability to succeed in the international economy are
essential for the Caribbean nations to create health markets
for their own goods and services, to fight crime and narcotics,
and to create--to your point, Congresswoman--stable, democratic
societies.
And they are essential for us to create mutually beneficial
trade relations with the region. As you mentioned, Mr.
Chairman, in the introduction to this session, the Caribbean
Basin Economic Recovery Act, better known as the Caribbean
Basin Initiative, or CBI, has helped us toward this goal for
some 15 years since its initiation during the Reagan
Administration. Indeed, the CBI is the centerpiece of our trade
relationships with Central America and with the Caribbean.
Since 1994, CBI has complemented the peace process in Central
America, assisted in the regions progress toward today's era of
peaceful democracy, and stimulated two-way trade between the
United States and CBI countries to our mutual benefit.
And this is evident, of course, in our trade statistics.
Last year, the U.S. merchandise exports to CBI countries were
more than $19 billion, 48 percent of which, parenthetically,
were textiles. To put this in context, as you referenced, Mr.
Chairman, in your introduction, last year our goods exports to
China were $14.4 billion. Our goods exports to France were $16
billion. Our goods exports to Brazil were $16 billion. So, in
short, we export more to the CBI countries than we do to the
countries I just mentioned. Regarding our imports, as you
referred to, Congresswoman, CBI beneficiaries exceed $17
billion.
Two-way trade with CBI, therefore, exceeds $36 billion.
That is real money. The Caribbean Basin is a market of great
importance to the United States, and we will all prosper from
better two-way trade. That is the underlying premise.
In designing the legislation that we have put forward, the
Administration, Mr. Chairman, has considered a number of
issues: the evolving economic and trade situation in the
Caribbean region; the need to help the region prepare for the
initiative of the Free Trade Areas of the Americas, the FTAA;
the need for the region to meet its commitments to the World
Trade Organization; and to succeed in the world economy.
We also consider the constraints imposed upon us by
budgetary considerations and the advice that we have received
from our friends in Congress. As a whole, we believe that the
package that we are putting forward is one of mutual benefit
for the United States and the beneficiary nations. I want to
stress that we look forward to working with you to further
improve it, if necessary, and, as was just mentioned by the
distinguished Senator and Congressman, to ensure its passage.
In an overall sense, the legislation authorizes enhanced
temporary trade benefits to the Caribbean Basin countries for
apparel products assembled from U.S. fabric and textile
handicrafts, and all non-textile products currently excluded
from the CBI program. These non-textile products are petroleum,
with petroleum derivatives, footwear, certain categories of
flat goods and gloves, leather apparel, canned tuna, and
categories of watches.
As was mentioned earlier, the sticking point in these
previous discussions have been textile and apparel provisions,
so I would like to turn to that and summarize what is in the
President's proposal.
The President's proposal provides eligible countries
immediate duty-free and quota-free treatment for products that
are (a) assembled in the CBI region of fabric, which was made
in the United States from U.S. yarn and cut in the United
States; (b) that are cut and assembled in the CBI region of
U.S.-formed fabric containing U.S. yarn; or (c) handloom or
hand-made or folklore articles. For non-textile products, the
President would be authorized to cut tariffs of the rate
applicable to Mexican goods under the NAFTA.
The benefits under the bill, Mr. Chairman, would apply for
21 months, from October 1, 1999 through June 30, 2001. We have
many different types of eligibility criteria. I see that the
red light is on. I will summarize them as quickly as I may, if
I may continue.
There are basically two types of eligibility criteria in
the President's proposal. One is mandatory, and the other is
discretionary. With respect to mandatory requirements,
countries may be designated beneficiaries only if they comply
with existing CBI criteria and also demonstrate commitments to
undertake their WTO commitments on or ahead of schedule,
participate in the FTAA negotiations, and undertake other steps
necessary for eventual accession to the Free Trade Area of the
Americas, or, in its place, an equivalent free trade agreement.
There are 11 discretionary data, which are summarized, Mr.
Chairman, in my written statement, and I won't take up your
time today by reviewing them.
I want to say, though, that the legislation also has very
strong provisions to prevent transshipment and other abuses
that one might be tempted to entertain to exploit the
provisions of this initiative.
Under the CBTA, if the President finds that goods from
third countries are being transshipped through CBI's countries
and are receiving duty-free preference that they should not be
receiving, the U.S. Trade Representative, our office, may
reduce the amount of any quota, including eliminating a
country's access to the U.S. market for this product.
Furthermore, the Caribbean Basin Trade Enhancement Act
contains a safeguard provision that enables the President to
suspend duty-free treatment if temporary import relief is
determined to be necessary due to serious injury to domestic
industry.
In summary, Mr. Chairman, this proposal offers significant
trade benefits to our partners in the Caribbean and Central
America. It reflects a maturing relationship between the United
States and the countries of the Caribbean Basin. It helps to
promote the goals we share with CBI members and their full
participation in regional and world trade. Its passage will
help the region remain on a healthy track, and the track it has
been on for the last years of CBI. Growing economies,
stabilizing democracies, strengthening peace and close trade
and other relations with the United States. And it will provide
a source of hope and confidence in the future to the people
who, as we speak, are rebuilding their homes and their farms
and lives in the conclusion and aftermath of these horrible
hurricanes.
Mr. Chairman, let me thank you, in conclusion, and the
Members of this Committee and Subcommittee for your constant
support of strong relations between the United States and our
neighbors in the Caribbean Basin. Ambassador Barshefsky and I,
all of us at USTR and in the administration look forward to
working with you to ensure passage of meaningful CBI
enhancement legislation this year.
As Congressman Rangel--excuse me for taking liberties,
Charlie--mentioned earlier, waiting is not an option. We are
eager to find a practicable solution to get a CBI initiative
passed through the Congress. Mr. Chairman, I thank you for the
time, and we look forward to working with you.
[The prepared statement follows:]
Statement of the Hon. Richard Fisher, Deputy United States Trade
Representative
Mr. Chairman, Mr. Ranking Member, Members of the Subcommittee: I
welcome this opportunity to appear before the Subcommittee today to
discuss the Administration's proposed Caribbean Basin Trade Enhancement
Act (CBTEA) and our desire to work with you to pass CBI enhancement
legislation.
Let me begin by offering my thanks to the Subcommittee for your
consistent support of our mission to open markets, expand trade, and
enforce trade laws and trade agreements. We appreciate our close
working relationship. We hope to continue it into the future.
Introduction
Mr. Chairman, we in the Administration share the concerns you and
others in Congress have expressed regarding the need to support our
neighbors in Central America and the Caribbean in the aftermath of last
year's devastating hurricanes.
This is, of course, a humanitarian imperative: in the past months,
hundreds of thousands of Central American families have lost their
homes and livelihoods, and risks to health and nutrition in affected
areas are high. It is also a matter of our own national interest.
Strong, expanding economies and the ability to succeed in the
international economy are essential to create healthy markets for our
own goods and services, to fight crime and narcotics, and to create
stable, democratic societies.
Thus, as we assist our neighbors in the Caribbean Basin by
increasing market access for their products, we advance our trade
agenda by encouraging them to continue to reform their economies and to
move closer to our common goal of more open and fair trade and
investment policies throughout our hemisphere; and to our broader
national interest in a close relationship with our neighbors based on
common interests and shared values.
The Caribbean Basin Economic Recovery Act (CBERA), better known as
the Caribbean Basin Initiative (CBI), has helped us toward this goal
for fifteen years since its initiation during the Reagan
Administration. Indeed, the CBI is the centerpiece of our trade
relations with Central America and the Caribbean. Passed by Congress in
1983 and implemented during 1984, CBI has complemented the peace
process in Central America, assisted in the region's progress toward
today's era of peaceful democracy, and stimulated two-way trade between
the United States and the CBI countries to our mutual benefit.
This is evident in our trade statistics. Last year, United States
merchandise exports to the CBI countries were more than $19 billion. To
put this in context, last year our merchandise exports to France were
$16.0 billion, to Brazil $15.9 billion, and to China $14.4 billion. Our
imports from CBI beneficiaries exceeded $17 billion. Two way trade with
CBI countries exceeds $36 billion. The Caribbean Basin is a market of
great importance to the U.S., and prosperity in the region will help
our two-way trade grow further.
In the aftermath of last winter's hurricanes, the Administration
strongly supports enhancing the CBI's benefits. This will help increase
international confidence in the long-term economic prospects of the
Caribbean region, supporting investment both at this especially
difficult time and over the long term. Let me stress at the outset, Mr.
Chairman, that the Administration's primary goal with regard to CBI
enhancement is to work together with you to pass a balanced, realistic
and meaningful bill this year.
The Caribbean Basin Initiative (CBI)
Let me begin with some of the CBI's history.
Created in 1983, the CBI allows the President to grant unilateral
duty-free treatment on U.S. imports of eligible articles from CBI
beneficiary countries. Most recently, Congress amended the CBI in Title
II of the Customs and Trade Act of 1990. Commonly known as CBI II, this
Caribbean Basin Economic Recovery Expansion Act of 1990 made the trade
benefits of the CBERA permanent by repealing the 12-year termination
date of September 30, 1995. In addition, it made several improvements
in the trade and tax benefits. These improvements included: a 20
percent tariff reduction on certain leather products, phased in over
five years; duty-free treatment for Puerto Rican products imported from
CBI countries; and duty-free imports from beneficiary countries for
products made from 100 percent U.S. components, except for textile and
apparel articles, and petroleum and certain products derived from
petroleum.
Additional improvements provided in CBI II included: an increase in
the duty-free tourist allowance from $400 to $600; an exception to the
general cumulation rule, required under the antidumping and
countervailing duty laws, for imports from CBI beneficiary countries;
and a scholarship assistance program for the region.
Since then, as part of our effort to improve the program through
administrative enhancements, Administrations have expanded the list of
products eligible for CBERA duty-free treatment through two
proclamations, intended to make the CBERA consistent with the
Generalized System of Preferences (GSP). Effective September 28, 1991,
94 tariff categories, affecting 47 million dollars in 1991 imports,
were provided new or expanded duty-free treatment. A second expansion
was effective on July 17, 1992. Twenty-eight tariff categories were
provided new or expanded status as CBI-eligible goods.
Principles of CBI Enhancement
That brings us to the present, when in the wake of last winter's
natural disasters, the Administration proposes extending CBI benefits
extended to products heretofore excluded by statute. In designing this
legislation the Administration considered a number of major issues: the
evolving economic and trade situation in the Caribbean Basin region;
the region's role in the negotiations toward the Free Trade Area of the
Americas; the region's commitments to the WTO; the constraints imposed
upon us by budgetary considerations; and areas in which enhancement
will benefit both the U.S. and the beneficiaries.
In the regional sense, the greater openness of most Caribbean Basin
economies over the past decade, improved macroeconomic stability, and
the growth of foreign direct investment has set CBI countries on a path
toward improved economic growth. Our legislative proposal supports
these reforms. We also considered the perception among some CBI
countries that passage of the NAFTA placed them at a relative
disadvantage vis-a-vis Mexico, especially in the textile and apparel
sector. Finally, we wanted to construct the enhancement in a way that
would help the region make the transition to the Free Trade Area of the
Americas.
With respect to the trading system, today all but one of the CBI
beneficiaries belong to the World Trade Organization. As WTO members
they have undertaken a commitment to adhere to the rules of that
organization. The CBI Trade Enhancement Act will promote compliance
with those obligations, especially the new obligations emanating from
the Uruguay Round. In many instances, the countries of the Caribbean
and Central America will conclude their Uruguay Round transition
periods during the period of the CBTEA.
Of course, the principal sector excluded from CBI until now has
been the textile and apparel sector. The CBTEA has been constructed
with the intention to respond both to the concerns of the CBI countries
that feel they have been disadvantaged by Mexico having NAFTA benefits
for apparel shipments to the U.S., and to the concerns of U.S. industry
that their own investments and partnership production operations in the
Caribbean have continued viability and success.
The key to CBI's success is that the trade it promotes provides
benefits to both the U.S. and the Caribbean Basin countries. We should
retain that feature of mutual benefit. The vast majority of our apparel
imports from the Caribbean Basin countries contains substantial U.S.
content. This means that our producers and our workers make fabric and
the other inputs (linings, sewing thread, notions) that go into the
CBI's apparel. Our companies employ people in manufacturing textiles
and in cutting and distribution in the U.S., and facilities in the
Caribbean and Central America employ people in sewing and assembling
and some textile manufacturing. As a result of this complementarity, we
have seen a declining share of U.S. market taken by imports from Asian
sources in favor of production within the hemisphere. Last year in
volume terms, imports of apparel from the CBI grew 8 percent, while
imports from China declined by four percent. Moreover, the CBI
countries, taken together, are our largest foreign supplier of apparel
products. We fully expect the textile and apparel provisions of our
proposed legislation to further expand such trade in a manner that will
benefit the United States as well as the CBI beneficiary countries.
Thus, given the potential benefits for these countries and the
changing economic and trade environment in the region, we have designed
a program that would give countries the incentive to continue to make
progress on trade policy. We have also given a great deal of thought to
ensuring increased market access for U.S. businesses as we grant
increased preferences to CBI countries. This bill does not create a one
way street of open-ended trade preferences with no benefit to U.S.
interests. It promotes a responsible partnership for prosperity and for
shaping the hemisphere's economy for the new century, as it fulfills
the President's commitment, reaffirmed during his recent trip to
Central America, to work with the Congress to pass legislation that
would provide enhanced trade preferences to countries in the region.
Provisions of the Caribbean Basin Trade Enhancement Act (CBTEA)
Let me now discuss the specific provisions of the Administration's
bill. In an overall sense, the legislation would authorize the
President to provide enhanced temporary trade benefits to Caribbean
Basin countries for: apparel products assembled from U.S. fabric;
textile handicrafts: and all non-textile products currently excluded
from the CBI program. Those non-textile products are: petroleum and
petroleum derivatives, footwear, certain categories of flat goods and
gloves, leather apparel, canned tuna, and a category of watches.
1. Textile and Apparel Provisions
The President's proposal would provide to eligible countries
immediate duty-free and quota free-treatment for textile and apparel
products if such products are:
(A) assembled in the CBI region of fabric which is made in the U.S.
from U.S. yarn, and cut in the U.S. (i.e., 807-A program);
(B) cut and assembled (using U.S. sewing thread) in the CBI region
of U.S. formed fabric containing U.S. yarn (known as the ``809''
program); or
(C) handloom, handmade, or folklore articles (as identified by
President and properly certified by the exporting country).
For non-textile products, the President would be authorized to cut
tariffs to the rate applicable to Mexican goods under the NAFTA. The
benefits under the bill (e.g. 100 percent tariff reduction) would apply
for 21 months, from October 1, 1999 through June 30, 2001.
2. Eligibility Requirements
Mandatory Eligibility Requirements. A country would be designated a
beneficiary for the new trade benefits only after the President has
determined that it has complied with a set of new eligibility criteria
in the bill. (Every CBI beneficiary already must be complying with the
criteria in the existing CBI law to continue to receive trade
benefits.) The mandatory eligibility requirements are that a CBI
country has demonstrated commitments to undertake its WTO obligations
on or ahead of schedule; to participate in FTAA negotiations; and to
undertake other steps necessary for eventual accession to the FTAA or
an equivalent free trade agreement.
Discretionary Eligibility Requirements. The bill also provides
eleven discretionary eligibility requirements to be examined in
determining whether the benefits provided in the bill should be
extended to a particular CBI country.
After the initial designation of CBTEA beneficiary countries based
on the mandatory eligibility requirements, the President would examine
these criteria to determine whether such countries should continue to
receive 100 percent of the CBTEA tariff reduction benefits. The CBERA
reports prepared by the Administration for the President to send to
Congress would include recommendations concerning the extent to which
each beneficiary country should continue to enjoy CBTEA benefits. In
the event a country failed to demonstrate sufficient progress under
these criteria, the country could have its level of benefits reduced
during the period currently covered by the CBTEA or, should the CBTEA
be extended beyond June 30, 2001, at a subsequent time. The eleven
additional eligibility requirements are as follows:
International Trade Rules: The extent to which a country
follows accepted rules of international trade provided in the WTO
Agreement, including compliance with WTO panel and Appellate Body
determinations.
Intellectual Property Rights (IPR): With respect to
intellectual property rights, the bill includes eligibility criteria
regarding a CBI nation's compliance with the WTO Agreement on Trade-
Related Aspects of Intellectual Property Rights, the provisions of
Chapter 17 (Intellectual Property) of the NAFTA, and certain other IPR
standards.
Investment: With regard to investment, the bill includes
an eligibility criterion based on a CBI nation's compliance with the
provisions of NAFTA Chapter 11 (Investment). These conditions would
encourage national treatment and other protection for U.S. investments.
Market Access: Beneficiary countries would be expected to
provide equitable and reasonable market access in product areas for
which the CBI countries are receiving new benefits.
Worker Rights: Beneficiary countries would be expected to
observe internationally recognized worker rights, including the right
of association, the right to organize and bargain collectively, a
prohibition on the use of any form of coerced or compulsory labor, a
minimum age for the employment of children, and acceptable conditions
of work with respect to minimum wages, hours of work, and occupational
safety and health.
Environmental Protection: The CBTEA would also take into
account the extent to which the country adopts and enforces laws
providing for a high level of environmental protection.
Narcotics Cooperation: The President would consider
whether the beneficiary country has met the narcotics cooperation
certification criteria set forth in section 490 of the Foreign
Assistance Act of 1961 for eligibility for United States assistance.
Corrupt Business Practices: This legislation would
encourage CBI nations to ratify the recently concluded Inter-American
Convention Against Corruption. The President also could take into
account whether, having ratified this Agreement, countries are taking
necessary measures to implement the Agreement.
Government Procurement: Our proposed eligibility criteria
include a CBI country's support for the multilateral and regional
objectives of the United States with respect to government procurement,
including the negotiation of government procurement provisions of the
FTAA and the work program in the WTO as agreed at the Singapore
Ministerial Conference; and the extent to which the country applies
transparent and competitive procedures in government procurement
equivalent to those in the WTO Agreement on Government Procurement.
Customs Valuation: The bill includes an eligibility
criterion based on the provisions of the WTO Agreement on
Implementation of Article VII of the GATT 94, which addresses rules for
customs valuation.
Fair Treatment: The President could take into account the
extent to which those CBI nations that have entered an FTA with any
other countries (i.e., beyond the members of CARICOM or the Central
American Common Market) are prepared to grant the United States
comparable access for commercially important products. This provision
is intended to give the United States protection against discrimination
in favor of partners outside the Caribbean region even as we grant a
beneficiary country enhanced market access.
These eligibility requirements are not imposed for the purpose of
excluding countries from the program. The intent is to encourage
countries to pursue sound trade and investment policies that prepare
them to assume the kinds of obligations that we expect to emerge from
the FTAA negotiations. In some cases, of course, these requirements
correspond to WTO obligations that these countries already have pledged
to abide by. Thus, the eligibility requirements are essential to make
the program a transition to a permanent, reciprocal relationship at the
appropriate time.
3. Transshipment and Safeguard Provisions
It is essential that the benefits of CBI enhancement be confined to
those countries for whom it is enacted. Accordingly, the legislation
has strong provisions to prevent transshipment and other abuses. CBTEA
customs enforcement is modeled on the NAFTA provisions, and NAFTA-type
documentary requirements will apply. Under the CBTEA, if the President
finds that goods from third countries are being transshipped through
CBI countries and are receiving duty preferences that they should not,
the United States Trade Representative may reduce the amount of any
quota with the countries involved in transshipment.
The CBTEA also contains a safeguard provision which, as in NAFTA,
enables the President to apply duties and/or impose quotas if imports
of textiles and apparel are causing or threatening serious damage to
domestic production.
4. Reporting Requirements
The CBTEA would coordinate the due dates of the reports to be
prepared by the President, the ITC, and the Secretary of Labor under
the CBERA and the Andean Trade Preferences Act. Under the CBTEA, the
President would deliver the next CBERA report to the Congress on
December 1, 2000, in sufficient time for the Congress to consider the
renewal of the program prior to June 30, 2001. The report would include
an evaluation of countries' compliance with the discretionary criteria.
As noted, it is our expectation that countries identified as
demonstrating inadequate progress under these criteria could have their
benefits reduced below the 100 percent level. The President would, of
course, be able to suspend a country's benefits at any time, if it
failed to maintain satisfactory performance under the criteria.
Coordination with GSP Country Eligibility Reviews
The legislation would codify the existing practice of withdrawing
or limiting CBI benefits when GSP benefits are withdrawn or limited as
a result of a finding in a GSP Country Eligibility Review that a
beneficiary country has failed to remedy a deficiency with respect to
one or more eligibility requirements.
Maturing Relationship
In summary, this is a balanced proposal. It provides significant
trade benefits to our partners in the Caribbean and Central America,
reflects the maturing relationship between the United States and the
countries in the Caribbean Basin, and helps promote the goals we share
with CBI members of their full participation in regional and world
trade.
We can be very proud of the work we have done in partnership with
the Caribbean Basin governments and people over the past fifteen years.
Since the beginning of the Caribbean Basin Economic Recovery Act in
1984, regional trade has grown; all but one CBI beneficiary belongs to
the World Trade Organization and all those that belong have agreed to
implement all of the obligations needed for membership; and all of the
countries in the region are involved in the FTAA process. During the
same period, Caribbean standards of living have grown; democracy has
stabilized in countries in which it was threatened; and peace has
strengthened. This is a trend of immense importance, most of all to the
Caribbean nations but also to the United States. This proposal will
help us remain on that path.
In conclusion, Mr. Chairman, let me salute your constancy over the
years in pursuit of stronger relations between the United States and
the countries of this region. Ambassador Barshefsky and I and our
colleagues in the Clinton Administration look forward to working with
you and this Committee to craft meaningful CBI enhancement legislation
that will pass the Congress and be signed into law this year. Thank you
again for this opportunity to appear before this Sub-Committee.
Chairman Crane. Thank you, Mr. Ambassador.
Mr. Larson.
STATEMENT OF HON. ALAN LARSON, ASSISTANT SECRETARY FOR ECONOMIC
AND BUSINESS AFFAIRS, U.S. DEPARTMENT OF STATE
Mr. Larson. Mr. Chairman and Members of the Committee,
thank you very much for this opportunity to testify. I would
like to complement Ambassador Fisher's testimony by stressing
four points: first, that the United States has a large stake in
seeing peace, prosperity, and democracy take root in Central
America and the Caribbean; second, that the Administration's
bill is a key part of a multi-faceted strategy to foster
durable, private sector led economic growth in the region;
third, that now, in the aftermath of Hurricane Mitch, quick
passage of this legislation is all the more important in order
to give hope to the region and guidance to investors; and,
fourth, enactment of this bill will continue a tradition of
enlightened bipartisan cooperation between the Congress and the
executive branch on these issues.
Mr. Chairman, we need to promote peace, build democratic
institutions, achieve prosperity, and raise the quality of life
in this region. And these are goals that are shared by the
people of Central America and the Caribbean. Growth in Central
America and the Caribbean nations does not benefit only those
countries; we benefit as well.
Trade with these countries has been bright spot. Between
1996 and 1998, United States exports to Central America
increased by 44 percent. The U.S. exported nearly as much to
CBI countries last year as it did to China and India combined.
Our relationship is marked by strong cultural and people to
people ties. But the flow of people between the United States
and the Caribbean Basin must be orderly. There are indications
that in the aftermath of Hurricane Mitch, the flow of illegal
immigrants to the United States from Central America is
increasing. Economic reconstruction and growth can provide
economic opportunities to help persuade potential illegal
migrants to stay home.
The fight against narcotics and other transnational crimes
is a top U.S. priority. We are deeply concerned that
traffickers will attempt to take advantage of the disruption
caused by the hurricane to bring through this region even
larger amounts of illegal drugs that will end up on our
streets. This bill will strengthen the battle against illegal
narcotics by encouraging legitimate job creation.
In recent years, we have taken a number of steps to
encourage economic development in this region. We have
cooperated in opening up the regional civil aviation market.
Working with private U.S. companies and potential lenders, we
are exploring a package to encourage telecom infrastructure
reconstruction. We have concluded bilateral intellectual
property rights agreements with Nicaragua and Honduras. We have
negotiated bilateral investment treaties with many countries
and are seeking ratification of new BITs with Honduras,
Nicaragua, and El Salvador. We have encouraged the
international financial institutions to be active in the
region. And we have participated in multilateral debt
rescheduling for many countries and pledged substantial debt
forgiveness to Nicaragua, Guyana, Honduras, and Haiti.
But, Mr. Chairman, CBI enhancement legislation is a key
element of this package, and it has so far been the missing
element. Now, in the aftermath of Hurricane Mitch, the economic
situation has become more urgent, and that is why quick action
is needed.
The Administration's bill may not please everyone in every
detail. But we cannot let perfect be the enemy of good. The
Administration's bill balances various competing interests, and
we believe provides a basis for early action.
Mr. Chairman, one of the most important chapters of this
region's history has been the transformation of its economic
policies from inward looking and state-directed policy toward
export-oriented and market-based policies. The Ways and Means
Committee has played a key role in making this possible. When
the original CBI was being considered, a Presidential mission,
composed of key Members of this Committee, made a crucial fact-
finding trip to the region. As head of the embassy economic and
commercial section in Jamaica, I had the privilege of observing
first-hand how the Committee developed tangible evidence that
extending trade benefits to CBI countries not only would create
jobs in the Caribbean, but also would create jobs here at home
as well. And this is as true now as it was then.
We have a proud history, Mr. Chairman, at helping others in
times of disaster, and that is why the Administration is
committed to working with Congress to achieve early agreement
on an effective bill that provides the economic opportunity
that this region needs and deserves. Thank you.
[The prepared statement follows:]
Statement of Hon. Alan Larson, Assistant Secretary for Economics and
Business Affairs, U.S. Department of State
Thank you for this opportunity to testify on the proposed Caribbean
Basin Trade Enhancement Act (CBTEA). The Department of State believes
that early enactment of this legislation is of critical importance.
Ambassador Fisher will present a detailed description of the
Administration's bill. I would like to complement his testimony by
stressing four points: (1) the United States has a large stake in
seeing peace, prosperity and democracy take root in Central America and
the Caribbean; (2) for several years we have been seeking legislation
like the CBTEA, because it is a key part of a multifaceted strategy to
foster durable private sector-led economic growth; (3) now, in the
aftermath of Hurricane Mitch, quick passage of this legislation is all
the more important in order to give hope to the region and guidance to
investors; and (4) enactment of this bill would continue a tradition of
enlightened bipartisan cooperation between Congress and the Executive
Branch in promoting economic development in this region.
The United States has a large stake in the Caribbean and Central
America. Promoting peace, building democratic institutions, achieving
prosperity, and raising the quality of life for all--these are the
principal U.S. aims for the region and these goals are shared by the
people of Central America and the Caribbean. As our close neighbors,
the countries of Central America and the Caribbean have unique
importance for us and they deserve our best efforts as we work together
to achieve shared goals.
The United States and the countries of the Caribbean Basin are
bound together geographically, politically, economically and socially.
Growth in Central America and the Caribbean doesn't benefit only those
countries; we benefit as well. The Administration's bill will stimulate
the Caribbean Basin economies by providing new incentives for
investment, exports and job creation. This increased economic activity,
in turn, will benefit our own economy by increasing opportunities for
our exports of both goods and services.
Despite the severe economic turbulence in the world economy over
the last two years, trade with the Central American and Caribbean
countries has continued to be a bright spot for the U.S. In 1998, when
U.S. exports to Asia shrank, exports to the Caribbean grew modestly and
exports to Central America expanded by 13%. In fact, between 1996 and
1998, U.S. exports to Central America increased by 44%. To put this in
context, the U.S. exported nearly as much to CBI countries in 1998 as
it exported to China and India combined. In addition, U.S. companies
are the primary investors in the region.
Our economic interdependence and shared democratic ideals are
underscored and reinforced by our strong cultural and people-to-people
ties. Over two million citizens of the countries of Central America and
the Caribbean live in the U.S., and an even larger community of U.S.
citizens is of Central American and Caribbean origin. Over the years,
communities of Central American and Caribbean immigrants in the United
States have grown roots and are now a major component of the social,
business and cultural fabric in the United States. This growing sector
of American society also is increasingly finding its voice within the
U.S. political system.
We want to assure that the flow of people between the U.S. and the
Caribbean Basin is an orderly one. There are indications that, in the
aftermath of Hurricane Mitch, the flow of illegal migrants to the U.S.
from Central America is increasing. It is understandable that
breadwinners would seek economic opportunities to help their families
rebuild shattered lives. But illegal immigration stretches the
resources of the U.S. Government while threatening the lives of the
people who attempt it. Only economic reconstruction and growth can
provide the economic impetus and opportunities to persuade Central
Americans to stay at home.
The fight against narcotics and other transnational crimes is
another U.S. priority. Before the hurricane, we had already noted an
increase in narco-trafficking; in fact, it was estimated that over half
of the cocaine entering the United States was coming in through the
Mexico-Central America transit zone. In the aftermath of the
hurricanes, we are concerned that traffickers will attempt to take
advantage of the disruption to bring in even larger amounts through the
region. The needs of recovery and reconstruction are putting enormous
new demands on the resources of governments in the region.
With this in mind, the Department of State plans to increase
significantly Embassy counter-narcotics budgets in the countries
affected by Hurricane Mitch to address the increased vulnerabilities.
But our counter-narcotics efforts will have much greater prospects of
success in an environment of economic and social stability. The
Administration's bill will strengthen the battle against narcotics in
the region by encouraging job creation, which is the foundation of
economic and social stability.
As the Congress examines this proposal, I urge that it keep in mind
the enormous depth of the disasters that struck Central America and the
Caribbean last October. Over 9,000 people died; over 9,000 remain
missing; nearly 13,000 people were injured; at least 3 million people
have been displaced. The U.S. Corps of Engineers has estimated the cost
of repairing infrastructure alone at $8.5 billion, which does not
include lost crops, lost businesses and the interruption of production.
Nearly one person out of four in the countries hit by Hurricane Mitch
was directly affected. There is no doubt that, one way or another,
every individual in Honduras, Nicaragua, Guatemala and El Salvador has
felt the impact.
The physical destruction of the hurricane also meant widespread
destruction of jobs. The ability of the economies of this region to
restore jobs and create them for new entrants into the labor markets
will to a very large extent determine whether the new democracies of
this region will survive.
This legislation is part of a multifaceted strategy to support
durable, private sector-led growth. In recent years, the U.S. and the
CBI countries have initiated a number of efforts that are laying the
foundations for durable, private sector-led growth. In particular, we
have taken steps to improve transportation and telecommunications
links, to improve the climate for investment, to foster sound macro-
economic policies and to relieve unsustainable debt burdens. CBI
enhancement legislation is a key element of this strategy to foster
sustained economic growth.
On transportation, we have cooperated successfully in recent years
with our partners in Central America in opening up the regional civil
aviation market. We signed Open Skies agreements in May 1997 with Costa
Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama.
Aviation liberalization is bringing tangible benefits in the form
of greater competition, increased business and tourist traffic, and
incentives for increased trade and investment. These benefits
complement our efforts to promote economic reform and development with
our partners in the region.
Since completion of these new agreements, flight choices to the
region have increased, new carriers have entered the market and
airfares have decreased. These benefits are shared by airlines,
airports, communities, travelers and businesses in the U.S. and in
Central America alike.
The Central Americans are helping themselves develop the
infrastructure essential to long-term prosperity by opening the telecom
sector to foreign capital. However, telecom infrastructure in Honduras
and Nicaragua was badly damaged by Hurricane Mitch. In response, the
State Department, working with private U.S. carriers and potential
lenders, has developed a package of policy reform and external
financing for telecom infrastructure reconstruction. By using a small
portion of revenues generated by U.S. calls to Honduras and Nicaragua
to back infrastructure loans, this package would provided needed
private sector funds for reconstruction of the telecom infrastructure.
Concurrent changes in bilateral settlement charges would lower fees
paid by U.S. carriers--and ultimately, by U.S. consumers--for telephone
calls to the two countries. We have invited Honduras and Nicaragua to
hold experts talks to explore this package further.
The United States has concluded two bilateral intellectual property
rights agreements in Central America--Nicaragua and Honduras. While
problems remain, the ratification of the World Intellectual Property
Organization Copyright Treaty and the WIPO Treaty on Performances and
Phonograms by Panama and El Salvador, indicate the region's progress
toward recognizing the importance of the protection of intellectual
property as we move into the digital age. As Central American countries
strive to diversify their economies in the wake of the recent
hurricane, modern intellectual property protection, compliance with
their obligations under the WTO Treaty on the Protection of
Intellectual Property Rights (TRIPS) and judicial reform will create an
improved environment for private investment.
We continue to seek to negotiate Bilateral Investment Treaties with
CBI countries. These treaties lock in a high level of treatment for
U.S. investors in these countries, including access to international
arbitration when problems do arise. We have BITs in force with Grenada,
Jamaica, Panama, and Trinidad and Tobago. We are also looking forward
to working with the Senate to obtain its advice and consent to
ratification of our BITs with Honduras, Nicaragua, and El Salvador. The
BIT with El Salvador was signed this year.
The international financial institutions have also made a
significant contribution to recovery and growth in the region. The
Inter-American Development Bank (IDB) hosted a meeting of all donors
December 10-11; more than 50 participating donor nations and
multilateral agencies signaled support of roughly $6.3 billion. A
follow-up meeting will be held May 25-28 in Stockholm.
In addition to organizing and contributing to the multilateral
Hurricane Mitch relief effort, the IDB itself provided $1.58 billion in
loans to CBI countries in 1998. The World Bank provided $465 million in
loans to CBI countries for the fiscal year ending June 30, 1998.
For many developing countries, agreement with the IMF on a
structural reform program (ESAF) is essential, both for the loans they
provide and for the reforms that promote growth. Currently, Guyana,
Haiti and Nicaragua are CBI countries with active ESAFs, and Honduras
is in the final stages of negotiations. El Salvador has a Stand-by
agreement, and Panama has an enhanced fund facility.
Even countries that adopt appropriate economic policies sometimes
are still unable to fully service their international debt. Part of our
strategy to assist in resolving that problem is participation in
multilateral debt rescheduling, through the Paris Club. Thus, since
1990, we have participated in 17 Paris Club negotiations with 9 CBI
countries, resulting in treatment of over 5 billion dollars of debt
(including debt owed to other bilateral official creditors).
More recently, we have participated in new efforts to provide
lasting solutions to the debt problems of the most heavily indebted
poor countries (HIPC). This program provides substantial debt
forgiveness to countries which demonstrate a track record of economic
reform. Nicaragua and Guyana are well along in the HIPC process.
Honduras and Haiti have also received ``Naples terms'' debt reduction
from the Paris Club; Honduras is under review for possible
participation in the more generous HIPC program.
The Administration has requested $41 million to implement an
exceptional three-pronged strategy to address the external debt
problems faced by Nicaragua and Honduras, the countries most severely
hit by Hurricane Mitch: first, by a deferral of the bilateral debt
service payments over the next 2-3 years; second by deeper bilateral
debt forgiveness from the Paris Club; and third, by addressing the
problem of IFI debt obligations. With respect to the IFI debt, the
Administration is seeking appropriations to contribute to the Central
American Debt Trust Fund to pay IFI debt service.
Finally, this week, Commerce Under Secretary for International
Trade David Aaron is in Central America leading a business development
mission. The 16 U.S. companies on the mission represent such key
rebuilding sectors as construction, housing, and water purification.
Now, in the aftermath of Hurricane Mitch, quick passage of the
CBTEA is especially important to give hope to the region and guidance
to investors. CBI enhancement legislation has been a key element of our
economic development strategy for several years. It is the missing
piece of the foregoing set of measures to foster private sector growth.
Now, in the aftermath of Hurricane Mitch, the economic situation has
become more urgent. That is why quick action is needed to enact the
CBTEA.
Ambassador Fisher is providing a more detailed description of the
contents of the Administration's bill. But in general, the bill will
authorize the President to provide enhanced temporary trade benefits to
CBI countries for: apparel products assembled from U.S. fabric; textile
handicrafts; and all non-textile products currently excluded from the
CBI program.
Along with increased benefits, the bill also establishes mandatory
and discretionary eligibility requirements. These provisions are meant
to encourage the CBI countries to adopt sound trade and investment
policies, to maintain high standards of environmental protection and
workers rights and to cooperate with the United States in anti-
narcotics efforts.
In sum, the bill is designed to provide both increased preferences
to the CBI countries and greater market opportunities for U.S.
businesses.
The CBI enhancement bill which is before this Committee is a key
element of the Administration's overall reconstruction strategy. It is
aimed precisely investment of job creation and private sector-led
growth. The improved market access that this bill offers dovetails
closely with our efforts to improve transportation and
telecommunications links, to create a sound environment for investment
and to mobilize support from international financial institutions.
The Administration's bill may not please everyone in every detail.
But as Ambassador Fisher has pointed out, Congress and the
Administration have been trying for more than six years to pass CBI
enhancement legislation. This is an example of the perfect being the
enemy of the good. The Administration's bill is one that balances
various competing interests and, in our view, should command a
consensus for early action. It is critical that we achieve some
consensus to pass legislation as soon as possible.
The Central Americans and Caribbeans require an opportunity to help
themselves. It is the nature of the apparel industry that companies can
react quickly and positively to enhancements to CBI. One major apparel
company told the State Department that it would employ additional
Central Americans within a week of CBI enhancement. Early action would
give hope to the region and would give investors the clear signals they
need to make investment decisions.
Enactment of this legislation will continue a tradition of
bipartisan leadership in support of the region's economic development.
One of the most important chapters of the region's history has been the
transformation of its economic policies from inward-looking and state-
directed, toward export-oriented and market-based. Together with the
movement toward democracy, this is the fundamental reason for the
region's solid growth, which averaged about 3% during the 1990's. As a
result of the success of these policies, there is now a broad consensus
in the region for freer trade and market competition.
The original Caribbean Basin Initiative was an important factor in
supporting the economic reforms of the 1980's and 1990's. Its expansion
to provide duty-free treatment for virtually all products exported by
the Caribbean Basin countries will reinforce the efforts of market-
oriented reformers of the region, both in the private sector and in
governments, to continue and deepen sound economic policies.
The Ways and Means Committee played a key role in making possible
this historic transformation. In the early 1980s when the original CBI
was being considered, a Presidential Mission composed of key members of
this committee made a fact-finding trip to the region. At the time I
was head of the Embassy's economic and commercial section in Jamaica
and had the privilege of escorting the delegation on a tour of an
apparel assembly facility. After the tour we all had to wait as
Congressman Gibbons roamed around the factory asking questions and
reviewing nearly every station and machine. When he finally came out,
he told us that nearly all of the inputs in the factory--sewing
machines, fabric, dyes and even light bulbs--came from the U.S. His
inspection of this factory provided tangible evidence that extending
trade benefits to CBI countries would not only create jobs in the
Caribbean, but would create jobs here at home as well.
Conclusion
The United States has a proud history of helping others in times of
disaster. Given our special relationship with the countries of Central
America, we could do no less than provide immediate and extensive
assistance. Hurricane Mitch took countless lives and undermined the
economies of the region.
It has also threatened to divert efforts away from further
consolidation of democracy. Resources that would be used, for example,
to reform judicial systems, to build transparent financial sectors, or
to ensure equal opportunities for all, now must meet basic needs. We
simply must not permit Hurricane Mitch to uproot progress toward
greater freedom and prosperity and in the process to create a fertile
environment for instability crime and narcotics trafficking. By helping
our neighbors and trading partners, we also help ourselves.
The Administration is committed to working with Congress to achieve
early agreement on and effective bill that provides the opportunity
that the region needs.
Chairman Crane. Thank you, Mr. Larson. Mr. Larson, has the
existing CBI program achieved its goal of stabilizing democracy
in countries where they were threatened not only with economic
instability, but civil wars as well, going back to the origins
of CBI in 1983?
Mr. Larson. Mr. Chairman, I think there has been very, very
strong progress in stabilizing democracies and stabilizing
economies. We have seen great progress in Central America where
the peace process has resulted in demobilization and an end to
the conflicts and the abuses of human rights that we have seen
in the past.
We have now, in the region, a much, much brighter picture
with respect to economic growth, strong institutions, and
democracy than we were looking at in the 1980's.
Chairman Crane. And, Mr. Ambassador, you mentioned that our
exports to the Caribbean countries total approximately $19
billion.
Mr. Fisher. Yes, sir.
Chairman Crane. And do you know what that translates into
in terms of job creation here in the United States?
Mr. Fisher. Well, I don't have a specific number, Mr.
Chairman, on top of my head, but, nonetheless, being able to
export that volume obviously results in jobs in this country.
And we have been growing a significant portion of our economy
at the margin through exports. Again, it is important to bear
in mind that the CBI countries represent a significant market.
Often when we think of export markets, we think of France, and
we think of Brazil, and we think of China--of course, we want
China to grow even further. But one rarely does think that
these CBI countries represents a significant chunk of change
and such an important market for our output. We value it. It is
job creating, and it is good.
Chairman Crane. Well, based upon information we have
received $1 billion in exports translates roughly into 20,000
domestic jobs, and the pay for those domestic jobs exceeds the
national average. And so that would be into 350,000 or 375,000
jobs directly related to our exports to the Caribbean
countries. And I think it is a message that has not been
properly disseminated.
Let me get another question off to you quickly, Mr. Fisher,
and that is, we have had a remarkable record of successes at
the WTO, winning 18 cases and settling favorably in 10. The one
dark spot on the USTR's record is in the textile area. And two
out of the four cases the United States has lost in the WTO
involve textiles. Did you personally review the
Administration's CBI bill for its consistency with our WTO
obligations?
Mr. Fisher. We believe, Congressman, that the proposal we
have put forward is consistent with our WTO obligations.
Chairman Crane. You don't see any potential problems
erupting?
Mr. Fisher. I would be happy to reanalyze that for you if
you wish me to, and get back to you on that. But I believe the
way it is proposed and structured presently that it is in
keeping with our commitment.
Chairman Crane. Very good. All righty. Mr. Levin.
Mr. Levin. Thank you. Let me just raise a couple of
questions, and it may well be that you will want to discuss
them with us further some other time. It is not immediately
pressing.
As you know, a summary of the Administration's bill was
sent to us fairly recently, and I have just been--begun to look
it over. But I did want to ask you, the bill has a set of
mandatory eligibility requirements and then discretionary
eligibility requirements, and I think, Mr. Fisher, this may be
best directed to you. And, for example, one of the, one of the
discretionary eligibility requirements is whether the
beneficiary country has met the narcotics cooperation
certification criteria, right?
Mr. Fisher. Yes, sir.
Mr. Levin. That is one of them. Another relates to
intellectual property rights--whether they are complying with
their obligations under the WTO; then another relates to worker
rights and whether they are pursuing internationally recognized
worker rights; and then there are a number of other important
ones.
As I read the summary at least, and we are just working on
the bill language itself, these are discretionary in the sense
that the President or the Administration does not have to
invoke them. Are there stated criteria as to when these and how
these discretionary requirements would be implemented? Or is it
just going to be under this bill something that is totally
discretionary within the Administration.
Mr. Fisher. Well, first, Congressman, if I may, I would
like to point out, because you listed in particular five
criteria for deciding whether benefits should be limited or
withdrawn as discretionary criteria, I would like to point out
that the first five you mentioned are also in Congressman
Crane's bill, in H.R. 984. We have an additional 6, but there
are 11 total in our proposed discretionary criteria list. And,
again, in terms of precise formula, there is no precise
formula. This would be at the discretion of the President.
I would say that, to our knowledge presently, in terms of
working with the current beneficiaries of this enhancement
legislation that almost all of these discretionary variables
are being addressed. But we would leave it up to the judgment
of the President, and it would be fully discretionary and,
hopefully, wisely applied.
Mr. Levin. All right. I think we need to----
Mr. Fisher. Also, Congressman, one thing I would offer to
you, and, of course, the Chairman of the Committee, is I had a
little spreadsheet prepared that distinguishes between the
three different versions--our proposal, the Congressman's and
his co-
authors' proposal, and Senator Graham's bill for the Senate. I
would be happy to share it with you afterwards. It goes through
all the different aspects of the bill and compares the three,
so we can look at them on one piece of paper.
Mr. Levin. All right. And let me suggest that, when we have
our further conversations, that we do address the issue of
implementation of discretionary requirements. I mean, just----
Mr. Fisher. We would, of course, under our formulation
prepare a report to the Congress for December 2000 which would
review these different variables. At the same time, the
discretion may be invoked during the existence of the
enhancement program. But I would be happy to follow up with
that in detail, if you would like.
Mr. Levin. Right. I mean, even potential or likely
conflict. I mean a discretionary requirement. And I think this
is going to be of interest to people, and I don't think that
anybody should assume that it's relevant only to our
relationships with the CBIs. We all know these are issues that
matter in varying degrees to various Members of the Congress,
and I think are increasingly of concern to Members of Congress
and to the Administration. And I do think we need to talk
through how it would operate. And let me just leave it at that,
partly because the red light is on. But even if it were yellow,
I would leave it at that because we need to discuss it in
greater length.
Mr. Fisher. Congressman, we would look forward to
discussing that with you and others.
Mr. Levin. Thank you. With all of us, we need to talk about
it.
Mr. Fisher. Thank you. Thank you very much.
Chairman Crane. Mr. Rangel.
Mr. Rangel. Thank you, Mr. Chairman. Mr. Larson, you
mentioned that trip in the early 1980's to the Caribbean, which
the Members of the Committee were on, including Sam Gibbons,
who was the senior member of this committee. And you pointed
out in your testimony that in Jamaica, Sam had examined the
machines and the fabric and dyes and the light bulbs and had
concluded that all of these had been made in America and were
exported to Jamaica. I would like to add two things. No. 1,
that as soon as you said that, Sam Gibbons entered the room.
And, No. 2, that Sam did that in every country we visited.
[Laughter.]
And the results were the same. Almost everything that they
consumed had been imported from the United States.
I assume that by having the State Department report that
you would indicate that this enhancement of the Caribbean Basin
bill would be in our national interest?
Mr. Larson. Very definitely, Mr. Congressman. If I could
just add one point? Why I put that reference to the trip by the
Presidential delegation in because it demonstrated so
graphically to me a point that has been made by many others
today, and that is that in this region a large share of the
inputs to the production process are supplied by the United
States. And so to the extent we're encouraging economic
activity they're including in their apparel industry, we are
creating a market for U.S. products.
Mr. Rangel. Well, I suppose that both of your offices have
heard from organized labor whose position would be that we have
suffered tremendously, our economy has been hit hard under the
existing CBI legislation. And to enhance it, to give it parity
with Mexico, would cause us further economic harm. In addition
to that, and I would like to get both of your reflections, the
working conditions in these countries are far below the
standard which Americans find acceptable. Have your office had
the opportunity to review these observations and to report on
them, Mr. Larson, Secretary Larson?
Mr. Larson. First of all, let me take up your last point
first, Congressman. I think that we just had a brief exchange
about the discretionary criteria under the Administration's
proposal. I think it is important that there is a reference in
those discretionary criteria to workers' rights and the respect
for internationally recognized core labor standards because
that gives the United States a tool in the implementation of
this legislation to encourage movement in the right direction
on workers' rights.
I visited a number of the factories in the region now, and
I have not found personally situations that I would regard as a
violation of workers' rights. Obviously, some people in this
part of the world have very low wages because that is part of
being a very poor, underdeveloped country. But I think we would
have the tools under this bill to be able to monitor and
address those concerns.
On your first point, as others have pointed out today, we
can expect that a significant part of what will happen as a
result of this proposed legislation would be a transfer of
economic activity in these industries from other parts of the
world outside of the United States to the Caribbean and Central
American countries. And it would largely be from countries
elsewhere that don't use much U.S. content in their production
to countries that do use a great deal of U.S. content in their
production and that would be a plus.
Mr. Fisher. Let me add to that?
Mr. Rangel. Sure.
Mr. Fisher. Congressman Rangel, if I may add to that? My
diplomatic colleague was quite diplomatic in not mentioning
which these countries are. We have seen a decline in Chinese
exports of textiles to the United States. We've seen an
increase on a compound constant basis from Mexico and from the
CBI countries. The product that is produced in the Asian sphere
typically lacks completely U.S. input whereas our producers and
our workers make the fabric and linings and the threads and the
notions that go into CBI apparel under the U.S. content rules.
And, of course, our companies employ people in the cutting and
distribution of those products.
I would like to just, if I may, take one aspect of this
that the two previous gentlemen were referring to, the Senator
and the Congressman, with regard to this 2005 issue. I think
it's very important, in light of this competitive aspect with
Asia, to understand that tariff benefits under the bill for CBI
countries are a significant advantage over its duration. That
is the bill that would give duty-free treatment to most CBI
apparel exports whereas, by contrast, the average tariff for
imports of apparel from the world is 13 percent, which Asian
countries would still be paying while we provided these
benefits to the CBI countries. I just wanted to add that in to
correct a mis-impression that might have been given previously.
But the summary answer to your question, Chairman Rangel,
is that we feel there is certainly a higher U.S. employment
benefit for products that are cut, excuse me, products that are
manufactured in the Caribbean area than the products that are
manufactured in Asia which have no U.S. content whatsoever.
Mr. Rangel. Well, I would appreciate if both of you could
send me whatever material you have dealing with the dislocation
or the impact on American textile workers as well as whatever
information you have on the working conditions that exist in
the Caribbean countries, and whatever you can get from the
Trade Commission.
Thank you, Mr. Chairman.
Chairman Crane. Mr. Jefferson.
Mr. Jefferson. Thank you, Mr. Chairman. I have a question
which is just for clarification purposes. I noticed that the
textile and apparel provisions in the bill submitted by the
Administration are more restrictive, considerably more
restrictive, than the ones in H.R. 984. The restrictive
difference is to the extent that they don't seem compatible.
Does that mean the Administration is not supportive of H.R. 984
and only supports the bill it submitted or what?
Mr. Fisher. Congressman, we have a different approach to
this than H.R. 984. The difference is in the regional content
question and U.S. content question of manufactured products in
the textile area. This is, as was pointed out by the two
previous witnesses you had, always been the divisive issue that
we have had to deal with in trying to push forward CBI
legislation. The reason for that, Congressman, is that 48
percent of the roughly $19 billion in exports that come from
the CBI countries comes in the form of textile products. And,
as Assistant Secretary Larson mentioned earlier, the majority
of those have significant U.S. content. One estimate is that 80
percent already have U.S. content.
The difference of view here is largely a matter of what is
practicable in terms of getting a bill through the Congress.
And I want to reiterate to you, and I want to iterate to
Chairman Crane, that we are eager to work with you to get
passage of this bill because we feel that passage delayed is
passage denied and that it's time to move on CBI, and we hope
to square our corners with you on this issue. This is our
considered judgment that approaching this critical area of
textiles in this manner is the best way to get passage of CBI
legislation, and we support the approach that we've initiated.
Mr. Jefferson. I understand you support your approach. I
guess I was trying to figure--in previous years the
Administration voiced its support for the approach of H.R. 984,
and my question really was, I know you support what you
submitted, and I'm not arguing whether that's the best approach
or not to get it out of the Congress or whether it's the best
approach on substance. I'm not arguing either one of those. I'm
just trying to see where the Administration stands now on H.R.
984. Does it stand in opposition to H.R. 984?
Mr. Fisher. Again, Congressman, we've put forward our own
initiative here. It has not materialized, as Chairman Crane
said, yet in being put on the floor as a bill, but we have our
different approach here. And there are differences from H.R.
984 and one would deduce from that that obviously we don't
support H.R. 984 as it is currently drafted. The significant
differences are the content provisions that deal with textiles.
There also is a difference on the duration of the program and
that's a budgetary consideration. And we would be eager to work
with this Committee and with you, Mr. Chairman, and everybody
else on the Subcommittee to try to figure out a way to extend
that if we could, if we could find the budgetary wherewithal to
get it done.
Mr. Jefferson. I yield back my time, Mr. Chairman. Do you
have a comment on this issue?
Mr. Larson. I would simply add, Mr. Jefferson, that we feel
very strongly that this is a time when we can't let the perfect
be the enemy of good. Fast action is necessary and we believe
the Administration's bill balances all of the competing
interests and provides an approach that could be susceptible of
getting quick approval and then quickly bringing these economic
opportunities to the benefit of the CBI nations.
Mr. Jefferson. Thank you. Mr. Chairman, I yield.
Chairman Crane. Mr. Becerra.
Mr. Becerra. Thank you, Mr. Chairman. Thank you, first of
all, to the two of you for your testimony. Let me pick up on a
point that Ranking Member, Mr. Rangel, made and ask that you
really see if you can get us some information on the working
conditions in a number of the countries that would be helped by
CBI. I think that information would be helpful to allay the
concerns of a number of Members who won't have the opportunity
to sit through these hearings, to hear the testimony, hear
about the positive effects trade-wise that the United States
stands to gain from going through a CBI process and expanding
trade with these countries.
Maybe one of the two of you, or both of you, can give me a
response to this. I'm hearing word from some American interests
that while they want to continue doing trade in a number of
these countries, CBI countries, their concern is that
oftentimes they run into a bureaucracy in either getting
fulfillment of a contract commitment, getting paid for work
that they've done, and it becomes a nightmare trying to obtain
remuneration for services rendered or products provided. Have
any of you heard of any of these complaints and, if so, can you
give me a sense of where we are with that?
Mr. Larson. I can give you a fairly general response but I
hope a helpful one. A lot of these countries are countries that
have just come out of very serious difficulties, some of them
economic alone, some of them political and economic together.
That's one of the reasons why it has been so important for us
to work with them on developing a strategy to build around
private sector growth so it wasn't just a question of aid. In
many cases, aid is necessary but it's not the total answer. We
have worked to provide a better environment for U.S. business.
We've negotiated bilateral investment treaties----
Mr. Becerra. Mr. Larson.
Mr. Larson. Yes.
Mr. Becerra. Let me see if I can get you to respond just to
the question because I'm going to run out of time and I want to
ask the two of you a quick question. Are you familiar or have
you heard any particular concerns expressed by American
business interests that are not finding as hospitable an
environment to actually see their work compensated?
Mr. Larson. I have not heard of specific problems of
getting paid for work that has been done. There are broad
issues of the business environment that we're trying to work
on.
Mr. Becerra. And I think you were hitting----
Mr. Larson. Yes, that's right.
Mr. Becerra. And I think we have to recognize that some of
the countries that have been hit hard by the hurricanes and so
forth do require some assistance and some time to get
themselves back and running again. So that's fine.
Second question, we focused on the more global aspect of
this and quite honestly in terms of labor and environment and
so forth, we focused on the various conditions more in terms of
the Caribbean and Central American countries. Focusing here
domestically, what do we see as the effect of expanded trade? I
know we're going to increase exports and therefore jobs in
those export industries, but now where we will see increased
imports, what's the prediction in terms of job loss and, more
specifically, I'm more interested in what the Administration is
looking to do? We're going to be reauthorizing TAA this year,
the Trade Adjustment Assistance, I would like to know what
specifically, even though the impact will be small compared to
a larger free trade agreement, what we're looking to do to try
to offset the hurt of dislocation to American workers here?
Mr. Fisher. Well, first, with regard to the specific
legislation that is being proposed, again, the majority of the
products covered when you really go through the numbers are
going to be textile related. The textile industry has been
suffering from significant employment losses. Congressman
Rangel referenced that earlier. I would submit that whether or
not CBI legislation is passed, this trend will likely continue.
We have some very low-cost competitors around the world. It's
likely to occur, however, at a slower pace, Congressman, if we
have a high U.S. content CBI partnership than it would
otherwise because, again, there's little to no U.S. content
from the Asian counterparts that come into this market. It's
very, very difficult to pinpoint a specific number that results
specifically from this aspect of our textile trade. We just
make the assumption, and it's a common sense assumption, that
if we have a portion of U.S. content coming in the form of the
legislation we've proposed, that it will have less damage and
be more beneficial to our textile workers in the United States
than it would be coming from Asia.
And, of course, if you receive product back in the final
assembly, as it were, and also the distribution of those
products, there are some numbers that have been calculated. For
every 100 jobs created in the Caribbean, there are some 15 that
get involved in the distribution system and so on. We can send
to you our best estimates of this analysis.
Mr. Becerra. That would be helpful.
Mr. Fisher. But I want to warn you, the numbers aren't
terribly precise.
Mr. Becerra. Understood. But that would be helpful to give
us some sense of what you're projecting to be the extent of
dislocation of American workers. I do appreciate that.
Chairman, thank you very much.
Chairman Crane. Thank you, and I want to thank our
witnesses. And before you depart though, I do want to ask that
some questions be made a part of the record that we can submit
to either one of you. And we thank you for your participation
today.
[Questions submitted by Chairman Crane and Mr. Ramstad, and
Mr. Fisher's responses are as follow:]
Question 1. Recently I was contacted by a company having trouble
doing business in the Dominican Republic due to the Dominican
Government's apparent refusal to pay for work performed pursuant to an
existing contract. My understanding is that in 1994, Mundogas Americas
Dominican, S.A. (``Mundogas''), signed a 15-year contract with the
Board of Directors of Operadora de Puerta Viejo, S.A., an entity of the
Government of the Dominican Republic (GODR), to supply 50% of the
Dominican Republic's requirements for liquified petroleum gas. Since
1997, there have been numerous instances of delayed and incomplete
payments and other contract manipulations. These, and other violations,
which make it difficult for U.S. companies to do business in the
Dominican Republic, are described in the attached document. Can you
please comment on your impressions of these apparent unfair business
practices that the Government of the Dominican Republic seems to be
participating in? In your view, are they a threat to United States
companies seeking to invest in this country?
Answer. Officials from Mundogas and their Washington counsel have
met with officials from my staff in the Office of the U.S. Trade
Representative (USTR) to discuss the situation. We understand Mundogas
has also met with officials from the U.S. State Department and other
appropriate U.S. agencies. We are also aware that officials from the
U.S. Embassy in Santo Domingo have been working closely with Mundogas
in the Dominican Republic to resolve the company's complaints. We
support our embassy's efforts.
Subsequent to our meeting with Mundogas, we spoke with the
Dominican Republic's Ambassador to the United States, Bernardo Vega, to
inform him of our concern and to urge him to seek a fair and
expeditious resolution of this dispute. We will continue to coordinate
with Mundogas' representatives in pursuit of a solution to this
problem.
Question 2. Ambassador Fisher, a very serious situation has
recently developed in Guatemala. I know your office is aware of the
situation, but for everyone else here, I want to summarize what has
happened.
As you know, on May 11th, a Guatemalan trial court unfairly and
improperly convicted Cargill de Guatemala, a subsidiary of Cargill,
Inc., and its financial officer on four counts of fraud and tax fraud.
Cargill manager, Daniel Tabora, was sentenced immediately to 4 years,
11 months in prison.
The charges in this case stem from the fraudulent activities of a
Guatemalan supplier, who fled Guatemala with the $80,000 in valued-
added taxes Cargill paid him (note: Guatemalan law does not permit
exporters to pay the VAT directly to the government). Rather than
pursue the perpetrator of the crime, however, the Guatemalan government
has focused on Cargill. Standard operating procedures have not been
followed in the trial, which was moved up on the calendar twice.
Prosecutors produced no witnesses and introduced no evidence proving
Cargill's knowledge of or even intent to avoid tax payments. Even
though many companies have been duped by this Guatemalan supplier,
Cargill is the only company that has been brought to trial
(coincidentally all the other companies who have not faced similar
punishment are Guatemalan). And, the employees who have testified
truthfully on behalf of Cargill, are now being threatened with
prosecution for perjury.
While I strongly question whether Guatemala should receive any of
the reconstruction and disaster mitigation funds as provided in the
bill, the reason I raise this issue today is because one of the basic
purposes of CBI was to encourage the development of democratic
governments and health economies. I generally support CBI, but I
strongly believe the eligibility requirements for this preferential
treatment should be closely and carefully followed. Benefits under CBI
are conditioned on countries continuing to meet seven mandatory and ten
discretionary conditions and the President may withdraw or suspend a
country's designation or the application of duty-free treatment on any
article at any time, if he determines the criteria are not being met.
In my opinion, these actions of the Guatemalan government do not
reflect a democratic government. In addition, they raise serious
concerns about their treatment of U.S. companies and foreign nationals
in general, as well as their ability to abide by internationally
recognized standards of trade. Can you please comment on how closely
you review questionable behavior on the part of a CBI beneficiary
nation?
Under Section 108 of the bill, USTR will report to Congress on
economic development and market-oriented reforms in each participating
country. USTR will assess the extent to which the country provides
equitable access to the markets of that country, macroeconomic reforms
in the country, how the country treats foreign investment whether the
country has moved trade liberalization measures and the extent to which
the country works to accommodate market access objectives of the US.
Would questionable activities by a country be outlined in this report
to Congress?
Answer. Officials from Cargill and their Washington counsel have
met with officials from my staff in the Office of the U.S. Trade
Representative (USTR) to discuss the situation. We understand Cargill
has also met with officials from the U.S. State Department and other
appropriate U.S. agencies. We are also aware that officials from the
U.S. Embassy in Guatemala City, Guatemala, have made numerous
interventions on behalf of Cargill in the past year.
Subsequent to our meeting with Cargill, we spoke with
representatives of the Guatemalan Government in Washington and
communicated our awareness of the situation and our concern that it be
resolved fairly and expeditiously.
As a matter of policy and law, the Administration actively monitors
and reviews actions taken by CBI and GSP beneficiary nations. Reports
on these programs are prepared regularly by the U.S. International
Trade Commission and by USTR. In the past, the U.S. has suspended
benefits for some beneficiary nations pending actions taken to correct
behavior that is not consistent with the conditionality of the program.
We will continue to monitor this case and enforce scrupulously the
provisions of the CBI program.
Question 3. I recently met with a representative from the Canadian
Consulate General in my Minnesota office. One of the issues we
discussed is a bill before the Canadian government to make it a
criminal act for foreign-owned magazines to include ads aimed at
Canadian consumers. It is my understanding the government of Canada is
justifying it under the guise of protecting Canadian culture. What is
USTR planning to do about this issue?
Answer. Should Canada have implemented C-55 as proposed, USTR had
announced that we were prepared to withdraw trade benefits of an
equivalent commercial effect. However, on May 26, United States Trade
Representative Charlene Barshefsky announced that the United States and
Canada successfully resolved outstanding differences relating to
Canada's magazine trade practices and its controversial legislation--
Bill C-55. The agreement addresses concerns that led the United States
to file and win a WTO case, and includes commitments from Canada in the
areas of investment, tax and market access for U.S. periodicals
carrying advertisements directed primarily for the Canadian market. In
return, the United States committed not to take action under the WTO,
NAFTA or section 301.
Under the agreement, U.S. magazines exported to Canada will be able
to carry 12 percent of total ad space with advertising aimed primarily
at the Canadian market--something C-55 as originally proposed would
have prohibited entirely. Within three years, this percentage will grow
to 18%. Canada has also committed to provide non-discriminatory tax
treatment under section 19 of their Income Tax Act. Previously, section
19 prohibited advertisers from receiving the standard business
deduction if they advertised in foreign-owned publications. Canada will
eliminate the nationality requirement within one year. In addition,
Canadian advertisers will be able to place ads in any magazine
regardless of the nationality of the publisher or place of production.
Canadian advertisers will also be eligible for half of the tax
deduction if they place ads in foreign magazines with zero to 79%
original editorial content or for the full deduction if the magazine
contains 80% or more original editorial content. Finally, Canada agreed
to permit 51% foreign equity in an enterprise, up from the current 25%,
within 90 days and will permit foreign investors to own 100% of an
enterprise after one year.
Chairman Crane. And with that, I would now like to invite
the next panel. Ambassador Bernardo Vega from the Dominican
Republic; Ambassador Francisco Aguirre-Sacasa from Nicaragua;
Ambassador Rene Leon from El Salvador; and Ambassador Jaime
Daremblum from Costa Rica.
And if you gentlemen will take your respective seats? And
when you are seated, we will proceed in the order in which I
presented you. And, as in the case of our other witnesses, if
you will, please, try to keep your oral presentations to
approximately 5 minutes. You don't have to be exactly on the
target, but then any printed statements will be made a part of
the permanent record.
And with that, we will start with you, Ambassador Vega.
STATEMENT OF HIS EXCELLENCY BERNARDO VEGA, AMBASSADOR TO THE
UNITED STATES FROM THE DOMINICAN REPUBLIC
Mr. Vega. Honorable Chairman Crane and Distinguished
Members of the Subcommittee, ladies and gentlemen, I am pleased
to be able to testify before the U.S. Congress on a subject
matter so important to my country, more now after Hurricane
George. But CBI enhancement legislation is also a win-win
proposal. It helps our region, but it also helps the U.S.
economy and creates U.S. jobs.
Last week Washington's press reported, again, a record U.S.
trade deficit. Yet, the United States has had a trade surplus
with the CBI region for the last 12 years, as you can see from
the graph I'm presenting. This U.S. surplus is the eighth
biggest in the world, surpassed only by that with seven
countries: The Netherlands; Australia, Belgium, Brazil, United
Kingdom, Saudi Arabia, and Argentina.
The U.S. trade surplus with the CBI region only started to
occur in 1986, precisely 2 years after the Caribbean Basin
Initiative legislation was passed in Washington, as you can see
from the graph.
The more new jobs that are created in CBI countries, the
more new jobs that are also created in the United States,
simply because approximately 60 percent of every dollar that
our countries spend on non-oil imports are spent on imports
from the U.S.A. CBI countries are the sixth biggest purchasers
of U.S. goods worldwide, surpassed only by the two NAFTA
countries, Japan, United Kingdom, and Germany. Ambassador
Barshefsky very correctly pointed out recently that 360,000
jobs in the United States depend on trade with our region.
Allow me to get into some specifics. The CBI region is the
tenth biggest importer worldwide of U.S. cars, surpassed only
by the two NAFTA countries, Japan, Germany, Saudi Arabia,
United Kingdom, Australia, Austria, and Belgium.
Our region is the fifth biggest importer of U.S. cereals,
surpassed only by Japan, Mexico, Egypt, and Korea.
Because of the importance of our apparel exports to the
United States, we are the biggest importer of U.S. sewing
machines after Mexico. But recent exports of U.S. sewing
machines to our region have decreased by 3 percent, while those
to Mexico have increased by 44 percent because of the trade
deviation created as a result of more advantageous import and
quote textile regimes granted to Mexico under the NAFTA.
In telecommunications equipment, we are the seventh biggest
purchaser worldwide, surpassed only by the two NAFTA countries,
Japan, United Kingdom, Hong Kong, and The Netherlands.
In U.S. exports of fats and vegetable oils, our region is
the third biggest consumer worldwide.
We purchase more U.S. air conditioners than any other
country in the world, with the exception of Canada, Mexico, and
easily explainable Saudi Arabia.
The next graph I'm showing shows how Mexico's apparel
exports have zoomed after the NAFTA came into effect, while
those of the CBI region have very much slowed down and in some
cases have even decreased because of the trade deviation caused
by the NAFTA. For us to keep purchasing U.S. goods, we need to
increase our apparel exports to you.
Haiti is probably the country that can mostly benefit from
CBI enhancement. Before its political problems affected its
investment climate, its exports of apparel to the United States
were only $80 million less than those of its neighbor, the
Dominican Republican. Yet, today, as you can see from the next
graph, Dominican exports of apparel exceeded those of Haiti by
$2 billion. Thus, CBI enhancement could mean thousands of new
jobs in Haiti, helping to stabilize its political situation,
and reducing today's illegal migratory pressures. Eighty-three
percent of all of Haiti's exports of goods are today made up of
apparel. So any increase means a lot to that nation.
All WTO member nations, including the United States, are
under the obligation to eliminate quotas on textiles 6 years
from now. Together with the very big recent Asian devaluations,
this commitment poses a double threat to U.S. producers of
cotton, textile fibers, cloth, and apparel. The way for the
U.S. industry to prepare itself for this challenge, resulting
from globalization, is to form a strategic alliance with CBI
countries, through CBI enhancement legislation, by sending
U.S.-made cloth to our region to be cut and converted into
apparel which would be shipped back to the United States.
Eighty-nine percent of CBI exports of apparel are today made
with U.S. components, predominately U.S. fabric.
Under this mechanism, U.S. production of cloth could
compete with Asian apparel imports. Practically all apparel
that comes from Asia is made, of course, from Asian cloth.
China and Hong Kong, after Mexico, already are the two biggest
exporters of apparel to the United States. Thus, U.S. cloth
producers in effect depend on CBI enhancement legislation in
order to be able to face globalization a very few years from
now.
Last year, U.S. imports of apparel grew by 13 percent. But
from Mexico alone, they increased by 28 percent--from South
Korea, 44 percent; from Thailand, 18 percent; while from CBI
countries, only 8 percent.
Textile assembly is the third biggest source of foreign
income in the Dominican Republic after tourism and money
remittances, and 93 percent of that assembly is made with U.S.
components, predominately U.S. fabric. One hundred and forty
thousand Dominicans assemble U.S. cloth. Our country is no
longer the plantation economy of a few years ago and most of
those who convert cloth into apparel are women. Their new and
important contribution to family income has been the most
stabilizing social phenomena in the last 15 years in our
country. If we can increase this figure, there would be less
pressure to migrate, illegally or legally, less temptation to
act as a transit point for illegal drugs from South America
into the United States. Ninety percent of the value of all
Dominican exports of apparel are made in factories which comply
with the voluntary code of conduct with respect to labor
practices that U.S. companies, for whom they are made, require
of them. These so-called ``terms of engagement'' are subject to
internal and also third party monitoring.
More jobs mean more political stability and a better
climate for U.S. investment and U.S. tourism. The same applies
to the rest of the region. U.S. national security objectives
with respect to its southern neighbors would thus be
strengthened.
For all these reasons, CBI enhancement, I repeat, is a win-
win situation for the Caribbean and Central America and also
for the United States.
I thank Chairman Philip Crane and Congressman Charles
Rangel, Jim Kolbe, William Jefferson, and Robert Matsui for
having introduced H.R. 984 and urge quick approval of the same.
Thank you.
[The prepared statement follows:]
Statement of His Excellency Bernardo Vega, Ambassador to the United
States from the Dominican Republic
Honorable Chairman Crane and distinguished Members of the
Subcommittee, Ladies and Gentlemen: I am pleased to be able to testify
before the U.S. Congress on a subject matter so important to my
country, but CBI enhancement legislation is also a win-win proposal. It
helps our region, but it also helps the U.S. economy and creates U.S.
jobs.
Last week Washington's press reported, again, a record U.S trade
deficit. Yet, the US has had a trade surplus with the CBI region for
the last twelve years (Graph No. 1). This U. S. surplus is the eighth
biggest in the world, surpassed only by that with seven countries: The
Netherlands, Australia, Belgium, Brazil, United Kingdom, Saudi Arabia
and Argentina (table No. 1).
The U.S. trade surplus with the CBI region only started to occur in
1986, precisely two years after the Caribbean Basin Initiative (CBI)
legislation was passed in Washington. (Graph No. 1).
The more new jobs that are created in CBI countries, the more new
jobs that are also created in the U.S., simply because approximately
70% of every dollar that our countries spend on non oil imports, are
spent on imports from the U.S.A. CBI countries are the sixth biggest
purchasers of U.S. goods worldwide, surpassed only by the two NAFTA
countries, Japan, the United Kingdom and Germany (table No. 2).
Secretary Barshefsky very correctly pointed out that 360,000 jobs in
the U.S. depend on trade with our region.
Allow me to get into some specifics. The CBI region is the 10th
biggest importer, worldwide, of U.S. cars, surpassed only by the two
NAFTA countries, Japan, Germany, Saudi Arabia, United Kingdom,
Australia, Austria and Belgium (table No. 3).
Our region is the fifth biggest importer of U.S. cereals, surpassed
only by Japan, Mexico, Egypt and Korea (table No. 4). Because of the
importance of our apparel exports to the U.S., we are the biggest
importer of U.S. sewing machines, after Mexico, but recent exports of
U.S. sewing machines to our region decreased by 3%, while those to
Mexico increased by 44% (table No. 5), because of the trade deviation
created as a result of more advantageous import and quota textile
regimes granted to Mexico under the NAFTA.
In telecommunication equipment we are the seventh biggest purchaser
worldwide, surpassed only by the two NAFTA countries, Japan, United
Kingdom, Hong Kong and The Netherlands (table No. 6).
In U.S. exports of fats and vegetable oils, our region is the third
biggest consumer (table No. 7).
We purchase more U.S. air conditioners than any country in the
world, with the exception of Canada, Mexico and easily explainable
Saudi Arabia (table No. 8).
Graph No. 2 shows how Mexico's apparel exports have zoomed after
the NAFTA came into effect, while those of the CBI region have slowed
down, and, in some cases, decreased, because of the trade deviation
caused by the NAFTA. For us to keep purchasing U.S. goods, we need to
increase our apparel exports to you.
A Way Out For Haiti's Economy
Haiti is probably the country that can more benefit from CBI
enhancement. Before its political problems affected its investment
climate, its exports of apparel to the U.S. were only US$80 million
less than those of its neighbor, the Dominican Republic. Yet, today,
Dominican exports of apparel exceed those of Haiti by US$2 billion
(Graph No. 3). Thus, CBI enhancement could mean thousands of new jobs
in Haiti, helping to stabilize its political situation and reducing
today's illegal migratory pressures. Eighty three percent of all of
Haiti's exports of goods are today made up of apparel, so any increase
means a lot to that nation.
A Strategic Alliance
All WTO nations, including the U.S., are under the obligation to
eliminate quotas on textiles six years from now. Together with the very
big recent Asian devaluations, this commitment poses a double threat to
U.S. producers of cotton, textile fibers, cloth and apparel. The way
for the U.S. industry to prepare itself for this challenge, resulting
from globalization, is to form a strategic alliance with CBI countries,
through CBI enhancement legislation, by sending U.S. made cloth to our
region to be cut and converted into apparel which would be shipped back
to the U.S. Eighty nine percent of CBI exports of apparel are today
made with U.S. components, predominantly U.S. fabric.
Under this mechanism, U.S. production of cloth could compete with
Asian apparel imports. Nearly all apparel that comes from Asia is made
from Asian cloth. China and Hong Kong, after Mexico, already are the
two biggest exporters of apparel to the U.S.A.
Thus, U.S. cloth producers in effect depend on CBI enhancement
legislation in order to be able to face globalization a very few years
from now.
More Jobs Mean Less Migration and Less Drugs
Textile assembly is the third biggest source of foreign income in
the Dominican Republic (after tourism and money remittances), and 93%
of that assembly is made with U.S. component, predominantly U.S.
fabric. One hundred forty thousand Dominicans assemble U.S. cloth. Our
country is no longer the plantation economy of a few years back. Most
of those who convert cloth into apparel are women. Their new and
important contribution to family income has been the most stabilizing
social phenomena in the last fifteen years in our country. If we can
increase this figure, there would be less pressure to migrate,
illegally or legally, and less temptation to act as a transit point for
illegal drugs from South America into the U.S.A. Ninety percent of the
value of all Dominican exports of apparel are made in factories which
comply with the voluntary code of conduct with respect to labor
practices that U.S. companies for whom they are made require of them.
These so called ``terms of engagement'' are subject to internal and
third party monitoring.
More jobs mean more political stability and a better climate for
U.S. investments and U.S. tourism. The same applies to the rest of the
region. U.S. national security objectives with respect to its southern
neighbors would thus be strengthened.
For all these reasons CBI enhancement is a win-win situation for
the Caribbean and Central America and also for the U.S.
I thank Chairman Philip M. Crane and Congressmen Charles B. Rangel,
Jim Kolbe, William J. Jefferson and Robert T. Matsui for having
introduced H.R. 984 and urge quick approval of the same.
Table 1.--U.S. Balance of Trade--Biggest Surpluses (January-November)
[Millions of U.S. Dollars]
------------------------------------------------------------------------
Rank Country 1997 1998
------------------------------------------------------------------------
1............................ Netherlands.... 11,460 10,386
2............................ Australia...... 6,859 6,119
3............................ Belgium........ 5,095 5,131
4............................ Brazil......... 5,531 4,471
5............................ United Kingdom. 3,555 4,410
6............................ Saudi Arabia... 2,086 3,726
7............................ Argentina...... 3,211 3,373
8............................ -CBI-.......... 1,553 2,597
------------------------------------------------------------------------
Source: Global Trade Information Services, Inc.
Table 2.--U.S. Exports (January-November)
[Millions of U.S. Dollars]
------------------------------------------------------------------------
Rank Country 1997 1998
------------------------------------------------------------------------
1............................ Canada......... 138,043 141,671
2............................ Mexico......... 65,046 72,467
3............................ Japan.......... 60,408 53,246
4............................ United Kingdom. 33,133 36,168
5............................ Germany........ 22,468 24,174
6............................ -CBI-.......... 16,926 18,381
7............................ Netherlands.... 18,055 17,330
8............................ Taiwan......... 18,152 16,485
9............................ France......... 14,509 15,994
10........................... Korean Republic 23,387 14,146
------------------------------------------------------------------------
Source: Global Trade Information Services, Inc.
Table 3.--U.S. Exports of Vehicles (January-November)
[Millions of U.S. Dollars]
------------------------------------------------------------------------
Rank Country 1997 1998
------------------------------------------------------------------------
1............................ Canada......... 28,963.1 28,730.1
2............................ Mexico......... 7,061.4 7,384.4
3............................ Japan.......... 3,054.1 2,440.6
4............................ Germany........ 2,048.0 2,176.7
5............................ Saudi Arabia... 1,011.0 1,057.7
6............................ United Kingdom. 794.9 1,049.0
7............................ Australia...... 987.8 1,031.9
8............................ Austria........ 698.6 1,014.1
9............................ Belgium........ 1,127.6 938.6
10........................... -CBI-.......... 665.5 909.8
------------------------------------------------------------------------
Source: Global Trade Information Services, Inc.
Table 4.--U.S. Exports of Cereals (January-November)
[Millions of U.S. Dollars]
------------------------------------------------------------------------
Rank Country 1997 1998
------------------------------------------------------------------------
1............................ Japan.......... 2,672.3 2,029.8
2............................ Mexico......... 809.0 1,179.7
3............................ Egypt.......... 701.4 636.8
4............................ Korean Republic 643.2 618.4
5............................ -CBI-.......... 682.3 616.1
6............................ Taiwan......... 770.2 485.5
7............................ Colombia....... 189.8 237.1
8............................ Philippines.... 310.8 232.3
9............................ Canada......... 222.5 227.4
10........................... Venezuala...... 180.0 163.6
------------------------------------------------------------------------
Source: Global Trade Information Services, Inc.
Table 5.--U.S. Exports of Sewing Equipment (January-November)
[Millions of U.S. Dollars]
----------------------------------------------------------------------------------------------------------------
Percent
Rank Country 1997 1998 Change 98/
97
----------------------------------------------------------------------------------------------------------------
1......................................... Mexico....................... 96.0 138.4 44.21
2......................................... -CBI-........................ 86.5 83.9 -2.93
3......................................... Canada....................... 28.2 28.1 -0.27
4......................................... Honduras..................... 24.5 24.1 -1.62
5......................................... Dominican Republic........... 30.9 22.3 -27.65
4......................................... Germany...................... 12.5 14.8 18.66
7......................................... Guatemala.................... 5.9 12.7 117.76
5......................................... Brazil....................... 22.0 12.2 -44.42
9......................................... El Salvador.................. 7.0 11.6 66.17
6......................................... Japan........................ 10.9 10.4 -4.71
7......................................... Colombia..................... 5.9 7.4 24.95
12........................................ Costa Rica................... 10.6 7.3 -30.86
8......................................... Hong Kong.................... 8.9 7.1 -20.25
----------------------------------------------------------------------------------------------------------------
Source: Global Trade Information Services, Inc.
Table 6.--U.S. Exports of Telecommunication Equipment (January-November)
[Millions of U.S. Dollars]
----------------------------------------------------------------------------------------------------------------
Percent
Rank Country 1997 1998 Change 98/
97
----------------------------------------------------------------------------------------------------------------
1......................................... Canada....................... 1,249.3 1,336.5 6.98
2......................................... Mexico....................... 569.3 874.4 53.59
3......................................... Japan........................ 793.0 748.2 -5.65
4......................................... United Kingdom............... 429.5 548.7 27.75
5......................................... Hong Kong.................... 315.4 331.4 5.09
6......................................... Netherlands.................. 244.0 305.3 25.12
7......................................... -CBI-........................ 158.3 240.7 52.06
8......................................... Germany...................... 200.4 201.2 0.41
9......................................... Taiwan....................... 145.8 198.4 36.12
10........................................ China........................ 169.5 196.3 15.77
----------------------------------------------------------------------------------------------------------------
Source: Global Trade Information Services, Inc.
Table 7.--U.S. Exports of Fats and Vegetable Oils (January-November)
[Millions of U.S. Dollars]
------------------------------------------------------------------------
Rank Country 1997 1998
------------------------------------------------------------------------
1............................ Mexico......... 328.7 415.2
2............................ China.......... 167.5 282.5
3............................ -CBI-.......... 182.8 217.0
4............................ Canada......... 195.9 180.2
5............................ Hong Kong...... 116.7 171.2
6............................ Turkey......... 117.1 99.4
7............................ Japan.......... 88.9 89.8
8............................ Spain.......... 37.3 74.8
9............................ Korean Republic 63.8 72.2
10........................... Saudi Arabia... 51.2 60.9
------------------------------------------------------------------------
Source: Global Trade Information Services, Inc.
Table 8.--U.S. Exports of Air Conditioning Equipment (January-November)
[Millions of U.S. Dollars]
------------------------------------------------------------------------
Rank Country 1997 1998
------------------------------------------------------------------------
1............................ Canada......... 880.6 941.3
2............................ Mexico......... 291.5 309.0
3............................ Saudi Arabia... 101.6 79.7
4............................ -CBI-.......... 57.0 72.1
5............................ Venezuala...... 41.8 58.0
6............................ Japan.......... 35.4 56.3
7............................ United Arab 46.8 42.5
Emirates.
8............................ Brazil......... 37.6 41.4
9............................ Germany........ 25.2 39.5
10........................... France......... 41.8 35.3
------------------------------------------------------------------------
Source: Global Trade Information Services, Inc.
[GRAPHIC] [TIFF OMITTED] T6685.002
[GRAPHIC] [TIFF OMITTED] T6685.003
[GRAPHIC] [TIFF OMITTED] T6685.004
[GRAPHIC] [TIFF OMITTED] T6685.005
Imports by the United States.--Chapters 61 and 62 of the HTS (Apparel)
[Millions of U.S. Dollars]
------------------------------------------------------------------------
Dominican Republic Haiti
Year ---------------------------------------------------------------
61 62 Total 61 62 Total
------------------------------------------------------------------------
1983 32.50 101.10 133.60 23.30 53.30 76.60
1984 38.50 129.90 168.40 29.80 58.90 88.70
1985 43.70 167.30 211.00 31.80 83.90 115.70
1986 54.20 221.30 275.50 33.00 83.10 116.10
1987 74.70 297.40 372.10 51.90 93.50 145.40
1988 109.30 405.80 515.10 58.00 101.90 159.90
1989 139.90 498.20 638.10 64.20 108.40 172.60
1990 178.40 507.30 685.70 73.10 89.90 163.00
1991 218.10 681.60 899.70 74.60 76.70 151.30
1992 308.90 854.00 1,162.90 38.10 26.70 64.80
1993 348.10 1,019.00 1,367.10 48.50 46.20 94.70
1994 390.20 1,147.60 1,537.80 17.70 13.50 31.20
1995 465.60 1,232.10 1,697.70 47.60 29.50 77.10
1996 538.30 1,181.80 1,720.10 68.40 36.10 104.50
1997 687.30 1,501.80 2,189.10 102.10 41.20 143.30
------------------------------------------------------------------------
Source: United States Department of Commerce
Chairman Crane. Thank you.
And our next witness is Mr. Aguirre-Sacasa. Mi Espanol es
muy malo [speaking briefly in Spanish].
STATEMENT OF HIS EXCELLENCY FRANCISCO X. AGUIRRE-SACASA,
AMBASSADOR TO UNITED STATES FROM THE REPUBLIC OF NICARAGUA
Mr. Aguirre-Sacasa. Muchas gracias, Senor Presidente and
members of the Trade Subcommittee. Let me open by thanking you
for giving us this opportunity to come and testify before you
today and for the great interest that you take in the recovery
of the countries that have been affected by Hurricanes Georges
and Mitch in Central America and the Caribbean.
At today's hearing you will hear from many people, but I
may be the only one who was an eyewitness to the hurricane
itself for I arrived in Managua on the 29th of October on the
last commercial air flight before the airport was shut down for
several days, and I will never forget what I witnessed. I saw
creeks that swelled to 100 times their normal flow, farms and
range lands that were flooded, the desperate faces of homeless
campesinos who had lost everything, and roads swallowed up by
rock slides, and most ominously of all, I recall the emergency
cabinet meeting when we got the first unconfirmed reports of a
major mud-slide which had wiped out the farming community of
Posoltega in western Nicaragua.
The rest is history. Hurricane Mitch proved to be the most
destructive natural calamity ever in our hemisphere. It left
over 10,000 dead, three million homeless, and over $8 billion
in destruction in its wake. In the two hardest hit countries,
Honduras and Nicaragua, rainfall exceeded 60 inches in 4 days.
That's nearly three times what San Francisco gets in a normal
year, Mr. Chairman. And coming as it did at the end of a
copious rainy season, Mitch caused enormous material damage.
According to the U.S. Army Corps of Engineers, destruction in
Honduras and Nicaragua came to the equivalent of 75 and 65
percent respectively of each country's GDP. And that's as if
the United States had suffered over $5.5 trillion in losses as
a result of a natural disaster.
The countries of Central America, especially Honduras and
Nicaragua, were battered but not broken by Mitch. The resilient
peoples of the region are slowly and quite literally digging
out from under the mud, and our societies and governments have
successfully carried out the critical emergency phase of the
recovery effort with the help of the international community
and especially of the people and the Government of the United
States. For this generous support, America has earned the
everlasting gratitude of our peoples.
Mr. Chairman, we are now entering the reconstruction phase.
As President Aleman of Nicaragua has often said,
Our governments and peoples do not merely want to reconstruct the
region as it was prior to Mitch. Instead, we are determined to
transform our nations into more robust, better societies where
democracy and the rule of law will be strengthened and where economic
growth will be accelerated and the fruits of that growth will be more
equitably distributed.
We understand that we bear primary responsibility for
getting our countries back on their feet. But we also realize
that the enormity of our losses mean that we cannot go it
alone. We urgently need the help of the international community
and especially of the United States, our closest friend and
partner. Give us the tools and we will get on with the task of
transforming our societies.
What do we require? The top priority is quick approval of
the supplemental aid bill for Central America to help us jump-
start the reconstruction effort. Let me stress, Mr. Chairman,
that all of our countries, but especially Honduras and
Nicaragua, need passage of the aid package now. Our rainy
season begins in 2 months and we need to get the aid in place
prior to then to plant our next crops.
Our countries also need fairer access to the U.S. market
for our exports. This would allow the Central American
economies to prosper, to create more jobs, thus cutting down on
illegal immigration, and to buy more U.S. exports. And American
consumers would benefit from high-quality goods at affordable
prices creating, as Ambassador Vega has mentioned, a win-win
situation for all concerned.
I urge the Congress to approve therefore a CBI enhancement
bill such as H.R. 984 quickly. And I encourage the
Administration to sign it into law before the end of 1999. To
wait until 2000, an electoral year, will, I fear, doom this
initiative to failure.
Mr. Chairman, allow me to end by saying a few words about
what is at stake.
In the 1980's, Central America was in turmoil. The region,
which is nearer to Washington, D.C. than California or Nevada
are, was being ripped apart by civil war, ideological
confrontation, and dictatorship. Economic chaos was the order
of the day as were human rights violations. Hundreds of
thousands of our citizens voted with their feet against these
conditions by emigrating illegally to safe havens in the United
States.
Today, this has changed. For the first time since the
Central American countries gained their independence almost 200
years ago, all five of our republics enjoy popularly elected
democracies and live in peace. The process of national
reconciliation is being deepened and prior to Mitch, all of our
countries were enjoying economic growth based on free-market
policies. Illegal emigration to the United States was down as
conditions in the region improved.
Today, Central America, Mr. Chairman, is a success story
that we can all take pride in. Central American blood, courage,
patriotism, and vision helped us to forge this remarkable
turnaround. So did the investment of American treasure and
American perseverance. But Central America is still a fragile
work in progress which must be carefully nurtured especially in
the wake of a killer storm like Mitch. By passing the
supplemental aid bill and a good CBI enhancement bill quickly,
Congress and the Administration, working in concert, have an
extraordinary opportunity to safeguard a major foreign policy
achievement. They can also help ensure that this success story
grounded in so many basic values which we share with the United
States will be preserved and strengthened.
Thank you very much.
[The prepared statement and an attachment follow:]
Statement of His Excellency Francisco X. Aguirre-Sacasa, Ambassador to
the United States from Nicaragua
Mr. Chairman, members of the Trade Subcommittee: By the time
today's hearing is concluded, you will have heard from many people, but
of all those who will testify, I may be the only one who was an
eyewitness to the hurricane itself.
I arrived in Managua on the 29th of October on the last commercial
flight before the airport was shut down for several days and will never
forget what I witnessed during the next four days. I saw creeks swell
to a hundred times their normal flow, farm and rangelands flooded, the
desperate faces of homeless campesinos, and roads closed by rockslides.
And, most ominously of all, I was at the emergency Cabinet Meeting when
we got the first unconfirmed report of a major mudslide which had wiped
out the farming community of Posoltega.
I saw, Mr. Chairman, the first videos brought back by air force
pilots who flew helicopters over devastated areas. These showed only
mud and debris where once villages had stood. And I'll never forget
when President Aleman declared three days of mourning when the
magnitude of the death toll began to become apparent.
The rest is history. Hurricane Mitch proved to be the most
destructive natural calamity in our Hemisphere, ever. It left over
10,000 dead, three million homeless and over $8 billion in destruction
in its wake. In the two hardest hit nations--Honduras and Nicaragua--
rainfall exceeded 60 inches in four days, three times what San
Francisco receives in a normal year! And coming as it did at the tail
end of a copious rainy season, Mitch caused enormous material damages.
According to estimates by the U.S. Corps of Engineers, destruction in
Honduras and Nicaragua came to the equivalent of 75% and 65%,
respectively, of both countries' GDP. To put this into some
perspective, that is as if the United States had suffered over $5.5
trillion in losses as the result of a natural disaster.
Mr. Chairman, the countries of Central America--especially Honduras
and Nicaragua--were battered but not broken--by Mitch. The resilient
peoples of the Region are slowly and quite literally digging out from
under the mud. And our societies and governments have successfully
carried out the critical emergency phase of the recovery effort with
the help of the international community and, especially, the people and
the government of the United States. For this, your people and
government have earned the everlasting gratitude of Central America.
Mr. Chairman, we are now entering the critical reconstruction phase
of the disaster. As President Aleman of Nicaragua has often said, our
governments and peoples do not want to reconstruct the Region as it was
prior to Mitch. Instead, we are determined to transform our countries
into stronger, better societies where democracy and national
reconstruction will be strengthened, where the rule of law will prevail
and where economic growth will be accelerated and the fruits of this
growth will be more equitably distributed.
We understand that we bear primary responsibility for getting our
countries back on their feet. But we also know that the enormity of our
losses also mean that we can not go it alone. We urgently need the help
of the international community, especially that of the United States
our closest friend and neighbor. If you give us the tools, we will get
on with the task of transforming our societies.
What do we require? The top priority is quick approval of the $960
million supplemental aid bill for Central America to help us jump start
the reconstruction effort. Let me stress, Mr. Chairman, that all of our
countries--but especially Honduras and Nicaragua--need passage of the
aid package now. Our rainy season begins, once again, in three months
and we need to get as much of the aid in place prior to then to plant
our next crops.
Our countries also need fairer access to the U.S. market for our
exports. America already is Central America's most important trading
partner. Your exports to CBI countries come to over $18 billion
annually and hundreds of thousands of American jobs depend on this
trade. Freer commerce would allow the Central American economies to
prosper, to create more jobs thus cutting down on emigration, and to
buy more U.S. goods. And American consumers would benefit from high
quality goods at affordable prices creating a ``win-win'' situation for
all concerned. I urge the Congress to approve, therefore, a CBI
enhancement bill quickly and I encourage the Administration to sign it
into law before the end of 1999. To wait until 2000, an electoral year,
will--I fear--doom this initiative to failure.
Mr. Chairman, allow me to end by saying a few words about what is
at stake.
In the 1980s, Central America was in turmoil. The Region, which is
nearer to Washington, D.C. than California or Nevada, was being ripped
apart by civil war, ideological confrontation and dictatorship.
Economic chaos was the order of the day as were human rights
violations. Hundreds of thousands of our citizens literally voted with
their feet against these conditions by emigrating illegally to safe
haven in the United States.
Today, this has changed. For the first time since the Central
American countries gained their independence 175 years ago, all five of
our republics enjoy popularly elected democracies and peace. The
process of national reconciliation is being deepened and all of our
countries were enjoying economic growth based on free market policies
before Mitch. Illegal emigration to the U.S. was down as conditions in
the Region improved.
Today's Central America is a success story that we can all take
pride in. Central American blood, courage and vision helped to forge
this remarkable transformation. So did American treasure and
perseverance. But our success story is still a fragile ``work in
progress'' which must be carefully nurtured, especially in the wake of
a killer storm like Mitch. By passing the supplemental aid bill and a
good CBI enhancement bill quickly, Congress and the Administration--
working in concert--have an extraordinary opportunity to safeguard a
major foreign policy achievement. They can also help ensure that this
Central American success story--grounded in so many basic values which
we share with the United States--will be preserved and strengthened.
Many thanks.
[GRAPHIC] [TIFF OMITTED] T6685.009
Chairman Crane. Thank you, Mr. Ambassador.
Our next witness, Ambassador Leon.
STATEMENT OF HIS EXCELLENCY RENE A. LEON, AMBASSADOR TO THE
UNITED STATES FROM THE REPUBLIC OF EL SALVADOR
Mr. Leon. Mr. Chairman, Members of the Subcommittee, thank
you for providing me this opportunity to appear before the
Trade Subcommittee regarding the proposed Caribbean and Central
American Relief and Economic Stabilization Act.
I would like to begin by thanking you, Mr. Chairman, as
well as Congressman Kolbe, Rangel, and Matsui, for introducing
this legislation which is urgently needed for the expeditious
and sustainable economic recovery of the Central American
region from Hurricane Mitch. I would also take this opportunity
to recognize the leadership that you have provided on CBI over
the years.
While direct financial assistance is greatly needed, we
believe that the key to a successful economic recovery from
Hurricane Mitch lies in expanding trade with our most important
trading partner, the United States.
El Salvador fully supports the immediate passage of the
Caribbean and Central American Relief and Economic
Stabilization Act. Enactment of this legislation will create
economic, social, and national security benefits for both
Central America and the United States.
Enhanced trade will expand economic opportunities that are
urgently needed to preserve our region's stability, creating
employment, and encouraging international and domestic
investment. It will also help us to preserve our most precious
achievements: peace after long periods of domestic conflicts,
functional and strong democracies based on governments elected
by the people, full respect for human rights, and market-
oriented reforms. Furthermore, economic expansion will permit
our countries to provide attractive jobs to our people, thus
discouraging them from emigrating outside of the region to seek
better living conditions.
Enhanced trade will strengthen the positive trend that we
have seen in trade between our region and the United States in
the past decade. We did some research, Mr. Chairman, during the
week on the Internet and we got the latest 1998 figures,
preliminary figures for the trade between our region and the
United States. U.S. exports to CBI countries, among which
exports to Central America are predominate, have more than
doubled since 1989 from $9 billion to $22.7 billion in 1998
creating more than 400,000 jobs in the United States according
to a ratio of one billion to 20,000 jobs that you have just
mentioned earlier. By comparison, U.S. exports to China in the
same year, 1998, were only $14.3 billion. And to India and
Russia combined, only $7.1 billion. The United States maintains
a growing deficit with those countries, whereas it enjoys a
trade surplus of $2.7 billion with the CBI region.
Enhanced trade will also help maintain and improve the
competitiveness of the U.S. industries vis-a-vis Asian
competitors. The financial crisis in Asia has created
difficulties for the textile and apparel industries in the
United States. The trade incentives provided in H.R. 984 will
allow U.S. firms operating in the CBI region to remain
competitive in textile and apparel market segments where
otherwise they would be displaced by increasingly inexpensive
Asian products.
Finally, enhanced trade will increase purchase of U.S. raw
materials and capital goods from the CBI region. In the period
from 1994 to 1998, U.S. exports to the CBI countries have
increased 78 percent. In 1998 alone, approximately 57 percent
of total imports from the Central American countries came from
the United States. The region's high propensity to import goods
and services from the United States, which is approximately 75
cents per each additional dollar exported by the CBI countries,
which by comparison, let me tell you that in Asia, for the
Asian region, it's only 2 cents; and our dependency on U.S.
imports will translate into more exports and jobs in this
country.
Mr. Chairman, I would like to close by pointing out that
H.R. 984 addresses the key trade interests of the Central
American countries. This bill provides tariff and quota
treatment equivalent to NAFTA to products currently excluded
from CBI. Thus, will eliminate the consequences of trade and
investment deviation that our countries have been experiencing
in the past 6 years.
By granting apparel products made with regional yarns and
fabrics, tariff and quota treatments, similar to that granted
to Mexican products under NAFTA, the bill addresses the concern
of El Salvador as well as other countries in Central America
that have a textile industry. Let me just point out that this
textile industry does not represent a threat to U.S. interests
due to its relatively small size. It does employ more than
18,000 people and supports about $850 million worth of exports
which are critical to preserve.
And, finally, this is a textile industry that complies with
the rule of origin of NAFTA and also it is a textile industry
that imports all its raw cotton from the United States.
Finally, Mr. Chairman, this legislation is fully consistent
with Central America's trade policy objective to negotiate a
free trade agreement with the United States similar to NAFTA
even before the deadline for the creation of the Free Trade
Area of the Americas in the year 2005.
The United States has invested hundreds of millions of
dollars to make the region what it is today: peaceful,
democratic, economically vibrant, and a good friend of America.
The magnitude of the Mitch disaster demands a strategic policy
for the region to preserve this reality. The expansion of trade
and investment opportunities through the enactment of a
flexible and comprehensive CBI legislation is a sine qua non
component to help Central America rebuild and recover in the
wake of Hurricane Mitch.
Thank you, Mr. Chairman.
[The prepared statement follows:]
Statement of His Excellency Rene A. Leon, Ambassador to the United
States from the Republic of El Salvador
Mr. Chairman, Members of the Subcommittee, thank you for providing
me this opportunity to appear before the Trade Subcommittee of the
House Ways and Means Committee regarding the proposed ``Caribbean and
Central American Relief and Economic Stabilization Act.'' I would like
to begin by thanking you, Mr. Chairman, as well as Congressmen Kolbe,
Rangel and Matsui for introducing this legislation, which is urgently
needed for the expeditious and sustainable economic recovery of the
Central American region from Hurricane Mitch. I would also take this
opportunity to recognize the leadership that you have provided on CBI
over the years.
While direct financial assistance is greatly needed, we are
convinced that the path to regional growth and sustainable development
lies in the region's ability to help itself. In this regard, we believe
that the key to a successful economic recovery from Hurricane Mitch
lies in expanding trade with our most important trading partner, the
United States.
Therefore, El Salvador fully supports the immediate passage of the
``Caribbean and Central American Relief and Economic Stabilization
Act.'' We regard this legislation as vital to the reconstruction of the
region in the wake of Hurricane Mitch and as a critical step toward the
creation of a free trade area between the United States and Central
America. Enactment of this legislation will create economic, social and
national security benefits for both Central America and the United
States.
Enhanced trade by granting our exports the most favorable tariff
and quota treatment will expand economic opportunities that are
urgently needed to preserve our region's stability, creating employment
and encouraging international and domestic investment. It will also
help us to preserve our most precious achievements: peace after long
periods of domestic conflicts, functional and strong democracies based
on governments elected by the people, full respect for human rights and
market oriented reforms. Furthermore, economic expansion will permit
our countries to provide attractive jobs to our people, thus
discouraging them from emigrating outside of the region to seek
enhanced living conditions.
Enhanced trade between the United States and the region will
strengthen the positive trend that we have seen in trade between our
region and the United States in the past decade. U.S. exports to CBI
countries--among which exports to Central America are predominant--have
more than double since 1989, from $9.0 billion to $22.7 billion in
1998, creating more than 360,000 jobs in the United States. By
comparison, U.S. exports to China the same year were only $14.3 billion
and to India and Russia combined only $7.1 billion. The United States
maintains a growing deficit with those countries, whereas it enjoys a
trade surplus with the CBI region. This surplus, was $3.3 billion in
1998, up 73% from the previous year, which compares favorably with the
trade deficit of $700 million the U.S. had with the CBI region in 1983.
The implementation of this legislation, will ensure that this positive
trend in trade with the CBI region continues.
Enhance trade will help maintain and improve the competitiveness of
the U.S. industry vis-a-vis Asian competitors. The financial crisis in
Asia has created difficulties for the textile and apparel industries in
the United States. The trade incentives provided in H.R. 984 will allow
U.S. firms operating in the CBI region to remain competitive in textile
and apparel market segments, where otherwise they would be displaced by
increasingly inexpensive Asian products.
Finally, enhanced trade will increase purchases of U.S. raw
materials and capital goods from the CBI region. In the period from
1994 to 1998, U.S. exports to the CBI countries have increased 78%.
This figure, constitutes one of the more dynamic growth rates
experienced by U.S. exports worldwide. In 1998 alone, approximately 57%
of total imports from the Central American countries came from the
United States. The region's high propensity to import goods and
services from the United States (approximately 79 cents per dollar) and
our dependency on U.S. imports, will translate in more exports and jobs
in this country.
Mr. Chairman and members of this subcommittee, there is
overwhelming evidence that show that the approval and implementation of
H.R. 984 will bring expanded growth and prosperity for the United
States and its citizens. And at the same time, by expanding trade and
investment in the CBI region, will permit us to restore economic growth
rapidly. Enactment of this bill, without any doubt, places the United
States and the CBI countries in a win-win situation.
Mr. Chairman, I would like to close my intervention by pointing out
that H.R. 984 addresses the key trade interest of the Central American
countries:
This bill provides tariff and quota treatment equivalent
to NAFTA to products currently excluded from CBI. Thus, will eliminate
the consequences of trade and investment deviation that our countries
have been experiencing in the past 6 years.
By granting apparel products made with regional yarns and
fabrics, tariff and quota treatment, similar to that granted to Mexican
products under NAFTA, the bill addresses the concern of El Salvador, as
well as other countries in Central America, that have a textile base,
that does not represent a threat to the U.S. textile industry. Support
for the Central American textile industry is important, because it is
one of the most dynamic economic activity in the manufacturing sector
of our economies, and one of the most reliable sources of employment,
that could help economies to a faster recovery in the wake of Mitch. It
would also mean supporting a high value added economic activity, which
is critical to our apparel industry and U.S. firms to remain
competitive vis-a-vis their Asian competitors.
Finally, this legislation is fully consistent with Central
America's trade objective to negotiate a free trade agreement with the
United States similar to NAFTA, even before the deadline for the
creation of the Free trade Area of The Americas in the year 2005.
Mr. Chairman and members of this Subcommittee: El Salvador is
committed to foster its economic reforms in order to keep our ability
to meet the criteria to undertake the obligations of NAFTA or any other
similar agreement, and our obligations under the WTO. Let me assure you
that, El Salvador and the rest of the Central American countries
already fulfill those requirements.
The United States has invested hundreds of millions of dollars to
make the region what it is today: peaceful, democratic, economically
vibrant and a good friend of America. The magnitude of the Mitch
disaster demands a strategic policy for the region to preserve this
reality. The expansion of trade and investment opportunities through
the enactment of a flexible and comprehensive CBI enhancement is a sine
qua non component of legislation that aims at helping Central America
rebuild and recover in the wake of Hurricane Mitch.
Thank you, Mr. Chairman.
Chairman Crane. Thank you.
And our final witness is Ambassador Daremblum from Costa
Rica and we would like to ask you to please give our best
regards to Sonia Pecado who accompanied us on a trip to Costa
Rica, our Trade Subcommittee, back in 1995.
STATEMENT OF HIS EXCELLENCY JAIME DAREMBLUM, AMBASSADOR TO THE
UNITED STATES FROM COSTA RICA
Mr. Daremblum. Delighted, Mr. Chairman.
Mr. Chairman, Congressman Rangel, I appreciate the
opportunity to testify in favor of H.R. 984 to provide enhanced
access to the U.S. market for exports from the Caribbean Basin
in order to restore the benefits of a proven trading
relationship between the United States and the nations of
Central America and the Caribbean. H.R. 984 is necessary
because it creates the most jobs in the region, because it
creates the most incentives for businesses to thrive in the
region.
I thank you, Mr. Chairman and Congressman Rangel, as well
as the other cosponsors of this legislation, for advancing it
as a part of your response to the devastation of Hurricanes
Mitch and Georges which impacted the entire region leaving
thousands dead and millions without shelter, health care,
education, and social services. Most important, millions lost
their means of livelihood, their employment swept away in flood
waters.
Mr. Chairman, my country, Costa Rica, was spared the utter
devastation suffered by our neighbors in the region but we were
affected as well, and we continue to bear an ever increasing
burden as a result of Hurricane Mitch. Costa Rica suffered more
than $100 million in infrastructure damage from Mitch but the
greatest impact is the influx of thousands of refugees into our
Nation from our neighbors, of people who are desperately
looking for a way to restore and sustain life shattered by the
unspeakable horror of the storm that has shattered their homes,
their communities, and, most importantly, their capacity to
earn a livelihood for themselves and their families. Costa Rica
has become the host to an estimated 600,000 refugees, many of
whom had entered our Nation fleeing social and political
turmoil and economic conditions during the course of the last
decade in our neighboring nations.
The Government of Costa Rica recently granted amnesty to
400,000 undocumented refugees, allowing them to become legal
residents and eventually full citizens. Given that the
population of Costa Rica is 3.5 million, in the United States
such an amnesty would be the equivalent of offering green cards
to an additional 30 million people. We, in Costa Rica, have and
will welcome these refugees because the people of Costa Rica
have a reverence for humanity and the protection of human
rights.
The laws and traditions of our Nation provide that each and
every refugee entering Costa Rica be given what is necessary to
sustain life: food, clothing, shelter, education, and the hope
for gainful employment. We thus have no choice and no desire to
do anything other than to provide for the many refugees from
neighboring nations who have come and are continuing to come to
Costa Rica in search of hope.
Parallel to this, recent data indicate a more than 30
percent increase in refugees from the south into Mexico en
route to the United States since Hurricane Mitch. We're
witnessing the beginning of what threatens to be a flood of
humanity fleeing poverty and hopelessness. That is why the
Central American nations need to be given enhanced access to
the U.S. market equal to that enjoyed by the U.S. NAFTA
partners, notably Mexico, so that they can obtain the
investment needed to rebuild their economies.
At present, we are seeing new investment go to Mexico and
even worse are experiencing the loss of existing investments
and jobs from our region to Mexico. The Crane-Rangel bill is
for these purposes the most advantageous of the proposals for
CBI enhancement that have been advanced in response to the
hurricanes to date. We need to allow access to the U.S. market
for apparel, manufactured from material produced in the region,
because we want to maximize the job creation effect of enhanced
access. Otherwise, we will be undermining jobs in the region
given as we strive to create new opportunities for employment.
Mr. Chairman, I would like to personally thank you and your
colleagues for your efforts to promote free trade among our
nations. In addressing the critics of this common sense
proposal, let the economic performance of our relationship
speak to their heads and let the humanitarian needs of their
neighbors speak to their hearts.
Thank you again for the invitation to testify before this
Subcommittee, and I look forward to working with this
Subcommittee and your colleagues on the full Committee toward
passage of this meaningful trade legislation.
Thank you very much.
[The prepared statement follows:]
Statement of His Excellency Jaime Daremblum, Ambassador to the United
States from Costa Rica
Chairman of the Trade Subcommittee of the Committee of Ways & Means
Cong. Crane, Ranking Democrats of the full committee Cong. Charles
Rangel and of the Trade Subcommittee Cong. Levin, and the other
distinguished members of the Committee on Ways & Means, I am Jaime
Daremblum, the Ambassador of Costa Rica to the United States, and I
thank you for the opportunity to provide testimony in support of the
Crane/Rangel legislation to enable the nations of the Caribbean to have
enhanced access for our exports to the United States market. I join my
fellow Ambassadors from the region in asking for passage of this
legislation as an essential element of the relief of the United States
is supplying in response to the unprecedented devastation caused in the
region by Hurricanes Mitch and Georges.
My nation, Costa Rica, was spared the utter devastation suffered by
our neighbors in the region, but we were affected as well and we
continue to bear an ever increasing burden as a result of Hurricane
Mitch. Costa Rica suffered more than $100 million in infrastructural
damage from Mitch, but the greatest impact is the influx of thousands
of refugees into our nation from our neighbors, of people who are
desperately looking for a way to restore and sustain lives shattered by
the unspeakable horror of a storm that has shattered their homes, their
communities and, most importantly, their capacity to earn a livelihood
for themselves and their families. Costa Rica has become host to an
estimated 500,000 to 600,000 refugees, many of whom had entered our
nation fleeing social and political turmoil and economic conditions
during the course of the last decade in our neighboring nations.
The Government of Costa Rica recently granted amnesty to 400,000
undocumented refugees, allowing them to become legal residents and
eventually full citizens. Given that the population of Costa Rica is
only 3.5 million, in the United States such an amnesty would be the
equivalent of offering green cards to an additional 30 million people.
We in Costa Rica have and will welcome these refugees because the
people of Costa Rica have a reverence for humanity and the protection
of human rights. The laws and traditions of our nation provide that
each and every refugee entering Costa Rica be given what is necessary
to sustain life: food, clothing, shelter and the hope of gainful
employment. We thus have no choice, and no desire, to do anything other
than to provide for the many refugees from neighboring nations who have
come and are continuing to come to Costa Rica in search of hope.
In this way, we share the guiding principles of the United States,
as your constitution and tradition calls upon you to ``give me your
hungry, your poor, those yearning to be free'' and impels the
humanitarian impulse which you have exhibited since the early aftermath
of the disastrous hurricanes which afflicted our region. Recent data
indicate a more than 30% increase in refugees from the South into
Mexico enroute to the United States since Hurricane Mitch. We are
witnessing the beginning of what threatens to be a flood of humanity
fleeing poverty and hopelessness. That is why it is absolutely critical
that the United States Congress enacts President Clinton's hurricane
relief request and, along with it, enacts the Crane/Rangel bill to
provide the enhanced access to the United States market required to
attract the investment needed to rebuild the affected economies and
create the jobs to provide hope and a reason to remain home.
I submit for the record excerpts from an editorial written by my
President which appeared in the Washington Post on November 24, 1998,
which expressed our gratitude for the assistance provided by the United
States and then raised the issue which we are addressing in today's
hearing.
``In the aftermath of Hurricane Mitch we, the people and
leaders of the nations of Central America, are still counting
the cost and trying to comprehend the extent of the devastation
we have suffered . . . Even as we struggle to alleviate the
human suffering with the assistance of the international donor
community, we are filled with growing apprehension for the
future of the survivors who have been deprived of their ability
to earn their livelihood. . . . [W]e are aware that the
suffering we have experienced in the wake of Hurricane Mitch is
only the beginning of a continuing tragedy that will produce
multiplied suffering unless we are able to find a way to
restore our economies. The path to our recovery from Hurricane
Mitch must be through the restoration and recovery of our
economies.
We will need the help of our friends in the United States to
restore our capacity for economic growth as much as we require
the emergency assistance you are providing us now in our hour
of need. We will have to attract private capital to our
economies from the United States and other developed nations to
enable us to create new means of production and opportunities
for employment.
The competition for private investment capital, however, is
global and intense, especially now in the wake of the losses
suffered by United States investors in some of the emerging
markets which has made investors leery and reluctant to invest
abroad. In addition to the challenge of attracting foreign
investment in a time of disillusionment with emerging markets,
we in Central America suffer from the disadvantage of being
disabled by not being a part of the North American Free Trade
Agreement (NAFTA), which has superseded our existing trade
relationship with the United States under the Caribbean Basin
Initiative.
The CBI has been responsible for a decade of unparalleled
growth in trade between the United States and the nations of
the Caribbean Basin, acting as a catalyst for exports,
investments and employment creation in the United States as
well as in nations of the region such as my own Costa Rica. The
Caribbean Basin has become one of the best markets in the world
for United States products, with each of the nations in the
region importing an average of 75% of our goods and services
from the United States. The Caribbean Basin is the area of the
world in which United States exports have grown most rapidly in
recent years. Since the CBI was enacted in 1984, the United
States has developed a growing trade surplus with CBI nations.
From 1983 to 1995, United States exports to the region surged
by nearly 300% from $5.7 billion to $15.3 billion. Since each
United States $1 billion of United States exports to the
Caribbean Basin generates 20,000 new direct jobs in the United
States, this means that the increase in purchases by Caribbean
Basin nations such as Costa Rica of United States goods and
service from the initiation of the CBI in 1983 to 1995 helped
to create more than 300,000 trade-related jobs in the United
States Thus the trading relationship developed under the CBI
has been to our mutual benefit for more than a decade. The CBI
proved that trade, not aid, is the key to economic development
and political stability in the region. Today the strong
democracies and, prior to Hurricane Mitch, growing economies of
the nations of Central America, are proof of the benefits of
the enhanced trade relationship under the CBI.
* * * * *
I am asking our friends in the Administration and the [United
States] Congress to enable us, through providing parity of
access to the United States market, to attract investment to
our economies with the same urgency as the mobilization of
emergency resources to relieve the victims of Hurricane Mitch.
It is difficult at this time of sorrow to associate this
tragedy with anything good or promising for the future but, if
we keep our faith and obtain the full commitment of our
friends, we may be able to build and secure an economic future
that is much better than what we have experienced in the
past.''
As my President stated in his opinion editorial, we in Costa Rica
support legislation to provide enhanced access to the United States
market for exports from the nations of Central America and the entire
Caribbean Basin. We know that such access is the only way for us to
achieve the new investment that will be needed to create new capacity
for production in the region and the new jobs that will be needed to
replace the thousands of jobs lost, literally swept away, by Hurricanes
Mitch and Georges. It is estimated that it will take close to 5 years
to restore the capacity to produce the agricultural exports that have
been the primary exports from the nations of Central America. Thousands
of people have lost their ability to earn a living and we must restore
that productive capacity. We can meet this challenge if the United
States Congress will enact the Crane/Rangel bill to enhance the
benefits of the Caribbean Basin Initiative. I ask the members of this
Committee to report this legislation favorably to the U.S. House.
Caribbean Parity Needs to be a Part of a Meaningful Hurricane Relief
Legislative Package
The path to recovery from Hurricanes Mitch and Georges must be
through the restoration and recovery of the devastated economies. The
nations of the region will have to attract private capital to their
economies from the United States and other developed nations to enable
them to create new means of production and opportunities for
employment. The Central American nations need to be given enhanced
access to the United States market equal to that enjoyed by the United
States' NAFTA partners--notably Mexico--so that they can obtain the
investment needed to rebuild their economies. At present, we are seeing
the bulk of new investment go to Mexico and are experiencing the loss
of existing investment and jobs from our region to Mexico.
The Crane/Rangel bill is the most deserving of support of the
proposals for CBI enhancement that have been advanced in response to
the hurricanes to date. We need to have enactment of the Crane/Rangel
bill because it will preserve the thousands of jobs in the nascent
textile industry in the region as well as stimulating the needed
investment to create new jobs. We need to allow access to the United
States market for apparel manufactured from materials produced in the
region because we want to maximize the job creation effect of enhanced
access. Otherwise, we will be undermining jobs in the region even as we
strive to create new opportunities for employment.
The CBI has benefitted the United States economy, while stimulating
economic growth in the Caribbean Basin, and this benefit is measurable
as shown in the following Tables I and II evidencing the growth in
United States exports to the region and the number of jobs created in
the United States economy from exports to the Caribbean. It is also
measurable on a state-by-state basis that the benefits derived from
Caribbean trade have been shared by the state economies in the nation
with every state enjoying a healthy trade surplus in the region (see
Annex 1).
US/CBI Trade Statistics (1985-1995)
[Millions of U.S. Dollars]
----------------------------------------------------------------------------------------------------------------
Annual
Export
Year U.S. Exports Trade Balance
Imports Growth [In
percent]
----------------------------------------------------------------------------------------------------------------
1985.......................................................... 6687 5942 - 745
1986.......................................................... 6065 6362 7.1% 297
1987.......................................................... 6039 6906 8.6 867
1988.......................................................... 6061 7690 11.4 1629
1989.......................................................... 6637 8290 7.8 1653
1990.......................................................... 7525 9569 15.4 2044
1991.......................................................... 8372 10013 4.6 1641
1992.......................................................... 9627 11263 12.5 1636
1993.......................................................... 10378 12428 10.3 2050
1994.......................................................... 11495 13441 8.1 1946
1995.......................................................... 12673 15306 13.8 2633
----------------------------------------------------------------------------------------------------------------
Source: International Trade Commission on the CBERA Thirteenth Report 1997 Investigation No. 332-227 USITC
Publication 3132 September 1998.
Number of US Workers Dependent on Trade with the Caribbean Basin Nations
------------------------------------------------------------------------
No. of New
Total No. U.S. Jobs
Year of U.S. Created Per
Workers Year
------------------------------------------------------------------------
1985.......................................... 118,840 -
1986.......................................... 127,240 8,400
1987.......................................... 138,120 10,880
1988.......................................... 153,800 15,680
1989.......................................... 165,800 12,000
1990.......................................... 191,380 25,580
1991.......................................... 200,260 8,880
1992.......................................... 225,262 25,002
1993.......................................... 248,552 23,290
1994.......................................... 268,814 20,292
1995.......................................... 306,120 37,306
------------------------------------------------------------------------
Source: The International Trade Commission Report on the CBERA
Thirteenth Report 1997 Investigation No. 332-227 USITC Publication
3132 September 1998.
The CBI has been responsible for 15 years of unparalleled growth in
trade between the United States and the nations of the Caribbean Basin,
acting as a catalyst for exports, investment and employment creation in
the economies of the United States and the nations of the Caribbean
Basin.
As the growth process in CBI economies has been strengthened by
increased United States investment and market access, their import
capacities have increased, resulting in increased purchases of United
States goods and services. Each dollar spent by the nations of the
Caribbean Basin for imported goods and services generates 60 cents
worth of United States exports, while that same dollar spent on imports
by Asian nations would only generate 10 cents per dollar of United
States exports. In addition, the jobs created in the Caribbean Basin
have often been in industries such as apparel manufacture where United
States employers can no longer offer globally competitive products if
all phases of production are carried out in the United States.
In this regard, the CBI has served as a first and vital step in the
path leading to expanded trade, investment and growth with the United
States. The CBI has supported economic reform to create genuine market
economies in the region and has laid the groundwork for mutual
prosperity through sustained growth and stronger commercial links.
The Significance of United States-Caribbean Trade
(1) Since the CBI was enacted in 1984, the United States has
developed a growing trade surplus with CBI countries: from 1985 to
1995, United States exports to the region almost tripled from $5.9
billion to $15.3 billion.
(2) Each $1 billion of United States exports to Latin America
generated 20,000 new direct jobs in the United States. This means that
the increase in CBI purchases of United States goods and services from
1985 to 1995 has created approximately 200,000 new direct jobs in the
United States. USTR Charlene Barshefsky currently estimates that almost
400,000 new U.S. jobs have been created as a result of the trade
surplus the U.S. enjoys with the nations of the Caribbean Basin.
(3) Of every dollar of income received by the average Central
American and Caribbean person, close to 60 cents go to buy American
products, as compared to Asia which spends only 10 cents on the import
of American goods.
(4) CBI industries also have a strong propensity to buy American
raw materials, machinery and equipment. On average, 45% of the imports
of CBI countries come from the United States.
(5) While CBI countries send over 50% of their exports to the
United States, a total of $7.6 billion, this represents only 1.5% of
total United States imports in 1990.
(6) In contrast, United States imports from the newly
industrialized economies of Japan and East Asia combined to export
$150.2 billion to the United States, which represents 30% of total
United States imports. These countries represent 58% of the United
States trade deficit, while the United States has a surplus with the
CBI.
In addition to the tangible measurable benefits from trade with the
Caribbean, the United States has benefitted from increased economic
growth in the region, producing greater social stability and a
reduction in poverty. The negative consequences of poverty,
instability, and social unrest in the region are clear: increased
pressure upon the United States borders from illegal immigration and an
increase in the flow of dangerous narcotics from the region into the
United States The United States thus has a real stake in the kind of
economic growth and poverty reduction which has been the positive
contribution of the CBI beyond its measurable economic benefits.
We in Costa Rica, as I indicated earlier, have a similar stake
because many thousands of these refugees will turn South rather than
North and enter Costa Rica. We have proven in Costa Rica the ability to
attract foreign investment to create employment, including recently the
investment of high tech firms in our nation. We are, however, suffering
from the some competitive disadvantage as the rest of the region and we
need enhanced access to the United States market in order to meet the
challenge of creating employment opportunities for the refugees
arriving from neighboring states. In today's world, trade, jobs,
immigration and the preservation of the environment have become
integrally intertwined. By granting enhanced trading opportunities for
the Caribbean Basin in the United States, we will be providing the
means for an economic recovery that meets the humanitarian imperative
of creating jobs and hope for the impoverished people of the region.
The Time to Enact Caribbean Parity is Now
President Clinton and many in the United States Congress have
recognized that the strength of our economies and democratic governance
is the best defense for the United States against trafficking in
illegal narcotics and a flood of illegal immigration. Recognizing that
the CBI had been undermined by the NAFTA, President Clinton promised
the restoration of equality of access to the United States Market for
Caribbean Basin nations to that afforded Mexico under the NAFTA at the
Miami Summit in 1995 and at a Central American regional summit in 1997.
The leadership and members of the Committee on Ways & Means and the
United States Congressional leadership have supported legislation to
provide the nations of the Caribbean Basin with enhanced access to the
United States market in the past, but the legislation has been caught
up in the fight over the granting of 'fast track' authority to the
President to expand the NAFTA. Now we have the opportunity to advance
the enactment of legislation to provide Caribbean Basin Initiative
enhancement as an important, even necessary, part of a program of
recovery of the economies of the region as a top priority.
Mr. Chairman and Members of the Committee, enhanced trade and
investment with the region will enable the creation of jobs that will
restore hope and provide the opportunity for the people of Central
America to remain at home.
[Attachments are being retained in the Committee files.]
Chairman Crane. Thank you, Mr. Ambassador.
And, Ambassador Leon, you've recently had very successful
elections which highlight the dramatic transition to democracy
in your country. Why do you believe a trade component is
essential to the U.S. hurricane relief package?
Mr. Leon. Yes, sir, thank you very much for that
recognition. And basically we believe that it is essential
simply because it will create the job opportunities that we
need to deliver what the benefits of the market are supposed to
be. Otherwise, it has been said here in this Committee during
this session that democracy is not only the act of voting, of
people going to the polls and elect presidents or authorities
to rule a country. And we believe that this will provide us
with tools to deliver what the people in our countries need and
this is a good economic opportunity to find a good job and with
better salaries. And it will bring also the additional
benefits, not only in terms of stabilization for our country
but for the United States because it would curtail the
incentive to seek for a better future outside our region.
Chairman Crane. Second question, what would the effect be
on your factories in El Salvador of a bill that mandated the
use of U.S. fabric?
Mr. Leon. I think that it will create disruption for about
4,000 jobs in El Salvador and it will create disruption
conditions for about $350 million worth of exports that use
regional yarns--I mean local yarns and regional fabrics in El
Salvador. The total figure for Central America, sir, will be
over 18,000 jobs and about a figure close to $900 million that
could be just disrupted if any CBI legislation just allows 807,
809 trade to benefit.
Chairman Crane. And for Ambassador Daremblum, Costa Rica
has had a leadership role in the summit with the Presidents of
the United States and Central America earlier this month. What
was the reaction of leaders in the region to the Clinton
administration's recent proposal on CBI?
Mr. Daremblum. Mr. Chairman, my government issued a
statement right after the summit in which it summarizes what
the position is concerning the Administration's proposal. We
feel that even though it's a step in the right direction
because it addresses the chapter of trade within the context of
the strategy for the reconstruction of Central America, there
are some aspects in that bill which are very worrisome and that
are of concern to us. First of all, the restrictions included
there concerning the fabric and the yarn, do not help to
correct the distortions that have led to investment being
diverted to Mexico in this area.
Second, there is a limitation as to time because it only
provides incentives for 21 months which is not very effective
for investors.
And, third, it creates and introduces greater
conditionalities that exist today in the present or in the
current CBI legislation. For all these reasons, we don't feel
that it's an effective instrument to really encourage the long-
term reconstruction of our area.
Chairman Crane. Thank you. Mr. Rangel.
Mr. Rangel. Thank you, Mr. Chairman. I think that all of
you will agree that the United States has felt it necessary to
reach out and try to do as much as we can do to repair some of
the harm that has been done by the natural disasters in that
area. And certainly when we first enacted the Caribbean Basin
Initiative, it was because we not only wanted to support
democracy, but we felt that it was trade that was necessary,
rather than just economic assistance and all of the governments
have agreed to that. And it has caused a great deal of
stability and, indeed, has enhanced and improved the exports of
the United States as a result of it. But whenever there's
change, we do have a great deal of problems where those changes
take place.
And so I need you to prepare to send to me, since we don't
have time to get it this morning, the number of American firms
that are operating in your countries because I would assume
that these firms are also operating in the United States of
America? And as a result of their investment in your countries,
we are assuming that they have increased their trade and
increased their employees and increased their taxes? But to be
honest with you, I don't really believe they're speaking on
behalf of the host countries the way you would expect that they
would.
Ambassador Vega, who would you just normally believe is the
largest American business presence in the Dominican Republic
without having to be accurate, just in thinking about U.S.
firms that are there?
Mr. Vega. If it's in terms of investment, Mr. Congressman,
it would be sugar--in the sugar industry and in banking because
most of the textile assembly in my country is done by
Dominican-owned companies who receive orders from U.S.
companies to produce for them and ship back.
Mr. Rangel. So one would assume that these U.S. companies,
enhancing their business as a result of the CBI parity, would
be in a sense lobbying on your behalf? Do any of you discuss
with the U.S. presence in your countries how important this
legislation is to you and, therefore, to them? I know
Ambassador Leon and I have discussed this earlier. Is my point
clear? Yes, Ambassador?
Mr. Daremblum. Congressman Rangel, the American Chamber or
the Costa Rican-American Chamber of Commerce has been lobbying
for a long time very actively here in the United States for CBI
enhancement. Twice a year or once a year, they come up here, a
big delegation, that includes very prominent American companies
doing business in my country. And they come up here and they
have been really promoting and supporting this type of
legislation.
Mr. Rangel. OK, well, let me give you lobbying 101. And
that is that Chambers of Commerce don't influence anybody
because we don't know who they are or where they're located.
It's the members of the Chamber of Commerce who have companies
and firms and plants in the United States because in the United
States it would be located in what--Congressional districts?
And so, therefore, it would mean that if these companies are
successful in your countries in expanding their ability to hire
more people, it would be in Members' districts. And Chambers
don't have Members except in the District of Columbia. And so
it would seem to me to make a lot of sense for these companies
not to come down here in large groups and impress nobody, but
to have their members that have plants and companies throughout
the United States to explain to their Member of Congress how
important it is that this legislation be passed.
Let me say this, there has been some criticism that the
working conditions have not improved in many of your countries,
that the workers' rights, notwithstanding the general system of
preferences, are not enforced. I would appreciate whatever
information each of you could send to me as to what the
conditions of working, any evidence of improvement, whether or
not the trade unions are active, whether there has been an
increase in wages, and whether or not the workers have been the
recipients of the increase in trade rather than just
management. And, of course, where we have allegations of sweat
shops, conditions that are abhorrent to those of us in the
Congress, where you've read those allegations or heard about
them, it would be helpful if without waiting for the questions,
you could come forward and share with us how proud you are of
the improvements or what you're doing to make the improvements?
Would anyone just like--I would expect that all of you
would be sending me materials in connection with that. But if
there is anyone that feels strongly that they would like to
make a short comment now, it would be helpful? Yes, Ambassador.
Mr. Aguirre-Sacasa. Congressman Rangel, I will make a
comment on the sweat shop issue because there was a series here
called Hard Copy about a year ago alleging that in Nicaragua
sweat shop conditions existed. The allegation was that we did
not pay minimum wage, that we had young kids working in our
apparel factories, that we prohibited labor unions, and that
there was sexual harassment, a whole series of very
inflammatory comments which worries me a great deal. I worked
for many years at the World Bank, was in charge of industrial
development in parts of Africa and parts of Latin America. And
when I saw that particular show, I rushed down to Nicaragua to
look into the reality.
I will be glad to send you the information, but the facts
are the following. In our own country of Nicaragua, we do have
free association of labor unions and they exist in our free
trade zones. No one in the free trade zone is under 18 years of
age and that is confirmed. And the average age, because of very
low employment levels, is about 25 or 26. The average worker in
the free trade zones in Nicaragua earns more than a doctor,
than a policeman, or than a teacher. The wages are low by
comparison by U.S. standards but that is a sad legacy of the
conditions in our country and the very low per capita income
that we have. And I could go on and on, but the point is that
in Nicaragua, we have a code of conduct, I know our neighboring
countries do as well, in the free trade zones and that that
particular series, that Hard Copy mauling and mugging of
reality in Nicaragua couldn't be further from the truth.
Mr. Rangel. Well, my time has expired but where you have
written evidence of the allegations, you might want to share
your responses because it could very well be that this
Subcommittee may want to make a visit not to see what you're
doing and to perform oversight, but we're here to help to
improve the quality of life for people and countries and not
just businesses. And I know that all of you, and those of you I
know personally, share that view.
So I regret the shortness of our time here, but all of you
know you should feel free in coming to see me to provide this
information so that we can have further discussions because I
know that the attacks on working practices on your countries
bother you individually as well as your national sovereignty,
and I want to make certain I give you ample time to respond.
Thank you, Mr. Chairman.
Chairman Crane. Thank you. Mr. Becerra.
Mr. Becerra. Thank you, Mr. Chairman. Let me welcome my
friends from the various countries that are represented today
here in Congress. I have had a chance to work with all of you
in one capacity or another and visit your home countries as
well except Costa Rica. I have not had a chance to go to Costa
Rica, and I do hope to have an opportunity at some point soon.
I want to thank you for the work that you've done during
this entire several month process of trying to raise the level
of understanding here in this country of what actually occurred
throughout Central America and in the Caribbean with regard to
the devastating storms. It's the voices of the representatives
from the various governments, and especially those of the
Ambassadors, that educated us very eloquently. I know I saw on
many occasions many of you on our news programs explaining the
devastation and what needed to be done. So I want to thank you
for that.
I think we've made some progress, and I appreciate all that
has been done so far from your home countries to move the
process forward here in Congress. As I said before when Mr.
Rangel made a remark, I will say again: he raised something
very important. There are going to be those here in Congress
who will not have an opportunity to really review these
legislative packages, and they're going to very quickly make a
decision yes or no on something very important to your
countries, whether it's the aid package or CBI. And I would
very much urge you to get us information that will help us
respond to some of the concerns that might be raised, whether
it is in regard to the working conditions in the country or
environmental concerns.
And, Ambassador Aguirre, the point you make about the
relative earnings is an important one. If you can make the
point in fact that folks that work in some of these zones that
you mentioned are earning as much, if not more, than a
professional, that is something that we could not dispute. I
think that's an extremely crucial point to be able to make that
while the wages may seem low relative to U.S. standards, when
you compare them to the wages of others, especially
professionals, that it's really a decent wage. That really
helps your cause.
And the other point I tried to raise when our
administration was testifying, I've been--I don't know if my
colleagues have--but I have been approached by some American
business interests that have said it has been difficult at
times to work in some of the
countries in the Caribbean and in Central America because the
bureaucracy or the difficulties in completing a contract or
getting remuneration and those are the kind of things that if
you can address them without much difficulty would really help
us alleviate those concerns that might be expressed to some of
my other colleagues.
Aside from all I've said, I hope that at the end of the day
whatever we come up with, and I hope it does include some form
of CBI, that it's something that truly does give you an
opportunity to do the work that you wish to do yourselves. I
know that you're looking for assistance from this Government
but that it's not going to help you recover completely. I know
that everything I saw, the goodwill of the people there in
Central America was we want to do this for ourselves. We just
want to have that partnership with the United States to help
get us there.
I would ask this question, and I may not have any other
question than this. The Graham bill is probably an in-between
between what the Administration is proposing and what Chairman
Crane has proposed. Your thoughts on the Graham bill? Any of
you, have your countries taken any official positions on the
Graham bill, whether it's support, oppose, or any particular
comment?
Mr. Leon. Thank you very much, Mr. Becerra. It has been a
most delightful experience working with you and discussing with
you many of the issues you have just raised. Let me tell you
that I would like to refer very quickly to the first issue
regarding working conditions. We will be glad to send you this
information, and I'm sure all the rest of my colleagues here
will do so too. I think that the major advance of the region in
terms of working conditions has been in terms the
enforceability of the labor laws in our country. And also in
terms of the, I would say, sanctions that we will apply to
those not obeying those laws. Our countries, almost all our
countries, I would say all our countries have very good labor
laws and basically what we have been trying to perfect is the
enforceability of these laws. In the case, for instance, of El
Salvador's, the government can unilaterally revoke the benefits
of a company operating in a free zone that doesn't comply with
the labor legislation of El Salvador, unilaterally. If, of
course, there is an investigation and due process that
corroborate that labor conditions are not being respected. But
also in terms of wages. El Salvador, for instance, right now at
this moment, wages in El Salvador in the textile and apparel
industry are 37 percent higher than those in Mexico, for
instance.
Mr. Becerra. You mentioned that when I was there in El
Salvador.
Mr. Leon. Yes, and the other point that I would like to
tell you is that also the private sector operated in the
Maquila sector have been doing a great effort to have its own
ethics code of conduct monitored by independent bodies so that
they reassure themselves. And this is very effective because it
uses peer pressure that everybody is complying with the labor
regulations.
In regard to the second point, we believe that the Graham
bill addresses the point that we need a trade component to be
able to complete our own efforts for the successful recovery of
the Central American countries. Of course, I don't think that
the Graham bill is the middle ground between in the CBI
legislation projects (bills). But I am sure that Congress could
be able to discuss together and try to make middle ground
between these two bills. That's our hope and it's solely in the
hands of the U.S. Congress.
Mr. Becerra. Thank you. Thank you, Mr. Chairman.
Chairman Crane. Thank you all for your presentations and,
gentlemen, we look forward to working with you as we move
hopefully toward the successful conclusion of the CBI parity
bill that we are talking about out of the House, out of this
Committee today.
And with that, then, I would like to ask our final panel to
come before the vote starts. And that's Ronald Rayner,
president,
National Cotton Council; Jim Conner, executive vice president,
American Yarn Spinners; Carlos Moore, executive vice president,
American Textile Manufacturers; Stephen Lamar, director of
government relations, American Apparel Manufacturers; and Erik
Autor, vice president, International Trade Council; and Mark
Levinson, chief economist, Union of Needletrades, Industrial
and Textile Employees, AFL-CIO.
If you gentlemen will please take seats, we will commence
in the order I presented you. All right, Charlie Rangel has
asked, if you don't mind, that Mark Levinson go first because
Charlie cannot stay for the entire panel but he has some
specific questions for Mr. Levinson. And I notice over here a
distinguished representative of the AFL-CIO, Evie Dubrow. Now
if Mr. Levinson wants to yield and have Evie replace him on the
panel? [Laughter.]
But Evie has worked faithfully even in retirement. She
retired a number of years ago, but she never does retire. I've
known Evie for all the years I've been here on the Hill and she
was here many years before me, but I salute Evie Dubrow.
And with that, Mr. Levinson, if you would proceed?
STATEMENT OF JAY MAZUR, PRESIDENT, UNION OF NEEDLETRADES,
INDUSTRIAL AND TEXTILE EMPLOYEES, NEW YORK, NEW YORK, AS
PRESENTED BY MARK LEVINSON, CHIEF ECONOMIST
Mr. Levinson. Thank you. I would yield to Evie at any time.
I'm actually here today representing Jay Mazur, who wasn't able
to make it down, and he asked me to apologize for that.
I'm the chief economist at UNITE. I appreciate this
opportunity to testify on H.R. 984, on behalf of the 250,000
members of UNITE.
We do not believe that the provisions of H.R. 984 meet the
needs of the people in the Caribbean Basin. They're poorly
designed to accomplish the task of promoting economic
development in the region. The bill will also lead to job loss
and reduced living standards in the United States.
The argument for H.R. 984 is that because of the
elimination of tariffs and quotas for Mexico as a result of the
NAFTA, the CBI countries are less competitive and U.S.
investment will flow out of the Caribbean and into Mexico.
The fact is that since NAFTA, the total share of U.S.
apparel imports coming from the Caribbean Basin has increased
from 18 percent in 1993 to 24 percent in 1998. In 1998, CBI
nations shipped an astonishing $7.6 billion worth of apparel
imports to the United States. By contrast, Mexico shipped $5
billion worth of apparel imports to the United States.
We believe the CBI/NAFTA development model is badly flawed.
In my submitted testimony, I document that there is an inverse
relationship between where investment is going in CBI countries
and the direction of wages. Growth in apparel imports from CBI
countries is increasing most rapidly in countries that are
experiencing the greatest wage declines. And, likewise, where
wages are increasing, growth in apparel imports is very slow.
Is this not a race to the bottom?
The United Nations' Economic Commission for Latin America
and the Caribbean describes the failure of the CBI/NAFTA
development strategy as follows:
The contribution made by Mexican and Central American maquila
factories to economic growth is more modest than that which one
could suppose upon seeing the volume of their activity. Should
the maquila factories multiply in their current form, the
countries would be specializing in supplying cheap labor, and
the sector's growth would depend on continual cheapening of
this factor. This is not compatible with a long-range strategy
of growth with social equity.
The economies of the CBI countries can only be bolstered if
their people, including their workers, truly share in economic
development. This requires that workers have a voice in their
own destiny. In short, this requires worker rights.
There are approximately half a million workers in CBI
countries producing apparel for U.S. retailers and
manufacturers and sold in the United States. Less than 1
percent have been able to exercise their right to collective
bargaining. Employers, in collusion with governmental
authorities, systematically crush organizing efforts.
Not one of the 65,000 workers in the maquilas of El
Salvador has a collective bargaining agreement. The same is
true for Guatemala, after the Philips-Van Heusen company shut
down the only unionized factory in that country in December.
The few functioning unions in Honduras are under fierce attack
and a similar pattern is developing in the Dominican Republic.
The U.S. labor movement has tried to utilize the worker
rights provision in the existing CBI law by filing petitions
under the GSP. But there are major problems which limit the
effectiveness of GSP and CBI in enforcing labor rights.
A major problem is the snail pace of investigations and the
fact that the Government has too much discretion over whether
or not to take action. Take the example of Guatemala. Labor
rights advocates in the United States first petitioned the U.S.
Government to investigate gross violations of internationally
recognized workers' rights in Guatemala in 1986. Petitions were
filed in 1987, 1989, 1990, 1991, and 1992. The U.S. Government
refused to act on the petitions until 1992. The U.S. Government
reviewed the State of workers' rights in Guatemala through
1993. In 1994, the GSP statute lapsed and the review process
ended. The AFL-CIO submitted allegations of violations of
workers' rights again in 1995. Again, the U.S. Government chose
not to suspend benefits but to review Guatemalan law and
practice. The United States terminated this review in 1997,
having concluded that the government of Guatemala was indeed
taking steps to afford Guatemalan workers their internationally
recognized rights. The AFL-CIO filed a new petition in 1998. It
is still pending.
There are over one million people making apparel and
textile products in the United States. They will be the primary
losers as jobs and companies relocate in response to the
perverse incentives of this NAFTA parity proposal. Hundreds of
thousands of workers could lose their jobs.
H.R. 984 does not address the main economic problem of
workers in the Caribbean and Central America: the lack of
decent paying jobs. The economies of expanding mass markets are
straightforward: either people have the ability to purchase or
they don't. Either we pursue policies in the CBI that increase
the ability of people to buy products or we are saying that we
don't really care, that we are engaged in a charade that
benefits an elite in CBI countries and U.S. importers at the
expense of workers in CBI countries and in the United States.
Members of our union, and the hundreds of thousands of
apparel and textile workers who have lost their jobs find it
hard to understand why the Committee believes that extending
NAFTA to the Caribbean, a policy that has been a windfall for
corporations but a disaster for workers, will improve the
conditions of work and enhance the living standards of working
people in the Caribbean Basin and in the United States. They
have a hard time understanding why workers have been all but
forgotten in this debate.
Thank you.
[The prepared statement follows:]
Statement of Jay Mazur, President, Union of Needletrades, Industrial
and Textile Employees, New York, New York, as presented by Mark
Levinson, Chief Economist
I appreciate this opportunity to testify on H.R. 984, the Caribbean
and Central American Relief and Economic Stabilization Act, on behalf
of the 250,000 members of the Union of Needletrades, Industrial and
Textile Employees (UNITE). Our members live and work in all parts of
our country. They are a cross section of the U.S. workforce: native
born, minorities and new Americans who have come to our shores from
just about every country in the world.
UNITE is not new to the Caribbean Basin scene. Many of our members
came to the United States from the Caribbean and Central American
countries. Many maintain close contact with the region, have family
living there and visit the lands of their birth. We work with garment
worker unions and union federations throughout the area. So we, too,
feel a special obligation to assist the peoples of these countries to
improve their economic circumstances. Furthermore, we are aware of the
importance of the region to our nation's well being.
We do not believe, however, that the provisions of H.R. 984 meet
the needs of the people of the Caribbean Basin. They are poorly
designed to accomplish the task of promoting economic development in
the region. The bill will also lead to job loss and reduced living
standards in the U.S.
The Premise Of The Bill Is Wrong
The argument for H.R. 984 is that because of the elimination of
tariffs and quotas for Mexico as a result of the North American Free
Trade Agreement, the CBI countries are less competitive and U.S.
investment will flow out of the CBI and into Mexico.\1\
---------------------------------------------------------------------------
\1\ The drafters of H.R. 984, having failed in several attempts to
pass CBI-NAFTA parity, are now attaching it to badly needed relief for
Central American countries hard hit by Hurricane Mitch. Ironically, the
development model encouraged by CBI/NAFTA parity is likely to
exacerbate, rather than heal, the damage wrought by the natural
disaster. See, Robert Scott, Rebuilding the Caribbean: A Better
Foundation for Sustainable Growth, Economic Policy Institute, 1999.
---------------------------------------------------------------------------
The fact is that since NAFTA the total share of U.S. apparel
imports coming from the Caribbean Basin has increased from 18% in 1993
to 24% in 1998. In 1998 CBI nations shipped an astonishing $7.6 billion
worth of apparel imports to the U.S. By contrast Mexico shipped $5
billion worth of apparel products to the U.S.
Four out of the six significant apparel exporting Caribbean Basin
nations continued to see apparel exports grow at double digit annual
growth rates in the five years since NAFTA took effect. The increase in
Mexican apparel production came at the expense of Asian countries and
the United States. If NAFTA undermined any Caribbean Basin countries'
apparel export promotion strategies, it undermined those of Jamaica and
Costa Rica--the region's two most democratic--and higher wage--apparel
exporting countries.
CBI/NAFTA Development Model Is Flawed
The CBI, we were told, would benefit the people of the region. But
it has not worked. The principal beneficiaries of CBI have been U.S.
based apparel companies, importers and retailers, a small elite in the
Caribbean Basin and some Asian companies who have set up apparel
factories in the CBI to export to the U.S. market.
As a result of CBI there has been a dramatic expansion of trade
between the United States and CBI countries. Despite the expansion of
trade, poverty is widespread, most roads in the five leading apparel-
exporting countries remain unpaved, government investment in
education--with the exception of Costa Rica--remains anemic and large
percentages of the population of the region do not have access to safe
drinking water.
Jobs in export-oriented manufacturing have been created due to CBI,
but job losses have occurred in the agricultural, mining and domestic
oriented manufacturing sectors of Caribbean and Central American
countries under CBI. Job losses in these traditional sectors have far
outweighed job gains. CBI related jobs pay poverty level wages, thus
exacerbating income inequality, social instability and migration from
the Caribbean Basin region.
Table 1 captures many of the problems of the CBI/NAFTA development
model. First, there is an inverse relationship between where investment
is going in CBI countries and the direction of wages. Growth in apparel
imports from CBI countries is increasing most rapidly in countries that
are experiencing the greatest wage declines. And likewise, where wages
are increasing, growth in apparel imports is very slow.\2\ Is this not
a race to the bottom?
---------------------------------------------------------------------------
\2\ Countries where wages have fallen the most are also the
countries that have the worst record of abusing worker rights. For an
interesting argument along these lines see: Dani Rodrik, Democracies
Pay Higher Wages, NBER Working Paper 6364, revised October 1998,
forthcoming in the Quarterly Journal of Economics.)
---------------------------------------------------------------------------
Second, because wages are so low, there is little incentive for
manufacturers to increase productivity. In the Caribbean and Central
America, manufacturers appear to compete by simply sweating labor. So
where apparel industry production has increased, productivity (as
measured by value added per employee) has decreased.
Table 1
----------------------------------------------------------------------------------------------------------------
Growth of U.S. imports Avg. annual growth of:
---------------------------------------------------- Growth of
Annual Value added avg. wages
average Employment per (US$) 1985-
Apparel Industry 1989-98 growth 1994- 1985-96 employee 96 (In
(In 98 (In (In 1985-96 percent)
percent) percent) percent) (In
percent)
----------------------------------------------------------------------------------------------------------------
Honduras....................................... 2523% 40% 32% -11% -59%
El Salvador.................................... 2512 39 21 -15* -27
Guatemala...................................... 466 13 bullet bullet 8***
Dominican Rep.................................. 256 11 bullet bullet 56***
Costa Rica..................................... 206 5 10 -10 65
Jamaica........................................ 74 3 5 -41** 71***
----------------------------------------------------------------------------------------------------------------
bulletNot available
* Estimate
** 1986-90
*** Bobbin Consulting Group (1987) and Werner International (1998) hourly wage and fringe data, 1987-96
Sources: (imports) U.S. Department of Commerce, Major Shippers Reports, various years; (employment and
productivity) United Nations Industrial Development Organization (UNIDO) country statistics, available on the
world wide web at http:\\www.unido.org; (wages) UNIDO, Bobbin Consulting Group (1987), and Werner
International Management Consultants (1998).
The United Nations' Economic Commission for Latin America and the
Caribbean (ECLAC) study of Mexican and Central American maquilas
describes the failure of the CBI/NAFTA development strategy:
The contribution made by [Mexican and Central American
maquila factories] to economic growth is more modest than that
which one could suppose upon seeing the volume of their
activity. Should the maquila factories multiply in their
current form, the countries would be specializing in supplying
cheap labor, and [the sector's] growth would depend on the
continual cheapening of this factor. This is not compatible
with a long-range strategy of growth with social equity.
(emphasis added) \3\
\3\ Comision Economica para America latina y el Caribe. Maquila y
transformacion productiiva en Mexico y centroamerica. LC/MEX/R.630. 28
de octubre de 1997. Translated by UNITE from the original Spanish.
---------------------------------------------------------------------------
Labor Rights Are Ignored
The economies of the CBI countries can only be bolstered if their
people, including their workers, truly share in economic development.
This requires that workers have a voice in their own and in their
nations'destinies. Trade unionists in Latin America are very clear on
this point. Luis Anderson, the Secretary General of the Inter-American
Regional Organization of Workers/ICFTU, put it this way:
``CBI Parity, like all trade and aid agreements, must place
workers' rights on an equal plane with property rights. We
cannot accept policies that grant employers and governments
privileged access to international markets without also
requiring them to respect the right of workers to freedom of
association and other internationally recognized workers'
rights. This is not protectionism. This is the critical link
between core labor standards and international commerce that
must be forged if workers are to realize a fair share of the
fruit of their labor.\4\
---------------------------------------------------------------------------
\4\ Press statement, ORIT, January 1999.
The abysmal exploitation of workers in almost every CBI country has
been fully documented, in testimony before Committees of the Congress,
by government investigators and in petitions filed with office of the
United States Trade Representative. Yet H.R. 984 fails to strengthen
worker rights.
Many CBI countries have elaborate and extensive labor codes, some
even more advanced than those in our own country. They guarantee
workers the right to organize and to bargain collectively with their
employers on working conditions and wages. They establish standards to
protect the health and physical well being of workers in their
countries. The problem is that just about every CBI country fails to
enforce its own laws. Workers are effectively denied the right to form
unions.
Working Conditions in the Caribbean Basin and the Inadequacy of the CBI
Worker Rights Provision
There are approximately half a million workers in CBI countries
producing apparel for U.S. retailers and manufacturers and sold in the
United States. Less than 1% have been able to exercise their right to
collective bargaining. Employers in collusion with governmental
authorities systematically crush organizing efforts. Workers are left
defenseless against the arbitrary and abusive practices of their
employers.
Not one of the 65,000 workers in the maquilas of El Salvador has a
collective bargaining agreement. The same is true for Guatemala, after
the Phillips-Van Heusen company shut down the only unionized factory in
that country in December.\5\ The few functioning unions in Honduras are
under fierce attack and a similar pattern is developing in the
Dominican Republic. The big U.S. retailers and manufacturers that call
the shots continue to cooperate with these anti-union practices, which
have proven virtually immune to existing CBI law.
---------------------------------------------------------------------------
\5\ In 1997 after a 7-year campaign, workers at a Phillips-Van
Heusen owned factory did succeed in winning union recognition and a
collective bargaining agreement. Shortly before Christmas last year
Philips Van Heusen closed the factory.
---------------------------------------------------------------------------
The U.S. labor movement has tried to utilize the worker rights
provision in the existing CBI law by filing petitions under the
Generalized System of Preferences. GSP conditions trade benefits on
whether or not a country in the region ``has taken or is taking steps
to afford to workers in that country . . . internationally recognized
workers' rights.'' (H.R. 984 has the same language.) Our attempts have
resulted in some modest improvements. But there are major problems
which limit the effectiveness of GSP and CBI in enforcing labor rights.
A major problem is the snail pace of investigations and the fact
that the government has too much discretion over whether or not to take
action. Take the example of Guatemala. Labor rights advocates in the
United States first petitioned the U.S. Government to investigate gross
violations of internationally recognized workers' rights in Guatemala
in 1986. Petitions also were filed in 1987, 1989, 1990, 1991 and 1992.
The U.S. Government refused to act on the petitions until 1992. The
U.S. Government ``reviewed'' the state of workers' rights in Guatemala
through 1993. In 1994 the GSP statute lapsed and the review process
ended. The AFL-CIO submitted new allegations of violations of workers'
rights in 1995--again, the U.S. Government chose not to suspend
benefits, but to ``review'' Guatemalan law and practice. The U.S.
terminated this review in 1997, having concluded that the government of
Guatemala was, indeed, ``taking steps'' to afford Guatemalan workers
their internationally recognized rights. The AFL-CIO filed a new
petition in 1998. It is still pending.
The law is simply inadequate to deal with the level and intensity
of exploitation that takes place on a routine basis. The information
reaching the public about these abuses is but the tip of an enormous
iceberg, but you can get a sense of what these hundreds of thousands of
workers face every day by looking at a few recent reports.
Four Wal-Mart contractors in Honduras--Evergreen, Ecotex, Seolim
Baracoa, Uniwear Embroiders--employ over 1200 workers, many of them
teenage girls, working shifts of 12 hours or more, paid 43 cents an
hour base wage, or about half the cost of survival. They are not
allowed to talk and must ask permission to go to the bathroom; there
are factories with fire exits blocked, the air hot and thick with dust;
complaints or attempts to organize a union result in immediate
dismissal.\6\
---------------------------------------------------------------------------
\6\ A Jesuit Priest in Honduras described conditions in the factory
this way:
``Going into these factories is like entering prison, where you
leave your life outside. The factory owners do not let--and don't
want--the young workers to think for themselves. They want them to be
stupid. The workers need permission to use the bathroom, and they are
told when they can and cannot go.
Young women enter these factories at 14, 15, 16 and 17 years old.
They become a mechanism of production, working 9 hours a day plus two,
three or four hours overtime, performing the exact same piece operation
over and over, day after day. . . . These young workers rarely last
more than six years n the maquila, when they leave exhausted. They
leave without having learned any useful skills or developed
intellectually. These young workers entered the maquila with a sixth
grade education, with no understanding of the maquila, the companies
whose clothing they sew or the forces shaping where they fit into the
global economy. They soon feel impotent, seeing that the Ministry of
labor does nothing, or almost nothing, to help defend their rights.
Once the women start working in the maquila they often fall into
debt. The wages are very low and no one can survive on them.'' Wal-Mart
Sweatshops in Honduras, National Labor Committee, November 17, 1998.
---------------------------------------------------------------------------
You will find very similar conditions in El Salvador at the Nike
and Adidas contractor called Formosa Textiles in the San Bartolo Free
Trade Zone. Here the pay and meager purchasing power are almost
identical to that of the Wal-Mart workers in Honduras, with the same
abusive treatment by supervisors. At Formosa Textiles there is the
added humiliation of new employees being forced to submit to two
pregnancy tests and being immediately--and illegally--fired if they
test positive. When Formosa workers reported these conditions and the
firing of workers suspected of union organizing to local union and
human rights workers, it appears that Nike has retaliated against the
workers by pulling its work out of Formosa.
There is a standard pattern of repression against workers who try
to exercise their rights. In the guise of ``economic'' considerations,
companies just walk away from troublesome workers who insist on
asserting themselves. This is a trend with which we are well familiar
in this country, the phenomenon of ``runaway shops.'' Now we see it in
the Caribbean region, as companies are abandoning the relatively higher
standards of Jamaica and Costa Rica, for example, for countries where
they can pay starvation wages and not worry about workers protesting.
This development has become particularly disturbing in the
Dominican Republic, the leading CBI exporter of apparel to the United
States. Dominican worker activism and supportive efforts made by U.S.
trade unions (partly in the form of a GSP worker rights petition) had
combined successfully to produce modest changes. These gains have begun
to unravel.
Maquiladora worker campaigns in the Dominican Republic ended in
union recognition and collective bargaining agreements at 9 factories
in the mid 1990s. Average wages rose significantly between 1993 and
1996, though they still fell well short of pushing workers and their
dependents above the poverty line.\7\ Maquiladora factory owners have
responded to these modest gains with the familiar strategy of the
runaway shop.
---------------------------------------------------------------------------
\7\ Pre-tax base pay for an operator in a cap manufacturing factory
in 1998 was $0.69 per hour. This wage is only \1/3\ of what the
Dominican government estimates to be a necessary income for a typical
family to meet its basic needs A worker can earn an estimated $43.22
for the week by putting in a 56-hour week and earning a $3.42 bonus for
perfect on-time attendance, meeting production quota, and not getting
on the bad side of the supervisor. After rent, lunch from free trade
zone vendors, transportation, child care, milk & cereal (for infant), a
worker is left with $2.26 per day for the rest of her family's food,
water, electricity, clothes, school costs, personal care products and
medicine. Was your school's cap made in this sweatshop? A UNITE report
on campus caps made by BJ&B in the Dominican Republic. New York: UNITE,
1998.
---------------------------------------------------------------------------
Sudden closures of maquiladora facilities have become common, as
plant owners increasingly take advantage of various legal loopholes and
official disinterest in order to avoid obligations under the terms of
the labor law and/or collective bargaining agreements. Owners have
abandoned thousands of employees to whom they owe, at a minimum,
severance pay, only to reestablish their business under a new name in
other maquiladora industrial parks.
One of the most notorious of those cases is Euromoda, a firm-owned
by one Leopoldo Nunez. Nunez operated Euromoda for 17 years in the
country's capital, producing for such well-known U.S. brands as
Victoria's Secret. In 1997 he declared bankruptcy leaving 366 workers
(85 percent of whom were women--most single mothers) jobless. The
workers have not received legally mandated severance pay.\8\
---------------------------------------------------------------------------
\8\ Listen to the testimony of Maria Moreno, formerly an operator
at Euromoda: ``Eleven years of my life were spent in Euromoda. When
they closed it I realized that I did not have anything more than the
very same hands that I had when I entered this factory to work without
rest. Now, to have nothing, not even the severance pay that by law they
owe to me, and that the owner, Mr. Nunez, denies to me. . . .''
Interview by Nino Pena, FENATRAZONAS, March 17, 1999.
---------------------------------------------------------------------------
The ostensibly broke businessman then transferred his capital to
two new businesses. One of the businesses produces the same general
product line formerly offered by Euromoda.
The National Federation of Free Trade Zone Workers (FENATRAZONAS)
believes that a series of plant closings similar to that at Euromoda
mark the reversal of progress toward greater respect for workers'
rights. According to FENATRAZONAS, the Dominican Labor Ministry now
assumes a generally negative posture towards pro-union maquiladora
workers, in contrast to the 1993-1996 period. A 1997 decree by the
Dominican President proclaiming the formation of a Tripartite
Commission empowered to design and execute social and economic benefit
programs has become a dead letter. Maquiladora employees are working
harder and longer for less.
The U.S. Economy Will Be Hurt
There are over one million people making apparel and textile
products in the U.S. They will be the primary losers of jobs as
companies relocate in response to the perverse incentives of this NAFTA
parity proposal.
U.S. apparel and textile industry employment trends have changed
dramatically in the five years since NAFTA. Average employment in the
U.S. apparel industry has shrunk at an annual rate of 6.6 percent since
NAFTA. In comparison, apparel industry employment shrank at an average
annual rate of only 1.6 percent over the course of the five years
preceding NAFTA.
Table 2.--Pre- and post-NAFTA job loss
----------------------------------------------------------------------------------------------------------------
Production workers Total lost jobs Average annual Change
--------------------------------------------------------------- in rate
change of losee
1990 1994 1998 1990-94 1994-98 (%) 1994-98 1994-98/
1990-94 1990-94
----------------------------------------------------------------------------------------------------------------
Textile................................ 592.9 574.5 505 -18.4 -69.5 -0.8 -3.2 4.08
Apparel................................ 868.5 814.7 619.9 -53.8 -194.8 -1.6 -6.6 4.18
----------------------------------------------------------------------------------------------------------------
Extending NAFTA to the CBI countries will mean accelerating even
further the already staggering job losses that are occurring in the
apparel and textile industries.
Apparel industry workers who lose their jobs suffer serious
declines in their standard of living. A U.S. Department of Labor survey
in February 1998 of apparel workers who lost their jobs between 1995
and 1997 showed that over half were unemployed or out of the labor
force. Only about one-third of the workers who lost their job found
full-time employment. Of those, the average worker suffered a loss of
pay of 20%.
Other Problems With The Bill
As I understand the bill, it gives apparel products from CBI
countries the same quota-free and duty-free treatment as imports from
Mexico under NAFTA for five years during which time the U.S. and the
CBI nations are to negotiate possible accession to NAFTA or a
comparable agreement. The bill also permits the import into the U.S. of
apparel made from specified amounts of non-CBI and non-U.S. origin
fabric as if they were the product of the agreement countries.
I fail to see how this benefits CBI countries. It would assist and
encourage increased use of the CBI countries by China and others as a
way of selling into the U.S. market without quota or tariff
restrictions. We oppose this provision of the bill. Under the Canadian
Free Trade Agreement, almost the entire TPL in wool was used for only
one product--wool fabric for suits--and that concentration had a
devastating effect on U.S. suit manufacturers.
This legislation guarantees the loss of hundreds of thousands of
jobs in the domestic textile and apparel industries. Further
compounding the cruelty of this unemployment is the transference of
over $1 billion in five years of forgone duties from the U.S. Treasury
to the importers and manufacturers of the production shifted from the
U.S. to the CBI. The companies and shareholders make out fine, while
workers simply lose their job. This is unacceptable. At a minimum,
funding for the Trade Adjustment Assistance program for displaced
workers should be increased so that displaced workers receive 75% of
their former earnings and maintain their health insurance for a year.
* * * * *
H.R. 984 does not address the main economic problem of workers in
the Caribbean and Central America: the lack of decent paying jobs. The
economics of expanding mass markets are straightforward: either people
have the ability to purchase or they don't. Either we pursue policies
in the CBI to increase the ability of people to buy products or we are
saying that we don't really care, that we are engaged in a charade that
benefits an elite in CBI countries and U.S. importers at the expense of
workers in CBI countries and in the U.S.
Members of our union, and the hundreds of thousands of apparel and
textile workers who have lost their jobs, find it hard to understand
why the Committee believes that extending NAFTA to the Caribbean--a
policy that has been a windfall for corporations but a disaster for
workers--will improve the conditions of work and enhance the living
standards of working people in the Caribbean Basin and in the U.S. They
have a hard time understanding why workers have been all but forgotten
in this debate.
Appendix.--Meaningful Worker Rights Protection
1. Additional trade benefits for CBI countries should be conferred
only after an initial review of each country's record of respect for
internationally recognized worker rights.
2. There should be an annual review of each country, which allows
individuals and organizations to petition, testify and present
documentation pertinent to continued favored status of beneficiary
countries. If GSP language is used to define worker rights and the
review process, the GSP phrase ``Taking or have taken steps'' to
protect internationally recognized worker rights should be amended to
read ``are adhering to and enforcing internationally recognized worker
rights.''
3. Any sanctions following demonstrated worker rights abuses should
be focused more carefully on the offending parties. For example,
violations found in a particular maquiladora or plant should lead to a
loss of benefits for the offending maquila or employer and any retailer
or manufacturer using that facility at the time of the abuse. In a free
trade zone where there is a pattern of abuse there should be a loss of
benefits for all companies in the zone. In this way, responsibility for
enforcing worker rights could be centered on offending zone owners and
operators and employers without penalizing legitimate parties.
4. There should be no tariff preference levels. The benefits of the
program should accrue exclusively to parties in the region.
5. Appropriate funds must be allocated to verify compliance with
worker rights and remedy abuses in CBI countries, and mitigate the
economic dislocation and hardships of workers in the U.S. caused by
this legislation.
Chairman Crane. Thank you. And let me reassure all of you
that any written statements you have will be made a part of the
permanent record beyond your oral presentation.
Since Mr. Rangel has to question and run, we will yield to
him now to ask questions of you, Mr. Levinson, and then he can
be excused?
Mr. Rangel. Thank you, Mr. Chairman, and let me join in
welcoming Evelyn Dubrow once again to this room where she
enjoys honorary membership. We welcome you back.
I was looking forward to meeting with Jay Mazur because I
know how strongly he feels about this particular piece of
legislation. And I was sharing with the Subcommittee Chairman
that there seems to be such a sharp conflict in the conditions
of work at these different places that over the Easter recess I
was thinking about seeing whether you would put together, a
list of the countries where you believe there is a violation of
workers' rights, so that we can take a look at that. In
addition to that, there's some serious question about loss of
American jobs in the textile and apparel industry. And, as you
can see from our list of witnesses, some people from those
industries are supporting the bill.
Last, the question of transshipment, which has always been
a very, very serious problem for all of us. And we've had
assurances that these countries are not, as a result of the law
and their abiding by the law, that they're not using their
countries for transshipment. So where you have evidence that
you can direct us to, we would like to do that.
In summary, I would hope that since so many of your workers
come from these areas and indeed send money back to these
countries, to their families, and would have a concern about
the working condition of their relatives and friends that are
back there, that I would be supporting the union and the
workers by personally taking a look and seeing what is
happening back home while they're working hard trying to
support their families that are still in the Caribbean.
So it's difficult to do this when you have the narration in
testimony, but having worked with you before and with my long
history of working with the union that you represent, if you
can present to me in terms this is where, if you're really
concerned about these conditions, this is where you should be
going, it would be very, very helpful to me and our colleagues.
Mr. Levinson. Congressman, we would be glad to do that and,
in fact, I think my president would be more than glad to even
perhaps arrange a trip where we would like to show anyone who's
interested in some of the conditions that we've described in
our submitted testimony. I would be glad to--and Jay Mazur
would be glad to work with you on that.
Mr. Rangel. OK, I'll look for the outline and then I'll
probably have some meetings with the representative--with USTR,
the State Department, and the Trade Commission so that we can
try to make certain we all are reading from the same page.
Mr. Levinson. Thank you.
Mr. Rangel. Thank you and give my best to Mr. Mazur.
Mr. Levinson. Thank you, will do.
Chairman Crane. Thank you.
And with that, we will now get back to the regular schedule
proceeding first with Mr. Rayner and the little red light there
indicates when the 5-minute limit has elapsed. And you are not
exactly instructed to abide by the light but as close as
possible. And any printed statements, as I say, will be part of
the permanent record.
STATEMENT OF F. RONALD RAYNER, PRESIDENT, NATIONAL COTTON
COUNCIL OF AMERICA
Mr. Rayner. Thank you, Mr. Chairman. My name is Ronald
Rayner. I'm a cotton farmer with a family farm in Goodyear,
Arizona. And I am the current president of the National Cotton
Council.
I appreciate the opportunity to speak to you today about
the Ca- ribbean Basin parity legislation. We believe this
legislation is vitally important to the U.S. cotton industry.
Mr. Chairman, the National Cotton Council has been supportive
of the Caribbean Basin trade bill because we believe the right
CBI bill will enable our industry to compete more effectively
with low price textile imports. CBI parity offers the
opportunity to increase the use of U.S. cotton and U.S. cotton
textiles. That is the reason we're supportive of this
initiative. A competitive edge that a CBI bill can give to our
product is crucial to our industry. If, however, CBI
legislation also enables our major textile competitors to take
advantage of the duty preferences under consideration for the
Caribbean, the bill will not be as beneficial to our industry.
The U.S. cotton industry is facing serious economic stress
from cotton producer to manufacturer. The combination of
decreased demand, low world prices, currency-driven surges in
Asian textile imports, and increasingly higher production costs
are taking a substantial toll. The domestic mill use of U.S.
cotton fell this year by about 1 million bales to less than
10.5 million. At the same time, textile imports from regions
other than the Caribbean and NAFTA increased by 1.2-million
bales annually. We did not have to lose that demand.
Council economists have estimated that the right Caribbean
Basin parity bill will increase total annual demand for U.S.
raw cotton, cotton yarn, and cotton textiles by at least 1
million bales within 3 years. If we had enacted CBI parity
legislation effective for 1998, we would have already seen a
dramatic increase in the use of U.S. cotton and cotton
textiles. We estimate the right parity bill would have
increased use by as much as 650,000 bales by the end of 1999.
That additional use could have helped to blunt the textile
import surge caused by the Asian financial crisis.
Mr. Chairman, we need to bring the divergent sides to a
compromise and get this bill passed as soon as possible. We
applaud your determination to get a CBI parity bill passed. We
are supportive of many of the provisions in the House bill and
Senator Graham's bill as well. We support granting trade
preferences to apparel that are composed of U.S. fabric and
U.S. yarn, what is known as 807 and 809 categories. We can also
support trade preferences applicable to apparel articles that
are knitted or woven in the Caribbean region from U.S. yarn.
The Council does not, however, support the inclusion of tariff
preference levels as significant exemptions to rules of origin.
The Council also opposes extending trade preferences to textile
or apparel articles that originate in the Caribbean region but
are not composed of U.S. yarn or U.S. fabric. We do not want to
enable our competitors to benefit from this trade preference.
The National Cotton Council supports a CBI bill that will
maximize the use of U.S. cotton and cotton textile components
including U.S. yarn. A CBI bill that ties the granting of
preferences to the use of U.S. textile components is a bill we
will support. It will help our industry. It will help the
Caribbean.
I will be happy to take questions.
[The prepared statement follows:]
Statement of the F. Ronald Rayner, President, National Cotton Council
of America
Mr. Chairman, my name is Ron Rayner. I am a cotton producer from
Goodyear, Arizona, and the current President of the National Cotton
Council.
The National Cotton Council is the central organization of the
United States cotton industry. Its members include producers, ginners,
oilseed crushers, merchants, cooperatives, warehousemen, and textile
manufacturers. While a majority of the industry is concentrated in 17
cotton producing states, stretching from the Carolinas to California,
the downstream manufacturers of cotton apparel and homefurnishings are
located in virtually every state.
The industry and its suppliers, together with the cotton product
manufacturers, account for one job of every thirteen in the U.S. Annual
cotton production is valued at more than $5 billion at the farm gate.
In addition to the fiber, cottonseed products are used for livestock
feed, and cottonseed oil is used for food products ranging from
margarine to salad dressing. While cotton's farm gate value is
significant, a more meaningful measure of cotton's value to the U.S.
economy is its retail value. Taken collectively, the business revenue
generated by cotton and its products in the U.S. economy is estimated
to be in excess of $50 billion annually. Cotton stands above all other
crops in its creation of jobs and its contribution to the U.S. economy.
International trade and the treaties that govern it are extremely
important to U.S. cotton. The United States depends on exports to
dispose of approximately 40% of its annual cotton production. It also
depends upon a healthy U.S. textile industry as a market for 60% of
annual production. Unique among the world's cotton producing countries,
the U.S. cotton industry spends some $65 million annually on market
development and research to expand these markets and improve its
competitiveness with man-made fibers and foreign-grown cotton.
Unlike much of United States agriculture, cotton's major
competitors in the world market are either developing countries or non-
market economies, namely China, Pakistan, the former Soviet Union, and
India. U.S. cotton must, therefore, compete with countries whose cotton
sectors are either shielded from real-world market conditions or are
aggressively sponsored by their governments as part of a development
strategy.
I appreciate the opportunity to speak to you today about Caribbean
Basin parity legislation. We believe this legislation is vitally
important to the U.S. cotton industry.
Mr. Chairman, the National Cotton Council has been supportive of a
Caribbean Basin trade bill because we believe the right CBI bill will
enable our industry to compete more effectively with low priced textile
imports. CBI parity offers the opportunity to increase the use of U.S.
cotton and U.S. cotton textiles. That is the reason we are supportive
of this initiative. The competitive edge that a CBI bill can give to
our product is crucial for our industry.
If, however, CBI legislation also enables our major textile
competitors to take advantage of the duty preferences under
consideration for the Caribbean, the bill will not be as beneficial to
our industry.
The U.S. cotton industry is facing serious economic stress. From
cotton producer to manufacturer, the combination of decreased demand,
low world prices, currency-driven textile import surges and unremitting
production costs are taking a substantial toll.
The annual domestic mill use of U.S. cotton has fallen by about one
million since last year to 10.4 million. Over the same time period,
cotton textile imports from regions other than the Caribbean and NAFTA
increased by 1.2 million bale equivalents.
We did not have to lose that demand.
The right Caribbean Basin parity bill could increase demand for
U.S. raw cotton and U.S. cotton yarn by at least 1 million bales
annually within 3 years. And this increase in demand does not come at
the expense of our trading relationship with Mexico.
Cotton knit products comprise about 50 percent of total U.S. retail
purchases of cotton products. A substantial portion of cotton knit
products consumed in the United States are sourced from non-NAFTA, non-
Caribbean and non-U.S. producers.
------------------------------------------------------------------------
Millions of
480-Lb.
Bales
------------------------------------------------------------------------
U.S. Retail Purchases of Cotton........................... 19.39
Portion that is knit products........................... 9.94
Domestically supplied knits............................. 3.73
CBI supplied knits...................................... 1.55
NAFTA supplied knits.................................... 1.19
Other sourced knits..................................... 3.46
Woven and Other Products................................ 9.45
------------------------------------------------------------------------
The annual growth rate in U.S. retail purchases of all cotton
textiles and cotton knit products has been about 7.5 percent for the
past 3 years. If the U.S. cotton knit product market grows at only 5
percent (roughly 60% of the recent average) for the next 3 years, it
will add the equivalent of 500,000 bales of cotton use annually. CBI
parity legislation should permit the Caribbean region to capture more
than its previous market share of these additional U.S. retail sales,
given the improved competitive position. Council economists predict
that with CBI parity in place, the Caribbean region would be able to
export an additional 90,000 bale equivalents of cotton annually by just
maintaining its share of this market growth.
Further, because of its enhanced competitive position, the CBI
region should displace some amount of non-NAFTA cotton knit imports. If
this legislation enables the CBI region to displace only 7.5% of non-
NAFTA cotton knit imports, that would add another 235,000 bale
equivalents of demand for U.S. cotton and cotton textiles.
With the right CBI bill in place, cotton knit imports from the
Caribbean region would be almost entirely comprised of U.S.
manufactured yarn spun from U.S. raw cotton.
If the right CBI parity legislation had been effective for 1998, we
would have likely seen an additional 325,000 bales of demand for 1998,
increasing to 650,000 this year. The lost opportunity for this
additional 650,000 bales of spinning activity has hurt the U.S. cotton
and cotton textile industries. That additional use could have more
effectively blunted the textile import surge caused by the Asian
financial crisis.
Mr. Chairman, if we cannot bring the divergent sides to a
compromise and get this bill passed soon, we are all fiddling while
Rome burns.
The National Cotton Council supports a CBI bill that will maximize
the use of U.S. cotton and cotton textile components, including U.S.
yarn. Specifically, the Council has committed to support the following
components in a CBI bill--
Duty and quota free access to apparel assembled in the
Caribbean region from fabric that was cut in the United States and
formed in the United States from U.S. yarn (so-called 807-A category);
Duty and quota free access to apparel assembled and cut in
the Caribbean region from fabric that was formed in the United States
from U.S. yarn and assembled with U.S. sewing thread;
Duty and quota free access for apparel made from knit and
woven fabric formed in the CBI region from U.S. yarn.
As part of our discussion with a broad coalition interested in CBI
legislation, including U.S. apparel manufacturers, many U.S. textile
companies, textile importers and apparel retailers, we have also agreed
to support a de minimis provision permitting up to 25 percent of the
value of the garment for findings and a single transformation rule for
brassieres.
While we are supportive of many provisions in the House Bill, there
are certain aspects we cannot support. The Council and the members of
the coalition oppose the inclusion of tariff preference levels or any
additional exceptions to rules of origin.
We oppose extending the trade preferences to textile or apparel
articles that originate in the Caribbean region but are not composed of
U.S. yarn or U.S. fabric.
First, allowing Caribbean apparel and fabric to qualify
will enable our competitors to benefit from this trade preference;
Second, this is a trade preference bill--not a free trade
arrangement. By this legislation we will give special access to our
markets in return for nothing. The full benefits of a NAFTA type
arrangement should be reserved for a trade agreement whereby both sides
give and get trade benefits.
We urge this Committee and the Congress to consider Caribbean Basin
parity legislation either on its own merits or as part of a hurricane
relief package. We are very concerned that combining this trade bill
with another trade preference initiative will undermine the support of
the U.S. cotton industry.
Mr. Chairman, I applaud your determination to get a CBI parity bill
passed. The National Cotton Council will support this effort to the
extent the benefits to our industry outweigh the risks.
A CBI bill that ties the granting of preferences to the use of U.S.
textile components is a bill we will support. It will help our
industry. It will help the Caribbean.
Chairman Crane. Thank you, Mr. Rayner.
Mr. Conner.
STATEMENT OF JIM H. CONNER, EXECUTIVE VICE PRESIDENT, AMERICAN
YARN SPINNERS ASSOCIATION, GASTONIA, NORTH CAROLINA
Mr. Conner. Mr. Chairman, my name is Jim Conner and I'm
executive vice president of the American Yarn Spinners
Association, on behalf of whom this testimony is given.
The AYSA has been a consistent supporter of special trade
preferences for the CBI and that support continues today with a
new urgency to work for passage of legislation based on the
yarn forward concept.
Two years ago, I accompanied six chief textile executive
officers of our member companies on a trip to five countries to
the region, that is, the Dominican Republic, Costa Rica,
Honduras, El Salvador, and Guatemala. The purpose of the trip
was to explore market opportunities for U.S. yarn in the
Caribbean region. The resounding message we got from that trip
was that these countries would rapidly become dominant
suppliers of apparel to the U.S. market. Needless to say, the
question from government officials, including the President of
Costa Rica, was the possibility of locating yarn producing
facilities in the region.
We came back and did the follow-up studies that led to the
conclusion that relocating capital intensive yarn production to
the region was not economically feasible. For instance, the
energy cost to operate modern efficient spinning mills today
exceeds the labor costs. Frequent power outages, coupled with
energy costs as much as four times that in the United States,
offset other incentives for locating yarn plants in the region
at this time. For the foreseeable future, it will simply be
more economical and efficient to produce and ship yarn to the
region than to ship fiber and spin it into yarn there. We
wanted to bring this to your attention because that is the
economic reason for the yarn forward concept.
The emergence in recent years of apparel production in the
Caribbean, however, is a matter of keen interest to U.S. yarn
spinners, particularly knit apparel. And that is because a
great deal, some 75 percent, of our production goes to knit
fabrics. Sixty-eight percent of the total U.S. sales yarn
production is spun from cotton fiber, practically all of which
is supplied by U.S. cotton farmers. The remainder is spun from
man-made fibers, predominately supplied by U.S. chemical fiber
producers, all of whom would benefit from the right kind of CBI
bill.
Faced with ever-increasing competition from imports of knit
apparel from Asia and a declining domestic market, U.S. sales
yarn producers and our fiber suppliers face a perilous future
unless we can develop partnerships to use our yarn in this
hemisphere. A growing number of U.S. knitters have found it
necessary to establish partnerships or joint ventures in Mexico
and the Caribbean to get closer to the apparel assembly
operations being established there.
Circular knit fabric production in the United States
declined between 1994 and 1997. While data is not available for
1998, the chief executive officer of a major U.S. knit fabric
producer was quoted recently as follows: ``During the last
year, circular knit fabric capacity, due to consolidation and
plant closings, dropped at least 25 percent.''
The situation was, of course, exacerbated last year by
imports of knit fabrics and finished garment from Asia.
Nonetheless, the loss of knitting capacity has created a void
in the yarn market of crisis proportions. It is estimated that
knit fabric production in the Caribbean region already exceeds
200 million pounds annually and will continue to grow, offering
U.S. spinners an opportunity to fill that void.
We believe a regional fabric provision using U.S. yarn in
the Caribbean will enable our spinners to recapture business
lost to Asia. Furthermore, we believe our domestic knitter
customer base can be stabilized as domestic fabric producers
enjoy the benefits of apparel assembly in the region with U.S.
fabric.
In conclusion, we believe the right CBI bill can benefit
U.S. producers of fiber, yarn, and fabric. And we welcome the
opportunity to work with the Committee in developing and
supporting such a bill.
Thank you, Mr. Chairman, for the opportunity to be with you
today.
[The prepared statement follows:]
Statement of Jim H. Conner, Executive Vice President, American Yarn
Spinners Association, Gastonia, North Carolina
Mr. Chairman, my name is Jim H. Conner and I am executive vice
president of the American Yarn Spinners Association, on whose behalf
this testimony is given. The Association is composed of some 100
corporations who operate 275 plants for the production of yarn which is
sold to other segments of the textile industry for conversion into
fabric and other textile products.
The American Yarn Spinners Association has been a consistent
supporter of special trade preferences for the CBI region, as long as
U.S. yarn producers share in the benefits of the Caribbean Trade
Partnership. That support continues today with a new urgency to work
for passage of legislation based on the yarn forward concept.
Two years ago I accompanied six chief executive officers of our
member companies on a trip to five countries in the region, i.e. the
Dominican Republic, Costa Rica, Honduras, El Salvador, and Guatemala.
The purpose of the trip was to explore market opportunities for U.S.
yarn in the Caribbean region. The resounding message from the trip was
that these countries would rapidly become dominant suppliers of apparel
to the U.S. market. Needless to say, the question from government
officials, including the President of Costa Rica, was the possibility
of locating yarn-producing facilities in the region. Follow-up studies
led to the conclusion that relocating capital-intensive yarn production
to the region was not economically feasible. For instance, the energy
cost to operate a modern efficient spinning mill exceeds labor costs.
Frequent power outages, coupled with energy costs as much as four times
that in the United States, offset other incentives for locating yarn
plants in the region. For the foreseeable future, it will simply be
more economical and efficient to produce and ship yarn to the region
than to ship fiber and spin it into yarn there.
The emergence in recent years of apparel production in the
Caribbean, however, is a matter of keen interest to U.S. spinners,
particularly knit apparel. According to the U.S. Bureau of Census, knit
fabrics constitute the dominant market for U.S. spinners, and consumes
75 percent of U.S. sales yarn production. Sixty-eight percent of total
U.S. sales yarn production is spun from cotton fiber, practically all
of which is supplied by U.S. cotton farmers. The remainder is spun from
manmade fibers, predominantly supplied by U.S. chemical fiber
producers, all of whom would benefit from the right kind of CBI bill.
Faced with ever-increasing competition from imports of knit apparel
from Asia and a declining domestic market, U.S. sales yarn producers
and our fiber suppliers face a perilous future unless we can develop
partnerships to use our yarn in this hemisphere. A growing number of
U.S. knitters have found it necessary to establish partnerships or
joint ventures in Mexico and the Caribbean to get closer to the apparel
assembly operations being established there.
Circular knit fabric production in the U.S. declined 24 percent
between 1994 and 1997. While data is not available for 1998, the chief
executive officers of a major U.S. knit fabric producer was quoted
recently as follows: ``During the last year (1998), circular knit
fabric capacity, due to consolidations and plant closings, dropped at
least 25 percent.''
The situation was, of course, exacerbated in 1998 by imports of
knit fabrics and finished garment from Asia. Nonetheless, the loss of
knitting capacity has created a void in the yarn market of crisis
proportions. It is estimated that knit fabric production in the
Caribbean region already exceeds 200 million pounds annually and will
continue to grow, offering U.S. spinners an opportunity to fill that
void.
We believe a regional fabric provision using U.S. yarn in the
Caribbean will enable our spinners to recapture business lost to Asia.
Furthermore, we believe that our domestic customer base can be
stabilized as domestic fabric producers enjoy the benefits of apparel
assembly in the region with U.S. fabric.
Since most woven apparel fabric produced in the U.S. is produced by
firms who spin their own yarn in vertical plants, weavers buy
relatively smaller volume of yarn on the outside than do knitters.
Nonetheless, the press has been full of announcements in recent weeks
about the closing of U.S. weaving mills, again contributing to the
declining domestic yarn market.
In conclusion, we believe that the right CBI bill can benefit U.S.
producers of fiber, yarn and fabric. We welcome the opportunity to work
with the Committee in developing and supporting such a bill.
Chairman Crane. Thank you, Mr. Conner.
And our next witness in order is Mr. Moore.
STATEMENT OF CARLOS MOORE, EXECUTIVE VICE PRESIDENT, AMERICAN
TEXTILE MANUFACTURERS INSTITUTE
Mr. Moore. Thank you, Mr. Chairman. My name is Carlos
Moore. I'm executive vice president of the American Textile
Manufacturers Institute, the national trade association of the
textile mill products industry. Our members account for nearly
75 percent of the textile fibers processed in the United
States. That includes some eight million bales of U.S. cotton
out of the nearly 11 million bales consumed in the United
States. Our firms have a long history of business relations
with firms in the Caribbean region. For decades, our mills have
furnished fabric and cut pieces to the region for assembly into
garments and return to the United States.
This relationship was strengthened in 1986 with the
creation of the Special Access Program. Since that program went
into effect, CBI exports of apparel to the United States have
grown from less than $800 million a year in 1986 to $8.3
billion last year. I want to emphasize that this growth was
achieved under a program that mandates the use of fabrics made
in the United States.
You've already heard that CBI countries are facing a slow
down in their garment industries mostly because of the flood of
Asian textiles and apparel into the U.S. market driven by
devalued currencies in Asia. In our own market, our industry
has witnessed prices for Asian fabrics that have declined by 10
percent since the currency crisis began there. Yarn prices have
fallen as much as 23 percent from Asia.
The cumulative effect of this crisis on the U.S. industry
is very sobering. More than 50 U.S. textile plants have closed
or announced they were closing during the last 14 months. More
than 30,000 U.S. textile workers have lost their jobs. Textile
shipments fell by almost 4 percent in 1998. The prognosis is
not promising. Fourth quarter data from 1998 show that all
indicators have worsened during the year.
A properly designed Caribbean parity bill can help both
Caribbean and U.S. companies and workers cope with this Asian
problem. Therefore, ATMI urges the Committee to re-balance the
competitive situation, both for the domestic textile industry
and for the Caribbean region, by extending duty-free and quota-
free entry for A, apparel sewn in the CBI from fabric produced
and cut in the United States and made of U.S. yarn; and, B,
apparel cut and sewn in the Caribbean with U.S. thread from
fabric produced in the United States of U.S. yarn.
These 807A/809 approaches, such as approved last year by
the Senate Finance Committee, would result in an improved
economic partnership between the U.S. textile industry and
garment makers in the Caribbean. This re-balancing will
certainly help our industry and the region compete when quotas
disappear under the WTO phaseout in 2005, as has already been
mentioned.
We believe, however, that H.R. 984 contains a number of
counterproductive elements that would cause unnecessary harm to
segments of the U.S. textile industry. Our concerns are given
in detail in my written statement. But in summary, I would like
to mention first: we strongly object to the provision that
provides quota-free entry for apparel which originates in the
territory of a partnership country. This is not allowed under
NAFTA. It should not be allowed here. For example, this permits
fabrics and yarns from any country, China or India, for
example, to benefit from this approach.
Second, we strongly oppose the inclusion of Tariff
Preference Levels, TPLs. These permit fabric produced anywhere
in the world to be used in apparel sewn in the Caribbean and
imported duty-free and quota-free into the United States. They
displace U.S. production and jobs and should be eliminated from
the bill.
The provision which permits access for apparel made from
fabric knit in the CBI is similarly objectionable and
unnecessary. We have a very diverse fabric knitting industry.
U.S. mills can provide the knit fabric needed by CBI apparel
manufacturers. If this provision is enacted, the stark reality
is that additional fabric knitted in the region will be at the
expense of U.S. knitters and U.S. jobs.
Also, the repeated references in the bill to ``textile and
apparel articles'' or ``textiles and apparel'' should be
revised to cover only apparel articles of Chapters 61 and 62 of
the harmonized system.
The best and quickest way to increase jobs and to add
income in the Caribbean region is to increase garment
manufacturing which employs much more labor than textile
manufacturing. For example, a $5 million investment in garment
making would create jobs for over 500 apparel workers. The same
investment would not even be enough to build a waste treatment
plant to service an integrated textile mill. A dollar invested
in apparel making generates 33 times the number of jobs that an
equivalent dollar creates in textile manufacturing.
Finally, the bill fails to include an enforcement provision
for origin verification identical to NAFTA. Production
verification is the cornerstone of effective enforcement.
I would like to conclude by saying that we urge the
Committee to act quickly, but to act in a way that will restore
the balance between the region and U.S. production and jobs for
the good of both regions and the 600,000 employees in textiles
in the United States and the over 500,000 garment-making
employees in the Caribbean by approving an 807A/809 CBI bill
and deleting the objectionable provisions that we've described
today.
Thank you.
[The prepared statement follows:]
Statement of Carlos Moore, Executive Vice President, American Textile
Manufacturers Institute
This statement is submitted by the American Textile Manufacturers
Institute (ATMI), the national association of the domestic textile mill
products industry. Collectively, ATMI's member companies produce
virtually every kind of yarn, fabric and textile furnishing made and
sold in the United States\1\ and account for approximately 75 percent
of the textile fibers processed in the U.S.
---------------------------------------------------------------------------
\1\ Silk, ramie and jute products being the only notable
exceptions.
---------------------------------------------------------------------------
ATMI's member firms have a long history of commercial relations
with firms in the Caribbean/Central American region (hereafter
``CBI''). For decades, American textile mills have furnished fabric and
cut pieces to the region for assembly into garments and return to the
U.S. American mills have long been the primary source of raw materials
for the burgeoning CBI garment-making industry. An ATMI member was the
first U.S. textile company to own and operate a garment-making facility
in Central America. There has been a true partnership between the
American textile industry and the CBI garment industry, one that has
proven mutually beneficial and rewarding.
This alliance was strengthened in 1986 with the creation of the
Special Access Program (SAP). Since the SAP went into effect, CBI
exports of apparel to the U.S. have grown from less than $800 million
annually (1986) to $8.3 billion last year. This growth was achieved
under a program which mandates the use of fabric made in the United
States.
ATMI believes a well-constructed legislative initiative is needed
to further strengthen and enlarge the economic partnership between the
U.S. and the CBI region. The nations of the Caribbean are currently
facing special and difficult challenges, not the least of which is
increased competition from Asia in the form of rapidly rising apparel
exports to the U.S. fueled by the severe currency devaluations in Asia
during the last two years.
Prior to 1997, the CBI was competing head to head with the Far East
in garment exports to the U.S.--and winning. From 1987 to 1997, the
CBI's share of the U.S. apparel import market grew from 2.5% to 25%; at
the same time, the Far East's share declined from 71% to 37%. However,
since 1997, the CBI's competitive advantage has rapidly eroded. Apparel
imports into the U.S. from the region are no longer increasing and, in
fact, during the fourth quarter of 1998 actually declined. During this
same period of time, apparel imports from the Far East increased by
$280 million.
In our view, the CBI is at a crucial window of opportunity: either
legislation will be enacted by Congress that permits the CBI to compete
successfully against the devalued currencies of the Far East, or the
CBI may lose the opportunity even to maintain what has been its most
vibrant and productive export sector. But it must be the right
legislation, or else that window will once again close, as it did in
the last Congress.
There are grounds for hope. Despite the severe declines in Asian
prices, textile and apparel trade between Mexico and the United States
has shown no sign of weakening. In fact, trade ties between the two
countries have grown even stronger over the last year as Mexico has
continued to gain market share faster than other countries. The figures
below testify to the power of tariff elimination to benefit both the
U.S. textile industry and foreign countries.
------------------------------------------------------------------------
Increase ($ mil)
-------------------------
1997-98 1993-98
------------------------------------------------------------------------
U.S. Textile Exports1 To Mexico............... +$802 +$3,040
Mexican Apparel Exports to U.S................ +$1,127 +$5,100
------------------------------------------------------------------------
1 Includes cut pieces of U.S. fabric.
The CBI apparel industry is not alone in being threatened by
historically low prices for Asian imports. The Asian crisis has taken a
toll on the U.S. textile industry. Prior to last year, exports of U.S.
textile products (including cut fabric pieces) to the CBI had been
showing regular healthy increases year-in, year-out, averaging 19%. In
1997 alone, the increase was $760 million. In 1998, that increase fell
to $199 million.
Damage from the Asian crisis has not been isolated to the CBI.
Exports of U.S. textile products to Asia, formerly a billion dollar
export market, fell by 24 percent in 1998 and exports to all markets
outside of North America were down 16 percent.
In our home market, the U.S. textile industry has also been
confronted by a wave of low-priced Asian imports. Overall prices for
Asian fabrics have declined by ten percent since the Asian currency
crisis began while yarn prices have fallen by 23%. Prices for certain
Asian fabrics have dropped by as much as 45%. Not surprisingly, textile
imports from Asia have surged, increasing last year by almost 900
million square meters, or 15%.
The cumulative effect of this crisis on the U.S. industry is
sobering. More than 50 U.S. textile plants have closed or announced
they were closing during the last 14 months and more than 30,000 U.S.
textile workers have lost their jobs. Textile shipments fell in 1998 by
almost 4 percent while new orders fell by more than 5 percent. And the
prognosis is for these difficult times to grow even more difficult.
Fourth quarter data from 1998 show textile shipments down 7
percent, new orders and unfilled orders down 11 percent and textile
fiber consumption off 12 percent. What all this means is that the U.S.
textile industry is facing large-scale job losses unless measures are
taken to rebalance the competitive situation.
Current Economic Condition, U.S. Textile Industry:
Job losses, 1998: -30,000
Plants closed (last 14 months): 45
Shipments, 4th quarter: -7%
New orders, 4th quarter: -11%
Unfilled orders, 4th quarter: -11%
Fiber consumption, 4th quarter: -12%
We ask the Committee to keep in mind that this crisis occurred
because of excess capacity in Asia encouraged by cozy finance and
industry relationships, lack of sound fiscal policy and the
subsidization of that excess capacity on a massive scale by Asian
governments. The U.S. textile industry and its workers should not have
to bear the brunt of irresponsible policies and predatory practices on
the part of foreign governments.
As a result, ATMI urges that the Committee substantively help to
rebalance the competitive situation both for the domestic textile
industry and for the Caribbean region by extending duty-free and quota-
free entry for: (a) apparel sewn in the CBI from fabric produced and
cut in the U.S., and made of U.S. yarn; and (b) apparel cut and sewn in
the CBI with U.S. thread from fabric produced in the U.S. of U.S. yarn.
Such an 807A/809 approach, as approved last year by the Senate Finance
Committee, would result in an improved economic partnership between the
U.S. textile industry and garment makers in the Caribbean.
A study by the economic consulting firm Nathan Associates shows
that by taking this simple step, U.S. textile exports to the region can
be boosted by $1.9 billion per year and that net U.S. textile
employment would increase by 35,000 jobs. As our experience with NAFTA
has shown, real and immediate gains in exports of U.S. textile products
to the CBI, as well as in imports of garments assembled in the CBI from
U.S. fabric and yarn, would result if such a move is taken.
Unfortunately, the committee is considering H.R. 984, which
contains a number of counterproductive elements that would cause
unnecessary harm to segments of the U.S. textile industry. These
elements and ATMI's grounds for objection are as follows:
Quota-Free Entry Using Foreign Components.--ATMI strongly objects
to the provision (Section 104, para. (b) (2) (A) (iii) (I)) which
provides quota-free entry for apparel which ``originates in the
territory of a partnership country.'' This means that fabric from
anywhere in the world could enter any of the CBI countries--it would be
entered duty-free, of course--be cut and sewn into apparel and shipped
to the U.S. with no restraint whatever. Not only is this a de facto
abrogation of the Uruguay Round Agreement on Textiles and Clothing, it
is bad trade policy. Why should China, India, Pakistan and other
undeserving countries be given this extraordinary entree to the U.S.
market at no cost to them? This is not allowed under NAFTA and it
should not be allowed here.
Tariff Preference Levels (TPLs).--Section 104 B (I), (ii) These
permit fabric produced anywhere in the world to be used in apparel sewn
in the CBI and imported duty-free and quota-free into the United
States. TPLs are loopholes that unnecessarily displace U.S. production
and jobs. Little, if any, of the apparel currently exported from the
CBI nations to the U.S. uses fabric not available from U.S. textile
mills.
It is noted that the NAFTA agreement (and the precursor U.S.-Canada
Free Trade Agreement) contains TPLs. It should also be noted, however,
that they have been greatly abused. The original intent of TPLs was to
permit the use of fabrics and yarns not available in any of the
participating countries. Unfortunately, that is not what has happened
under NAFTA. Canada has used its TPLs to export to the United States
textile and apparel products made of non-North American yarns and
fabrics freely available in North America. As a result, textile mills
in Europe and Asia are getting a $300 million free ride into the U.S.
market annually on the coattails of Canada's TPLs. This has severely
damaged U.S. manufacturers of wool suits and wool fabric and harmed
producers of many other garments and fabrics.
More recently, Mexican officials acknowledge that Mexico's TPLs are
also now being used to export textiles and apparel made from Asian
yarns and fabrics that could just as easily have been sourced from
textile mills in Mexico and the United States. The fact that these TPLs
lay essentially unused until the Asian currency devaluations caused
Asian fabric prices to plummet is indicative of how the original intent
behind these preferences has been perverted. This situation must not be
duplicated in the CBI.
The unavailability or short supply of any yarns or fabrics--which,
it will be noted again, is highly unlikely to begin with--can better be
dealt with by the specific enumeration of exempt fabrics and yarns 2
and/or a ``short supply'' provision 3 , just as was done in NAFTA.
There is no need for TPLs.
---------------------------------------------------------------------------
\2\ See NAFTA Annex 401-B, Chapter 62 and headings 6205.20-6205.30.
\3\ See NAFTA Annex 300-B, Section 7, para. 2.
---------------------------------------------------------------------------
Apparel Made From Fabric Knit in CBI.--(Section 104, (2) (A) (ii)
(iii)) This provision is similarly unnecessary. The United States
boasts the world's most diverse fabric knitting industry. U.S. mills
can provide all the knit fabric needed by CBI apparel manufacturers.
Enactment of this provision would encourage foreign, not local or U.S.,
investors to install knitting capacity in the region. The investors
will almost certainly be Asian and they will leap at the chance to get
their fabric into the U.S. market duty-free. They should not be given
license to do so.
The stark reality is that every pound of fabric knitted in the
region by these outsiders will be at the expense of U.S. knitters. It
is simply wrong to enact provisions which will take existing business
away from American producers, business which has been carefully
nurtured over the years, and will, as well, deny them any future
business, all in favor of Asian interests.
Preference for Textile Articles.--(Section 104, Para.2) The
repeated references to ``textile and apparel articles'' and ``textile
or apparel articles'' should be revised to cover apparel articles of
HTS Chapters 61 and 62 only. The legislation's stated objective to
``promote the growth of free enterprises and economic opportunity,''
can best be realized by providing job opportunities in the labor
intensive apparel manufacturing sector rather than in the textile
sector. For example, a five million dollar investment in garment making
would create jobs for over 500 apparel workers; the same investment
would not even be enough to build the waste treatment plant to service
an integrated textile mill. A dollar invested in apparel making
generates 33 times the number of jobs that an equivalent dollar creates
in textile manufacturing.
Transshipment Provisions Not Included.--The bill fails to include
provisions for origin verification identical to those in Article 506 of
NAFTA. Such Article 506 procedures are absolutely essential to ensure
that goods entering the U.S. with preferential treatment are indeed
entitled to these benefits. Failure to include these provisions would
almost certainly lead to the region being used as an illegal
transshipment point by Asian manufacturers and/or encourage the use of
non-U.S. produced fabric in apparel entering the U.S. duty-free.
The record shows that there have been repeated violations of the
requirements of the SAP and NAFTA even with verification procedures in
place. U.S. Customs has already discovered transshipment activity by
Asian manufacturers in nine CBI countries 4. An absence of such Article
506 procedures would lead to a tidal wave of illicit imports.
---------------------------------------------------------------------------
\4\ Jamaica, Panama, Costa Rica, Guatemala, Belize, Honduras,
Haiti, the Dominican Republic and St. Lucia.
---------------------------------------------------------------------------
ATMI notes language contained in Section 104, Subsection 5 of H.R.
984 which indicates congressional desire to have the beneficiary
partnership countries accede to NAFTA or enter into a NAFTA-comparable
agreement with the United States. ATMI is wholly supportive of this
policy and would welcome a NAFTA-type agreement with any or all of the
parties.
However, H.R. 984 would grant overly generous privileges and
preferences to the CBI countries in a unilateral fashion. CBI countries
will have little incentive to make the commitments needed to join in a
full free trade agreement if they get nearly all the benefits of such
an agreement via H.R. 984.
In the final analysis, legislation which grants preference to
apparel made in the CBI region solely from American-formed fabric and
yarn is the best course of action to pursue. Such legislation would
convey benefits to everyone involved--American apparel importers, CBI
garment makers, U.S. textile mills--while harming none of them. Such an
approach has a precedent--the Special Access Program. The historical
record clearly shows the efficacy of this approach: a ten-fold increase
over twelve years in the dollar value of CBI apparel exports to the
United States; an increase in the CBI's share of U.S. apparel imports
from 6.5 percent (1986) to 23.8 percent (1998); and a nine-fold
increase in U.S. exports of textiles and cut-pieces to the region.
There is clearly a compelling need to extend duty-free treatment
immediately to CBI apparel items made from U.S. fabrics and U.S. yarns.
Failing that, the Caribbean will lose its competitive edge and the
region will be placed in even greater economic stress. And the U.S.
textile industry will face larger and more serious job losses and even
more plant closings in the face of unprecedented price declines from
Asia. We urge the Committee to act quickly to restore this balance for
the good of both the nations of the Caribbean and the United States
textile industry and our 600,000 employees by approving an 807A/809 CBI
bill in lieu of H.R. 984.
Appendix
ATMI wishes to point out what we believe are certain technical
errors in the language of H.R. 984. In Section 104, para. (b) (2) (A)
(ii) (I) the line should read ``is assembled in a partnership country,
wholly from fabrics formed and cut. . . .'' Likewise, in para. IV of
this subsection, the word ``wholly'' should be moved from after the
word ``fabrics'' to after the word ``country''.
Chairman Crane. Thank you, Mr. Moore.
Mr. Lamar.
STATEMENT OF LARRY K. MARTIN, PRESIDENT, AMERICAN APPAREL
MANUFACTURERS, ARLINGTON, VIRGINIA, AS PRESENTED BY STEPHEN
LAMAR, DIRECTOR OF GOVERNMENT RELATIONS
Mr. Lamar. Thank you. I am Steve Lamar, director of
Government Relations at the American Apparel Manufacturers
Association, the national trade association of the U.S. apparel
industry. I appreciate the opportunity to appear before the
Subcommittee on the subject of Central American and Caribbean
reconstruction.
Mr. Chairman, let me congratulate you and your colleagues
for your strong leadership in introducing H.R. 984, the CCARES
bill. Let me also congratulate Senator Graham for introducing a
similar bill in the Senate. These measures, which contain a
crucial Caribbean Basin trade enhancement provision, will be
important to foster long-term reconstruction from the
hurricanes that recently devastated the Caribbean Basin region.
Our member firms have made enactment of this legislation a top
priority for 1999.
As you know, AAMA has long supported enactment of CBI trade
enhancement legislation as a key component to ensure the
competitiveness of the U.S. apparel industry. Sadly, the need
for this legislation has been reinforced by two hurricanes that
visited severe devastation upon areas of Central America and
the Caribbean. It has now become a vital tool to sustain
economic recovery in the region.
Let me speak for a moment on these two points. First, the
hurricanes. Before the hurricanes struck, the apparel sector
was already emerging as an engine of economic growth. Now with
severe damage to many other export industries, such as tourism,
bananas, and coffee, the apparel sector takes on added
significance as a source of much-needed foreign exchange and
employment.
The apparel sector is ready to put people to work
immediately. In many parts of the region, the apparel sector
has escaped severe damage. Other sources of traditional
employment were not so lucky and are not likely to recover for
many months or years.
Moreover, throughout the crisis, the apparel industry has
emerged as a source of stability and relief. Many factories
doubled as shelters and hospitals and served as distribution
points for donations, both through official and private
channels. I might add that members of our own association
contributed more than $5 million worth of direct aid to the
region immediately after the hurricanes and continued to pay
workers even when they could not get to their jobs. Keeping the
apparel industry viable, through expanded access to the U.S.
market, reinforces this stabilizing role.
Let me also speak for a moment about the apparel industry.
Our industry relies upon programs like the CBI, and subsequent
improvements made through the Special Access Program, to allow
us to meet the challenges of low-cost foreign imports. Broadly,
these programs give us lower average costs, make U.S. companies
more competitive, and allow us to maintain significant
employment in the United States. Moreover, as you've already
heard, our supplier industries have a strong interest in an
apparel industry that is located close to U.S. shores.
But these programs, which were tailored for the late
1980's, no longer make as much sense for U.S. apparel firms.
Preferential benefits accorded Mexico under NAFTA, the imminent
phaseout of the quotas under the Uruguay Round, and the
discounts induced by the Asian economic crisis have largely
eroded the benefit of the CBI. Just like we no longer use IBM
PS 2 computers we had on our desks in the early 1990's, our
members are finding they have less use for the CBI program.
To remain competitive, many apparel firms now find it
increasingly more cost-effective to source garments out of
Asia. Although we would prefer to do business in the CBI, we
have greater control and it is closer to our customers, we are
finding we cannot stay in business unless we shift some of our
production East.
Unfortunately, we are already seeing the effects of this
diversion. For years, we have warned that growth rates for the
CBI were down because new investment was being directed to
Mexico. In 1998, for the first time ever, the CBI actually lost
share of the U.S. apparel import market. That same year,
Mexico's market share increased. More ominously, the U.S.
market share by ASEAN nations increased by about 50 percent.
Let me leave you with a bottom line economic fact. At the
end of the day, our members essentially do business where the
Government tells us. In the 1980's and the early 1990's,
through a deliberate policy to promote regional stability and
ensure our competitiveness, the Government encouraged us to do
business in the Caribbean Basin. Now with the global changes
that are occurring, and absent enactment of CBI trade
enhancement, the Government is essentially telling us to do
business in Asia.
If we are forced to source more of our garments from Asia,
we will buy less U.S. cotton, less U.S. yarn, and less U.S.
fabric. This will have a detrimental impact on U.S. workers and
U.S. suppliers to our industry. Moreover, as we shut down
facilities in San Pedro Sula, and replace them with ones in
Shanghai, CBI workers and regional economic prosperity suffer
as well.
The continued health of the CBI region is tied inextricably
to the growth of the region's apparel assembly industry.
Apparel assembly creates thousands of jobs in the region and
generates millions of export revenues that are used to sustain
development goals. Improving economic conditions contributes to
political stability, deters illegal immigration, and creates an
alternative to the production and trafficking of illegal drugs.
And as we have seen, a prosperous Caribbean Basin means more
exports of U.S. consumer goods, capital equipment, and farm
products.
At the same time, the apparel industry in the region is
vital to the continued economic health of the U.S. apparel
industry. These strategic partnerships enable us to stay
competitive to meet the challenges of low-cost foreign imports,
maintain significant apparel employment in the United States,
and maximize the use of U.S. inputs--again, such as U.S.
cotton, U.S. yarn, and U.S. fabric.
There has long been a need for CBI enhancement legislation.
It should have been enacted 5 years ago. The damage caused by
the hurricanes makes it even more imperative that it be enacted
now.
I appreciate the opportunity to submit this testimony, and
I would be pleased to respond to any questions you may have.
[The prepared statement follows:]
Statement of Larry K. Martin, President, American Apparel Manufacturers
Association, Arlington, Virginia, as presented by Stephen Lamar,
Director
Thank you. I am Larry Martin, President of the American Apparel
Manufacturers Association (AAMA). We appreciate the opportunity to
appear before the Subcommittee on the subject of Central American and
Caribbean reconstruction.
AAMA is the trade association of the U.S. apparel industry,
representing about 85 percent of clothes sold at wholesale. While the
industry is large, most of the companies are relatively small. Three-
fourths of our members have sales under $20 million and more than half
have sales under $10 million. Our members employ most of the 725,000
Americans working at apparel manufacturing jobs in the U.S. They also
operate in Mexico under NAFTA, in Central America and the Caribbean,
and some import from other sources.
Mr. Chairman, let me congratulate you and your colleagues--Mr.
Rangel, Mr. Kolbe, Mr. Matsui, and Mr. Jefferson--for your strong
leadership in introducing H.R. 984--the Caribbean and Central America
Relief bill. This measure--which contains a crucial Caribbean Basin
trade enhancement provision--will be important to foster long term
reconstruction from the hurricanes that recently devastated many of the
countries of the Caribbean Basin Initiative (CBI) region. It is also
critical for the long-term health of the US apparel industry.
Hurricane Reconstruction
AAMA has long supported enactment of CBI trade enhancement
legislation. Sadly, the need for this legislation has been reinforced
by two hurricanes that visited severe devastation upon areas of Central
America and the Caribbean. Expanding the US/CBI trade relationship will
be a vital element in helping the countries of the Caribbean and
Central America recover from the devastation caused by Hurricanes Mitch
and Georges.
Short-term relief is important in helping these countries weather
the immediate crisis. US support for long term reconstruction, however,
will be necessary to sustain economic growth in the region. Regional
leaders agree.
In a November 9 letter to President Clinton, the five Central
American Presidents asked for Caribbean Basin trade enhancement
legislation as an element of the reconstruction effort for Central
America. In a November 24 guest editorial in the Washington Post, Costa
Rican President Miguel Rodriguez reiterated this point, stating that
Caribbean trade enhancement would be a ``necessary part of a program of
recovery of our region.'' Since then, and as most recently as 2 weeks
during the President*s trip to Central America, these leaders had made
repeated calls for CBI trade enhancement.
A CBI trade enhancement package would buildupon the successful US/
Caribbean partnerships already at work in dozens of locations across
the region. It would expand US market opportunities for apparel and
other products assembled in Central America and the Caribbean. And
because most of that apparel is manufactured using US textiles and
related inputs, American workers and their firms would benefit as well.
Before the hurricanes struck, the apparel sector was already
emerging as an engine of economic growth. Now, with severe damage to
many other export industries--such as tourism, bananas, and coffee--the
apparel sector takes on added significance as a source of much-needed
foreign exchange and employment.
The apparel sector is ready to put people to work immediately. In
many parts of the region, the apparel sector has escaped severe damage.
For example, by mid-November, 1998, Honduran apparel production had
again reached 92 percent of pre-hurricane production. Other sources of
traditional employment are not likely to recover to this level for many
months or years.
Throughout the crisis, the apparel industry has emerged as a source
of stability and relief. Many factories doubled as shelters and
hospitals, and served as distribution points for donations--both
through official and private channels. I might add that members of our
association contributed more than $5 million worth of direct aid to the
region immediately after the hurricanes and continued to pay workers
even when they could not get to their jobs. Keeping the apparel
industry viable, through expanded access to the US market, reinforces
this stabilizing role.
Over the past 15 years, the US government and private sector have
invested substantial political and financial capital to secure peace
and economic prosperity in this region. Passage of a Caribbean Basin
trade enhancement package--as an element of hurricane reconstruction--
keeps that investment viable.
Apparel Industry Competitiveness
While the havoc caused by the hurricanes brings urgency to the need
for CBI enhancement legislation, AAMA has felt a strong need for it
since the onset of negotiations over NAFTA.
AAMA supports the maintenance of a large and viable U.S. apparel
manufacturing industry. American apparel companies are not in business
to move jobs offshore. Every one of our members would rather do all its
manufacturing in the United States and not have to deal with the
complexity of offshore production. However, we must compete with low-
wage imports, which have taken over half of our market. In order to
compete with low-wage imports, many U.S. companies opened production in
Mexico and the CBI countries. Firms often found sourcing from the CBI
countries best fit their operations, even though apparel was
specifically excluded from the CBI program.
This exclusion was partially offset by the 807 program, which gives
us lower average costs, makes U.S. companies more competitive and
allows us to maintain significant employment in the U.S. Under 807, a
$10.00 garment usually has $6.00 in U.S. components and about $4.00 in
value-added by offshore assembly. The duty is assessed on only the
value-added. That duty is usually about 20 percent, which on $4.00 is
80 cents. This is equivalent to 8 percent on the value of the entire
garment. With wholesale and retail markups, a garment from the CBI
region carries a penalty of approximately $3.00, as compared to the
same garment coming from Mexico.
In 1986, 807 was modified by the creation of the 807-A program.
Under it, duty still was paid, but only on the value-added in the
region. However, the creation of Guaranteed Access Levels (GALs)
essentially made many products from the region quota-free. 807-A was
duplicated for the Mexican industry and named the Special Regime.
It is important to realize the production moved was no longer
viable in the U.S. Without the incentives of 807-A, NAFTA and hopefully
CBI enhancement, that production would go to the Far East where there
would be little U.S. involvement in the manufacturing process. Although
Asia is further away from the U.S. market, its access to lower priced
inputs, especially since the onset of the financial crisis, makes it
extremely competitive.
With the implementation of NAFTA, which AAMA strongly supported,
apparel assembled in Mexico of U.S. formed fabric enters our market
quota and tariff-free. However, duties are still charged on the value
added to imports from the CBI countries. This places the CBI countries
at a great competitive disadvantage vis-a-vis Mexico, and the progress
the U.S. fostered in the Caribbean Basin will in large part be
reversed. Competition from Mexico will force many local and U.S. firms
out of business or to move their investments from the CBI countries to
Mexico or Asia.
With the elimination of tariffs under NAFTA, this 8 percent cost no
longer is added to the price of garments coming from Mexico. Couple
this with slightly easier and cheaper transportation between Mexico and
the U.S. vs. that between the Caribbean and the U.S. and Mexico has a
significant advantage. Eight percent may not appear to be a significant
saving, but the average profitability of an apparel firm in the U.S. is
much less than that.
The effects of NAFTA on the CBI region have become apparent. Since
NAFTA went into effect on January 1, 1994, apparel imports from Mexico
have increased 611 percent. While starting from a larger base, imports
from the CBI have increased at one-third that rate.
Now, for the first time, the CBI region actually is losing share of
the import market. In 1998, the CBI region accounted for 23.8 percent
of the garments imported into the United States, a decline from the
25.1 percent in 1997. During that same year, the market share of Mexico
and other regions--such as ASEAN--continued to increase.
807 production created thousands of good jobs in Mexico and the
Caribbean Basin. We estimate 15 apparel jobs in the U.S. are created by
every 100 jobs in 807 production in the region. This is in addition to
the thousands of U.S. jobs it maintains in the textile, transportation
and other industries. These jobs in Caribbean Basin, the related U.S.
apparel jobs and the jobs in ancillary industries will not come to the
U.S. if the Caribbean should be shut down. They will migrate to the Far
East.
Regional Economic Goals
CBI trade enhancement makes good foreign policy. The United States
needs to remain engaged in the region to promote stable, democratic
governments and market-oriented economies. Our interests in this regard
our clear:
Political and economic turmoil in the CBI often manifests
itself in the US through increased narcotics trafficking or waves of
immigrants and refugees.
Many US residents and communities share family ties with
individuals in Central America and the Caribbean.
The Caribbean Basin is the 9th largest destination of US
exports worldwide, and is one of the few regions where we maintain a
consistent trade surplus.
US commercial and security interests demand uninterrupted
access to transit routes through the Caribbean Sea and the Panama
Canal.
The continued economic health and of the CBI region is tied
inextricably to the growth of the region's apparel assembly. The jobs
available in the apparel industry, as well as supporting industries,
are key sources of employment throughout the region. Export revenues
generated by apparel assembly encourages Caribbean Basin governments to
increase and accelerate economic reform, including investment
liberalization, protection of intellectual property rights, promotion
of worker rights, and expansion of market access. Strong economic
conditions contribute to political stability, deter illegal
immigration, and create an alternative to the production and
trafficking of illegal drugs. Caribbean Basin trade enhancement only
accelerates this process.
Conclusion
Although unintentional, passage of NAFTA adversely affected the
competitiveness of the CBI region by diverting existing and potential
investment from the region in favor of Mexico and, increasingly, Asia.
CBI trade enhancement assures a level playing field will exist between
the CBI region and Mexico. Without it, U.S. companies already in the
region, competitively disadvantaged by the elimination of Mexican duty
rates and quotas, will move new investment elsewhere and disinvest
existing manufacturing facilities. If the apparel sector leaves Central
America and the Caribbean for Asia, US workers, US supplier industries,
and Caribbean regional economic stability will suffer.
There has long been a need for CBI enhancement legislation. It
should have been enacted 5 years ago. The damage caused by the
hurricanes make it even more imperative that it be enacted now.
Once again, we appreciate the opportunity to submit this testimony.
We would be pleased to respond to any questions you may have.
Chairman Crane. Thank you, Mr. Lamar.
And our last witness, Mr. Autor.
STATEMENT OF ERIK O. AUTOR, VICE PRESIDENT, INTERNATIONAL TRADE
COUNSEL, NATIONAL RETAIL FEDERATION
Mr. Autor. Thank you, Mr. Chairman. My name is Erik Autor.
I'm vice president of International Trade Counsel of the
National Retail Federation. I appreciate the opportunity to
testify in support of H.R. 984, the Caribbean and Central
American Relief and Economic Stabilization Act.
NRF is the largest trade association that speaks for the
U.S. retail industry. NRF members cover the spectrum of
retailing, including department, specialty, discount,
catalogue, Internet, and independent stores. NRF's members
represent an industry that employs more than 22 million, about
one in five American workers, and registered sales of more than
$2.6 trillion in 1998.
NRF and the U.S. retail industry strongly support H.R. 984
because it would provide immediate tangible benefits to
Caribbean Basin Initiative countries, several of which were
devastated by recent hurricanes. This bill will give those
countries the benefits they need to attract new business and
investment quickly thereby creating jobs, income, and economic
opportunity in countries struggling to recover from natural
disasters. The legislation's textile and apparel provisions are
particularly critical in this effort, by encouraging U.S.
apparel producers to manufacture products in partnership with
their CBI counterparts. In turn, U.S. retailers, who buy
clothing from U.S. apparel producers, will be better able to
give our U.S. customers a good selection of value-priced
apparel.
We commend Representatives Crane, Kolbe, Rangel, Jefferson,
and Matsui for their insistence that the trade-related relief
in H.R. 984 be meaningful and effective. The CBI region is a
very important source of apparel products for the U.S. retail
industry. We have long supported giving CBI countries trade
benefits that parallel those provided to Mexico, particularly
for textile and apparel products.
We are disappointed that efforts to pass such legislation
have so far been stalled by certain domestic interests who
would limit the trade benefits so as to help mainly themselves
rather than the CBI countries. By seeking to deny trade
benefits to apparel products made from fabric produced in the
CBI region, these advocates of ``enhanced'' CBI trade
legislation would, in fact, ensure that manufacturing in CBI
countries remains limited to assembly of U.S. garments. Such
restrictions would ultimately hurt the economic development of
CBI countries by preventing CBI producers from moving into
related, higher-paying, and more technologically sophisticated
production sectors. Watering down the textile and apparel
provisions in this bill will also continue to handicap the
ability of the CBI region to compete with Asia and Mexico.
In contrast, H.R. 984 would promote broader, deeper
economic development in the CBI by encouraging both apparel
production and assembly and the development of a textile
industry to supply that apparel production.
H.R. 984 also promotes U.S. economic interests. Between
1992 and 1998, U.S. exports to the CBI countries increased 76
percent to $19.2 billion. Imports from the CBI region increased
82 percent over the same period reaching $17.1 billion,
resulting in a $2.1 billion trade surplus with the region. Most
of this trade involves textiles and apparel.
The current CBI program allows U.S. apparel producers to
ship cut U.S. fabric to a CBI country for assembly into
clothing that is then re-exported to the United States. The
importer pays duty only on the value added in the CBI country.
The program has been a boon to U.S. textile and apparel
producers, U.S. retailers, and the CBI countries.
However, NAFTA gave Mexico a significant advantage over its
CBI competitors: immediate duty-free treatment on apparel from
Mexico that is assembled from fabric formed and cut in the
United States. Because U.S. tariff rates are so high on many of
these products, a portion of retail sourcing shifted to Mexico
from both Asian and CBI sources. Thus, even without the damage
due to the hurricanes, the CBI apparel industry suffered a
significant loss in competitiveness relative to Mexico.
Focusing solely on likely increases in U.S. imports as a
result of additional trade preferences for CBI countries
overlooks the growth potential for U.S. exports of yarn,
fabric, notions, and production machinery. Increased production
of those products as a result of providing CBI countries true
NAFTA parity would also create jobs in the United States.
It's puzzling why the U.S. textile industry, which
supported NAFTA and touts the benefits of that agreement, would
seek anything less for CBI countries. H.R. 984 also promises
the United States social and political benefits as well. CBI
countries must have the incentive and the means to move up the
economic ladder by offering their citizens better jobs in
legitimate industries. Otherwise, they face the risk of
political and economic instability resulting from unemployment
and the temptation to engage in activities harmful to the
United States, such as drug trafficking or illegal immigration.
NRF looks forward to working with the members of the
Committee in both Houses to ensure rapid enactment of CBI
legislation that is meaningful and that will accomplish U.S.
economic, political, and social goals for the CBI region.
In conclusion, open trade has played a key role in our
strong growing economy and low unemployment. We have no excuse
but to further liberalize trade boldly, not timidly, as some
suggest. H.R. 984 presents us with a perfect opportunity to set
the example and ensure our own economic future.
Thank you.
[The prepared statement follows:]
Statement of Erik O. Autor, Vice President, International Trade
Counsel, National Retail Federation
I. Introduction
My name is Erik O. Autor. I am Vice President and International
Trade Counsel, to the National Retail Federation (``NRF''). I am
pleased to have the opportunity to appear before you today in support
of H.R. 984, the ``Caribbean and Central American Relief and Economic
Stabilization Act (CCARE).''
NRF is the nation's largest trade association that speaks for the
U.S. retail industry. NRF members cover the entire spectrum of
retailing, including department, specialty, discount, catalogue,
internet, and independent stores, as well as 32 national and 50 state
retail associations. In all, NRF's members represent an industry that
encompasses over 1.6 million retail establishments, employs more than
22 million people--about 1 in 5 American workers--and registered sales
of more than $2.6 trillion in 1998.
NRF and the U.S. retail industry strongly support H.R. 984 because
it provides immediate, tangible benefits to Caribbean Basin Initiative
(CBI) countries, a number of which were hard-hit by recent hurricanes.
This bill will give those counties the benefits they need to attract
new business and investment quickly, which will, in turn, create jobs,
income, and economic opportunity in countries struggling to get back on
their feet after devastating natural disasters. The legislation's
textile and apparel provisions are particularly critical in this
effort, by encouraging U.S. apparel producers to manufacture products
in partnership with their CBI counterparts. In turn, U.S. retailers,
who buy clothing from U.S. apparel producers, will be better able to
supply our customers in the United States with a good selection of
value-priced apparel. Representatives Crane, Kolbe, Rangel and Matsui
are to be commended for their insistence that the trade-related relief
in Title I of the legislation be meaningful and effective, and we thank
them for their persistence and hard work in maintaining the integrity
of this critical trade initiative against those who seek to water it
down.
II. H.R. 984 Will Promote the Meaningful Development of CBI Economies
The U.S. retail industry has long supported giving CBI countries
trade benefits that parallel those provided to Mexico, particularly for
textile and apparel products. We are disappointed that several years
spent seeking meaningful legislation for the region have so far been
stalled by certain parochial domestic interests, who would limit the
trade benefits so as to benefit themselves, rather than the CBI
countries. By seeking to deny special trade benefits to apparel
products made from fabric produced in the CBI region, these advocates
of ``enhanced'' CBI trade legislation would, in fact, ensure that
manufacturing in CBI countries remain limited to assembly of U.S.
garments. Such restrictions would ultimately hurt CBI producers and
their workers by preventing CBI countries from moving their economies
to the next level of development in related, higher-paying and more
technologically-sophisticated production sectors. Watering down the
textile and apparel provisions in this bill will also continue to
handicap the ability of the CBI region to compete with Asia and Mexico.
But H.R. 984 has a bigger economic vision for the CBI region, and
for that it has the full and strong support of the NRF and the U.S.
retail industry. H.R. 984 would promote broader, deeper development in
the CBI by encouraging not only apparel production and assembly, but
also the development of a textile industry to supply that apparel
production. In addition, by allowing eligibility to CBI-made apparel
produced from specified volumes of fabrics that are unavailable from
the United States or the CBI region, H.R. 984 would enable CBI
producers to accept orders from U.S. retailers for certain fashion
products that can only be made with these fabrics.
Overall, H.R. 984 will significantly help countries in the region
to diversify their economies, the importance of which should not be
underestimated. In the banana dispute with Europe, the United States
has argued that Caribbean countries should be weaned away from
overreliance on inefficient banana production. Encouraging the
expansion of local apparel and textile production capability, is an
obvious way to help these countries along the right path.
III. H.R. 984 Also Promotes U.S. Interests
H.R. 984 also promotes many U.S. interests. The Subcommittee is
probably aware that, on trade, the United States enjoys strong export
growth to the CBI, and annual trade surpluses with the region. U.S.
exports to CBI countries increased 76 percent between 1992 and 1998,
reaching $19.2 billion. Imports from the region increased 82 percent
over the same period, reaching $17.1 billion. Thus, we ended 1998 with
a $2.1 billion trade surplus with the CBI.
Most of this trade involves textiles and apparel. Half our imports
from the region in 1998 and 24 percent of our exports were either
textile or apparel products. The current CBI program allows U.S.
apparel producers to ship cut U.S. fabric to a CBI country for assembly
into finished clothing, which is then re-exported to the United States.
The importer pays duty only on the value added in the CBI country.
Quotas on these products are typically non-existent or liberal enough
so as not to be a restraint on trade. The program has been a boon to
U.S. textile and apparel producers, U.S. retailers, and CBI apparel
producers.
However, the implementation of NAFTA gave Mexico one particularly
significant advantage over its CBI competitors: the immediate duty-free
treatment on imports of apparel from Mexico that are assembled from
fabric wholly formed and cut in the United States--the so-called ``807A
imports.'' Because U.S. tariff rates are so high on these products, a
portion of retail sourcing shifted to Mexico from both Asian and CBI
sources. The tariff break was too important to ignore in the highly
competitive U.S. apparel retail market. Even without the added
dislocation caused by the hurricanes, the apparel industry in CBI
countries has suffered a significant loss in competitiveness relative
to Mexico. It is high time to rectify the disadvantage to these
important neighbors and trading partners.
In focusing on the likely increase in U.S. imports, what is often
overlooked in the debate over additional trade preferences for CBI
countries is the growth potential for U.S. exports of yarn, fabric, and
notions, not to mention the potential for export growth from U.S.
machinery and equipment manufacturers. Increased production of those
products as a result of providing CBI countries true NAFTA parity would
also create additional jobs in the United States. Thus, we find it
ironic that one industry--the U.S. textile industry--that supported
NAFTA and so strongly lauds the benefits its has received as a result
of the textile and apparel provision of that agreement would seek
anything less for countries in the CBI. If NAFTA has been good for the
textile industry, why would NAFTA parity for the CBI not also be
equally good for the textile industry?
Moreover, H.R. 984 promises the United States social and political
benefits as well. Only if these economies are able to move up the
economic ladder by offering their citizens better and better jobs in
legitimate industries will they be able to guard against the
instability (both political and economic) that results from massive
unemployment and the temptation to move instead into endeavors harmful
the United States, such as drug trafficking. Only by providing
incentives to create new good jobs in the CBI region can the United
States forestall waves of illegal immigration of people looking for a
better life.
IV. Conclusion
The Federation looks forward to working with the Chairman, his co-
sponsors and others in the House and eventually the Senate to ensure
that legislation that is meaningful, that will accomplish U.S. goals of
promoting economic development and political and social stability in
important U.S. neighbors, will finally be enacted this session of
Congress.
We are at an important crossroads in shaping trade policy in the
United States. The world is looking to the United States for leadership
on trade. Up until today, we have had a long and laudable history of
promoting trade liberalization, even in the face of strong political
opposition. We exhort other countries to follow the same course, even
those facing economic recessions and strong domestic pressures for new
barriers to foreign competition. Today we are blessed with a strong and
growing economy, and unemployment rates among the lowest in recent
memory. This enviable situation has come in no small measure, as a
result of open trade. Further trade liberalization will only continue
this trend. In short, we have no excuse but to liberalize boldly, not
timidly as some suggest. It should be kept in mind that this trade
program will set the standard for such initiatives in the future. H.R.
984 presents us with a perfect opportunity to lead by example.
Chairman Crane. Thank you, Mr. Autor.
Mr. Moore, your president, Doug Ellis, has been quoted as
saying that NAFTA is working for the U.S. textile industry. Why
wouldn't NAFTA rules on textile and apparel imports from CBI
regions, including eligibility for regional fabrics, work for
the textile industry as well as NAFTA has?
Mr. Moore. Mr. Chairman, if you would, the Committee, the
Congress, the Administration, would like to add the Caribbean
countries to NAFTA as full-fledged partners, we would support
that wholeheartedly. What this is is a unilateral grant of
access to our market. It is not a full blown free trade
agreement. Therefore, it seems to us that we have to construct
a CBI parity approach that favors the countries that
participate in it, that is, the Caribbean and the United
States, does not favor others with TPLs and other things like
that. We recognize that if there is a full-blown free trade
agreement like NAFTA or if the Caribbean countries come into
NAFTA, there will be negotiations that will deal with the
issues you've raised. This is a one-way deal right now.
Chairman Crane. Mr. Lamar, why is passage of H.R. 984
urgent for the companies you represent? And will it help your
firms in the CBI region compete against Asian competition,
particularly as we move toward the 2005 date when all textile
and apparel quotas will be phased out?
Mr. Lamar. It's our No. 1 priority. It's essential that we
get this enacted. The apparel industry is finding, as I
mentioned in my testimony, that the incentive structure right
now is to source garments from the Far East, from Asia and not
to source garments from the CBI. And what that is doing then is
that is moving us away from places where we are more
comfortable doing business, where we are closer to our
customers, closer to our traditional suppliers into places
where we have a little bit less control. And that affects the
ability I think of the entire garment chain to stay
competitive.
It also hurts our ability to maintain the maximum amount of
employment here in the United States because the support
industries that are built up here that support the economies--
our assembly operations in the Caribbean--would be gone if we
were to source garments from Asia.
Chairman Crane. Thank you.
Mr. Levin.
Mr. Levin. Just a few questions. It's late and thank you
for your patience. And we're going to be spending a lot more
time on this I hope in a expeditious manner. So I won't try to
cover even a part of the waterfront. Mr. Autor, let me say
something to you, if I might, in a kindly way. You hold a
responsible position within the National Retail Federation. And
I think we need to discuss these issues acknowledging that
there are countervailing and competing interests. And I don't
really think it's fair to say that those interests that are
opposed to yours are parochial domestic interests. Your
interests then are parochial domestic interests, no? Unless
somehow you classify yours as non-parochial.
I don't think we'll get very far if we don't acknowledge
the people who are on the panel with you represent legitimate
domestic interests that have some stake in the outcome. And
where you say ``they would limit trade benefits to benefit
themselves rather than CBI countries,'' just a note about that.
You're reflecting interests, mainly those of your members, not
mainly the benefits to CBI countries. I assume that the people
who pay your dues are your primary constituents, right? And so
I just want to urge everybody to try to be a bit acknowledging
that there's a clash here, if you want to put it that way, of
legitimate, non-parochial interests. And we have an array of
industry here that takes somewhat different positions and it's
somewhat understandable.
So I hope we can solve these differences. I don't think
they're small ones. The difference between H.R. 984 and the
Graham bill are significant. And we need to address them.
So you hold a responsible position, otherwise I wouldn't
comment. And maybe you didn't write this, somebody else did?
Mr. Autor. Well, I appreciate your comments on that. I
think it's a fair point.
Mr. Levin. And I appreciate your saying that. These trade
issues get so instantaneously polarized. They shut out
intelligent discussion. There's been an impact on the textile
and apparel industry in this country. And there's a question--
you can reach the conclusion if you want that it doesn't matter
if any of that is done here, but a lot of people disagree with
that, including myself.
And, Mr. Lamar, I'm going to want to have some further
discussions with you because I'm not quite sure where you come
out or why you come out there. You seem to be saying that, as
you said here, that your primary interest--let me see if I
underlined this. You're not in the business to shift jobs--
``American apparel companies are not in business to move jobs
offshore.'' But then you seem to say because the interplay with
NAFTA and the reality of imports, the influx of imports and
competition from Asia, that ``we don't need to maintain the
provisions in the Senate bill.'' It seems to be where you're
coming out. The requirements for use of fabric and yarn from
this country when the work is done in the Caribbean, that it's
no longer relevant. Maybe I'm not quite capturing what you're
saying, but I think that's what you're saying. And I just
urge--we have some realistic and factual discussions about that
because I think there's contradictory evidence in the way of
what has happened to Caribbean imports after NAFTA. It doesn't
quite fit together.
But the main point I want to make is we have a series of
bills: Mr. Crane's bill, Mr. Rangel's, we have the bill that
Senator Graham introduced, we have the Administration's
proposal. Let's see if we can knock heads together while
talking to each other and see if we can come out with a bill
that is a sound one.
Thanks very much.
Chairman Crane. Thank you, Sandy.
Mr. Becerra.
Mr. Becerra. Thank you, Mr. Chairman. And I recognize we
have votes, so I will try to be brief. Rather than ask
questions, maybe I can do what Mr. Levin did and just make a
couple of comments and see if we can follow-up on some of the
panelists. Let me thank you all for your testimony. A
question--or actually a comment I guess now at this stage to
Mr. Levinson. I believe you were present when the Ambassadors
from the various countries testified. Several of them said that
the conditions for some of the workers in the textile/apparel
industries in their countries were actually fairly good when
you compare them relative to some of the other industries and
some of the other professions that are out there. I know the
testimony that was submitted on behalf of UNITE points out a
few particular instances where you point to the contrary. It
would be helpful for us to have as much information and
evidence you can point to to help us try to make sense of this,
and also to be able to raise those questions to the Ambassadors
as we get the information from you.
To the folks representing the industries involved, I was
looking over again the testimony of the union, UNITE, and they
mention that some 70,000 jobs have been lost in the textile
industry and close to 200,000 jobs have been lost in the
apparel industry in the 1994 to 1998 period. That's about four
times what was lost in the 4 years prior to that and that's
sort of the NAFTA, pre-NAFTA, post-NAFTA breakdown. The point I
guess that UNITE is making is that, in fact, we will be losing
jobs and while we were losing jobs to begin with before NAFTA,
we're losing them at an accelerated pace. It would be helpful
to hear your thoughts because you're the industries impacted
and certainly you're concerned not just with your workers, but
also with the livelihood of the companies. It would be helpful
if we had a chance to engage in further discussion with you
about how we can address some of these things that will happen
regardless of whether or not we accelerate the trade movement
or not. But certainly there will be people who are affected
detrimentally who can't pick themselves up and go to some other
place and start anew. There are some companies, businesses that
will have the wherewithal to do that, to perhaps begin the
business offshore, hopefully, in Central America or the
Caribbean versus in far away Asian countries, but individuals
who are employed can't do that. And chances are they're not
highly skilled so they won't be able to quickly find something
else. It would be helpful if there were more discussion among
those who are representing the workers and those who are
representing the industries and, of course, those of us in
Government, discuss further how we address this because one way
or the other, we're going to see the effect that some people
will lose jobs. And, of course, I'm not going to discount the
fact that others will gain jobs as we begin to export more into
those regions as well. That all becomes very important as we
try to resolve this and reconcile the hurt and the gain that
will occur. And I know that most of us would like to see
something that comes out that benefits us in the long-run
because come 2005, I believe most of us do recognize that all
of sudden the table for competition will have changed. So to
the degree that there is that opportunity, as Mr. Levin said,
to have further discussion, I know a number of us would be very
interested in doing that.
So with that said, Mr. Chairman, I will go ahead and
conclude and thank all the panelists for their time.
Chairman Crane. Well, and it's not just Xavier that might
want to have contact with all of you as we go forward. But we
do appreciate very much your participation, your patience
today. We're sorry for speaking and running this way, but we've
got four votes in a row coming up.
And with that, the Committee stands adjourned. And, Evie,
we love you.
[Whereupon, at 4:13 p.m., the hearing was adjourned.]
[Submissions for the record follow:]
Statement of Seth M. Bodner, American Apparel Alliance, New York, NY
This statement is filed on behalf of a group of trade associations
representing domestic apparel and sewn products companies and including
more than 2000 domestic producing companies making clothes and other
sewn products in America. Our participating associations are as
follows:
American Apparel Alliance, consisting of the National Knitwear and
Sportswear Association and the American Apparel Producers Network.
The following supporting associations also join in this statement:
The Apparel Contractors Alliance of California based in Los Angeles
and consisting of the Garment Contractors Association of Southern
California; American Chinese Garment Contractors Assoc.; Korean
American Garment Industry Assoc.; Northern California Chinese Garment
Contractors Assoc.; The Atlantic Apparel Contractors Association,
Bethlehem, PA; The Greater Blouse, Skirt & Undergarment Association of
NYC; The Korean Apparel Manufacturers Association of Greater New York;
and SEAMS (South Eastern Apparel Manufacturers and Suppliers Assoc.)
Columbia, SC.
Our associations are comprised of companies which manufacture
clothing and sewn products in the U.S. for major labels, private store
labels, catalogs and for their own labels. some of our members provide
design and related fashion services to such apparel production
companies. Our members are in many states across the country.
Frequently, they manufacture for retail stores and are in direct
competition with other suppliers to the same retailers. In some cases
they purchase their own raw materials such as yarn or fabric, and in
other cases their customer provides these materials and they process
them into finished clothing or other sewn products. Those in the
knitting industries have a significant capital investment in equipment,
while those in the cut and sew products area somewhat less so. In all
cases, however, the investment in plant and equipment is a relatively
important one to the enterprises involved. Many of these companies are
small, family owned businesses in which the business is both their
livelihood and their estate. Other firms are substantially larger. All
would be directly and adversely affected by this legislation. Given the
diversity of our membership and its nationwide distribution, we are
confident that our views reflect those of other companies in the
industry who while not our members, have decided to attempt to remain
in business within the United States rather than moving offshore.
We strongly oppose this legislative give away of our industry and
the domestic jobs it represents. More than 730,000 Americans still earn
their living in garment production jobs in the United States. CBI
preferences, even the most limited form, would force hundreds and
perhaps thousands of apparel plant closings and the accelerating loss
of tens of thousands of U.S. production jobs. For many garment
production workers, the employment alternatives if any are available,
will be a lower paying service industry positions. The wage losses for
many will be substantial. The human disruption of this would be felt
wherever apparel is produced, virtually every state in the country.
Many small towns and inner city residents will be harmed.
This bill is being promoted by associations and companies all too
willing to give away the businesses of others in furtherance of their
own specific business interests. As the ATMI statement by Mr. Carlos
Moore summed up,
Such legislation [i.e. H.R. 984 redrafted to suit ATMI] would
convey benefits to everyone involved-American apparel
importers, CBI garment makers, U.S. textile mills--while
harming none of them.
We guess it depends on what you mean by ``everyone.'' Mr. Moore
conveniently failed to note that among those not included in his
``unharmed'' group is the entire domestic apparel production industry.
They too are ``involved'' even if not party of his definition of
``everyone.''
At the same time, these CBI-apparel-import-promoting-associations
seek every possible draft change which will prevent import competition
for their products, even if it comes at the expense of others in the
domestic production chain. Not one of them proposed even a modestly
balancing effort to give domestic apparel producers who do not move
their companies offshore, access to imported yarns or fabrics on a duty
free and quota free basis for use in production in the United States.
In short, they are quite prepared to give away tariff and quota
protection for products they don't make, but are unwilling to compete
on a similar basis themselves. They want the ultimate protection, a
lock on future business from a whole region of the world coupled with
continuing protection of their home market.
Some claiming to speak for the ``American'' apparel industry, in
fact are representing the interests of American companies already
heavily importing apparel from the Caribbean. The situation they
espouse may improve the competitive 1positions of their
``companies'' but that should not be equated with improving the
competitive position of domestic apparel production, as their
``companies'' have become major importers and offshore manufacturers.
Many of them have shut U.S. production operations in favor of opening
new factories or contracting with existing ones in the Caribbean and
importing the production to be sold under their brands. they have done
this to take advantage of existing provisions of law which make it
feasible. Now, they want more. Relief from duties. Why not? If the
government is willing to give, why not take?\1\
---------------------------------------------------------------------------
\1\ One company, Fruit of the Loom, not only closed numerous U.S.
factories, but even relocated its corporate persona to the Cayman
Islands to avoid U.S. taxes on its offshore profits. Perhaps others
will follow suit if this legislation is passed, producing in the
Caribbean through offshore companies, taking the profits in those
offshore companies, and dramatically reducing their tax liability for
sales actually made in the US market.
---------------------------------------------------------------------------
In our view, preferential trade legislation for apparel imports
from the CBI is unnecessary, unfair and untimely.
Unnecessary for the Caribbean because, even without special
legislation, apparel imports from the Caribbean area have grown during
the past decade at annual rates in excess of 17%. (Chart Attached.)
That dramatic growth continued through last year, notwithstanding the
defeat of Parity Legislation on Nov. 4, 1997 by a vote of 182 to 234.
As imports grow at high rates, it is not surprising that any country
finds its share of the total market declining, but that is scarcely as
relevant as the increase in the absolute volume of imports. Sales of
Caribbean produced goods in the U.S. are increasing. It is U.S.
producers who find not only their market their share declining, but in
many cases, their absolute volume of production. And domestic pricing
has never been more difficult. Hundreds of smaller U.S. firms are being
forced into reduced production or even closure under the current import
surge and the market conditions it brings. Adding to that import
pressure by eliminating duties and quotas on Caribbean and Central
American production will exacerbate these conditions.
Unfair for three basic reasons. First, unfair because of its total
disregard of previous commitments made to this industry and its workers
by both the Administration and the Congress, including the Ways and
Means Committee.
These commitments were made in connection with the Uruguay Round
Implementing Legislation. This committee was directly involved.
Congressional Promises and Administration Promises. When Congress
passed the GATT/WTO bill in 1993, our industry was given to understand
that as a result of the GATT negotiations, quotas would be eliminated
``gradually over an extended period.'' (Pres. Clinton in transmittal
letter on implementing legislation to the Speaker of the House.) Ten
years to be exact. Tariff reductions also were negotiated on a ten year
schedule. That phase out schedule was adopted, implicitly, if not
explicitly, in the implementing legislation putting the Round into
effect as of January 1, 1995. The Administration followed provisions of
the law in announcing the ten year phase out of quotas as per that
understanding, by Federal Register notice of Jan. 30, 1995. As the Ways
& Means Committee Report noted, ``. . . the implementing bill
establishes the timetable and requirements . . . of products which the
United States will integrate in conformity with . . . the Agreement.
The SSA details the procedures that will be used. . . . The Committee
intends that these requirements provide certainty and transparency for
the industry, importers, and retailers as to the timetable for
integration of specific products. in order to facilitate a smooth
transition.'' (emphasis supplied.)
By carving a multi-country loophole in the quota system so big as
to mock the notion of gradual quota phase out, and by suddenly zeroing
out duties that were carefully and deliberately negotiated to be either
left alone, or slightly reduced over ten years, in the Uruguay Round
deal, the proposed CBI legislation on apparel, (and similar legislation
on Africa) would directly violate that Congressional intent and the
clear promise it made to the industry and its workers. Instead of the
promised ``certainty'' and ``smooth transition'' we would have a
dramatic and stunning shock. Congress, which has recently spoken so
forcefully about truth, trust and credibility, should keep its word to
the domestic garment industry and workers.
Second, unfair because domestic garment producers, both companies
and workers, should not be asked to bear the burden of hurricane relief
for those few countries in Central America that were impacted last
year. Those are national issues and national responsibilities, not
industry specific ones.
H.R. 984 will have the same impact on domestic makers as would a
tax on them with revenues dedicated to providing windfall benefits for
a selected group of importing companies and their suppliers.
Eliminating these duties will lower the costs of importing. We note
that the Yarn Spinners' testimony recommended the elimination of duties
on knit fabric made in the beneficiary countries with U.S. yarn. A
market grab as nice for them as it would be crippling to domestic
knitters and domestic apparel companies. All of these variations would
take care of one group at the expense of domestic apparel, or knitting
companies. Many will be forced to close, further enhancing the dominant
position of their importing competitors.
Targeting the garment industry as a ``foreign aid'' giveaway is
fundamentally unfair. While this bill deals with garments from the
Caribbean, will the response be different when the question is to
permit extra steel to be imported to help Russia, or to permit
continued subsidization of aircraft from financially challenged Brazil?
or to bring peace to Sub-Saharan Africa? The possibilities are endless.
The results likely to be meager. We note that the ATMI reacts
vigorously to the possibilities of transshipments through Sub-Saharan
Africa, a position with which we agree, but fails to see that the same
problem will develop in Central America. Does the ATMI really believe
that China will not attempt to transship through Panama, Honduras,
Costa Rica, Guatemala, and El Salvador while devoting all of its
efforts at Africa? Transshipment prevention language is fine in
legislation, but in fact how will it be enforced? Who is to provide the
appropriations to Customs to add the personpower required to cover this
enormous range of countries. How will they know whose yarn is in these
T-shirts and sweaters? Is Congress going to declare that it is more
important for Customs to chase foreign yarn than heroin? We think not.
It is simply fiction to believe that this type of import flood can be
unleashed without it becoming a massive transshipment loophole.
Third, unfair because the bill provides no offset to help U.S.
located manufacturers by giving them duty and quota free access to
materials such as yarn that are used in the production of apparel in
the United States.
While that would admittedly increase the budgetary costs of this
bill and would increase total imports, elimination of the 7-15% duty
rates on yarn and fabric imports from world suppliers would aid
domestic garment producers struggling to remain viable. It would
partially offset some of the damage that would otherwise be done to
domestic production. Interesting that the Yarn Spinners Association did
not suggest such a competitive balance.
Untimely when the nation's manufactured goods trade deficit is
running in excess of $250,000,000,000, presenting a massive challenge
to the domestic economy. In 1998, the deficit in apparel alone neared
$60 billion as CBI imports rose, Mexican imports soared and other
garment sources took maximum advantage of depreciated currencies and a
strong dollar.
Domestic growth is being sharply curtailed by this net import
deficit. Borrowing to pay for the deficit will be an annual cost for
years to come. Changing the basic trade rules to add to the flow--
whether for apparel or other products--can hardly be in the national
interest, whatever the alleged motivation.
Just how big must the nation's manufactured goods deficit get
before Congress considers policy alternatives other than increasing
imports? Foreign countries continue to seek export markets as a
solution to their financial woes while U.S. domestic consumption and
household debt patterns are impacted not only by actual layoffs but by
fear of a clouded economic future. The full impact of this mix cannot
yet be measured as there is no experience of a deficit this large.
Congress should be wary of the ``what, me worry?'' syndrome and avoid
an overconfident piling on in the midst of an unstable international
economic environment.
Additionally, the Committee was told that this bill will provide so
many jobs in Central America and the Caribbean that it will help
stability in the entire area, reducing the flow of both immigrants and
drugs, and even thereby helping secure our uninterrupted access to
transit routes through the Caribbean Sea and the Panama Canal!
How quickly some forget. Not too long ago, Los Angeles was seared
by violence and became, for a brief moment, the subject of urgent
national attention. Jobs were to be provided, economic doors unlocked.
That aid disappeared under the pressure of a Florida hurricane, but
problems remain. Unemployment continues to be a problem in the nation's
inner cities, and in California, the garment industry is a major
component of that State's domestic social stability. Its dislocation by
this legislation will not be without cost.
As for the drug trade, the Committee should be aware of the
President's recent communications on this subject. In his December,
1998 letter on drug trafficking to the Chairmen of the Foreign
Relations committees of the House and the Senate, the President listed
the following CBI countries as among the ``major illicit drug-producing
or drug-transit countries: The Bahamas, Belize . . . Dominican
Republic, Guatemala, Jamaica, Mexico and Panama.'' The President noted
that,
Geography makes Central America a logical conduit and
transshipment area for South American drugs bound for Mexico
and the United States, and that there has been evidence of
increased trafficking activity in this region over the past
year. Its location . . . combined with thousands of miles of
coastline, the availability of container-handling ports in
Costa Rica, Nicaragua, and Honduras, the presence of the Pan
American Highway, and the limited law enforcement capability,
have made the isthmus. attractive to the drug trade. Hurricane
Mitch has disrupted traffic flow through the region, but over
the longer term resumption or even an increase in trafficking
activity remains possible. (White House Release, Dec. 7, 1998)
emphasis supplied
Any rapid increase in the flow of apparel containers from the
Caribbean to the U.S. is virtually guaranteed to bring with it an
increase in narcotics trade. Drug trafficking increased under NAFTA as
the surge of vehicles largely overwhelmed Customs' capability to carry
out physical inspections. Repeating that mistake with the entire
Caribbean will be costly.
Additional failures of this legislation.
Incremental Trade: Nothing in this legislation calls for any
reduction of apparel imports from any other source to offset the
increases that will surely come from the Caribbean. This newly duty-
free trade will add to the flood, it will not displace it. China's
leadership has just recently called for promoting exports ``through a
thousand and one ways'' and we must assume they have no intention of
ceding the U.S. market to Caribbean competitors. Indeed, Chinese
companies will jump on any opportunity offered to ship goods through
designated duty-free or quota-free areas.
Substantive and drafting problems which combined would devastate
the sweater knitting industry in America.
(a) The exemption of ``knit to shape'' garments made with US
yarns'' could force the exit of virtually the entire sweater and knit
blouse and dress industry from this country. Indigenous knitwear
manufacturers as well as investors from abroad would be able to avoid
duty and quota on all of their production in the Caribbean by claiming
to use, and perhaps even actually using some, US yarn. Knit products
would be a major target of investors, and established importers who
have searched the world for cheap production. Nice for the domestic
yarn companies, but crippling to US knitwear manufacturers. Those
domestic yarn companies selling to smaller knitwear manufacturers also
would be destroyed by this legislation.
(b) The provision for special treatment of ``handloomed, handmade,
or folklore articles . . .'' is a corruption of a provision originally
included in GATT textile agreements for the very limited purpose of
making room for possible quota exemptions to assist cottage industry
folklore products. The current WTO/ATC language is in Annex 3 of the
Agreement on Textiles and Clothing where it defines certain products as
exempt from restraint actions. In relevant part it reads as follows:
``3. Actions under the safeguard provisions . . . of this
Agreement shall not apply to: (a) developing country Members'
exports of handloom fabrics of the cottage industry, or hand
made cottage industry products made of such handloom fabrics,
or traditional folklore handicraft textile and clothing
products, provided that such products are properly certified
under arrangements established between the Members concerned.
How far that is from the sweeping provisions of H.R. 984, under
which any product of a handloom would be eligible for duty and quota
exemption! The ``certification'' idea, originally confined to certain
cottage industry and folkloric products, is used here in a craftily
meaningless formulation. The President cannot refuse to certify that a
handloom product was handloomed! And he is not asked to certify that it
is a handloomed product of the cottage industry which should be
considered for exemption because of its cottage industry origin. The
Committee should be aware that much of the knitwear production of the
Far East and South Asia is made on hand machines typically--if
incorrectly--referred to as ``handlooms.'' Thousands of dozens of
cotton sweaters and knit shirts from Cambodia that were placed under
quota in just concluded negotiations were made on such hand powered
machines. That type of industrial production would be duty and quota
free under this bill, a total perversion of the original GATT/WTO
language and a further undercutting of the ``smooth transition'' to
regular GATT rules referred to by this Committee in its Uruguay Round
report. These provisions would generate a flood of trade and
effectively destroy much of the remaining domestic sweater industry.
On behalf of domestic apparel production, we urge this Committee to
re-evaluate this legislation and remove its company destroying, job
destroying apparel provisions. Congress should honor its word to the
domestic industry and its workers.
Thank you for your attention to this very important matter.
The American Apparel Alliance consists of the National Knitwear and
Sportswear Association and the American Apparel Producers Network.
Other Associations supporting this letter are:
The Apparel Contractors Alliance of California based in
Los Angeles and consisting of four garment contractor associations with
more than 1200 companies throughout California as members;
The Atlantic Apparel Contractors Association, Bethlehem,
PA;
The Greater Blouse, Skirt & Undergarment Association of
NYC; and the Korean Apparel Manufacturers Association of Greater New
York.
The South Eastern Manufacturers and Suppliers Association,
Columbia, SC.
[Attachments are being retained in the Committee files.]
Statement of J. Benjamin Zapata, Charge D'Affaires, Embassy of Honduras
Thank you, Mr. Chairman, for the opportunity to provide written
testimony in support of the CBI enhancement legislation which you and
Congressmen Kolbe, Rangel, and Matsui have introduced in the House as
the Caribbean and Central American Relief and Economic Stabilization
Act (CCARES) or House Bill 984 (H.R. 984).
My country, Honduras, believes that your proposed legislation
provides the kind of economic opportunities necessary to strengthen our
democracy and promote our economic recovery and long-term development
in the aftermath of Hurricane Mitch's destruction. Moreover, CCARES is
a critical step in the direction of free trade. Honduras, as a member
of the World Trade Organization (WTO), believes that Congress and the
Administration must work together to enact this bill and ensure that
our countries develop a mutually beneficial trade relationship,
particularly in the textile and apparel sector, under WTO rules.
I. Leveling the Playing Field for the CBI Countries
In order for Honduras and the CBI region to attract continued
investment in the textile and apparel sector, they must receive trade
benefits similar to those enjoyed by Mexico. Honduras' and the CBI
region's main sources of competition are the Far East, where wages and
working conditions are much lower, and Mexico where apparel made of
U.S. formed fabrics enter the U.S. market duty and tariff free. For
example, under current U.S. trade policies, the average duty for
Honduran exports to the United States is 17.7%, as compared to 2.4% for
Mexican exports. These different trade policies have provided Mexico
with an increasing competitive advantage in the U.S. market over CBI
suppliers (graph #1). As a result, Honduras is beginning to lose
investment in its critical textile and apparel sector to Mexico. The
attached letter to President Clinton from Jesus Canahuati, President of
the Honduras Apparel Manufacturers Association discusses the
difficulties created by Mexico's competitive advantage under NAFTA and
provides specific proposals on measures that would allow Honduran
exports to compete.
CCARES is an important step in leveling the playing field for the
CBI countries because it offers them trade benefits on the remaining
30% of their exports to the U.S., which include textiles and apparel,
that are not currently duty free under the existing CBI program. In
order for the Honduran apparel manufacturing industry to flourish, the
U.S.-CBI trade playing field needs to be as predictable and transparent
as possible. The status of two specific elements--quotas and duties--
need to be clearly spelled out. H.R. 984 is good for Honduras because
it states that goods will be quota free, and subject to the same duties
as Mexican goods. Other elements included in H.R. 984 which are
favorable to Honduras are:
Goods from regional fabric (fabric knit or woven from
yarns made in the CBI countries or the U.S.) qualify for the benefits
of the program;
Tariff Preference Levels (TPL's) similar to Mexico's are
established for goods made from fabric sourced elsewhere. Mexico's
experience shows just how highly utilized these TPL's are--in 1998,
three of the six TPL's were 100% utilized; and
CBI countries would immediately qualify for the same
duties as Mexico.
II. Labor Issues
CBI enhancement is a vital component of the long-term
reconstruction effort in Honduras and complements the Administration's
humanitarian relief package. Honduras was devastated by Hurricane Mitch
and its traditional economic sectors were wiped out. It will take years
to replace the soils, the crops and the infrastructure that support our
agricultural and tourist sectors.
An important element of Honduras' reconstruction after the
devastation of Hurricane Mitch is that enhanced trade and access to the
United States markets will promote economic revitalization and increase
employment opportunities for Hondurans who may otherwise seek to
emigrate. Fortunately, over a twelve-year period, the Honduran maquila
(textile and apparel manufacturing) industry has evolved into one of
the most important economic sectors and was largely unaffected by
Hurricane Mitch (although apparel exports have been impacted as is
shown in graph #2). To put Honduras' textile and apparel industry in
perspective, 109,000 Hondurans are employed in the maquila industry as
compared to 17,000 in the banana industry.
The maquila employees are among the highest paid workers in
Honduras and wage increases have exceeded the inflation rate. Moreover,
Honduran maquila workers are paid 2.5 to 3 times what similar workers
would receive for working in the textile and apparel industry in Asia.
Recently, the United States Government Accounting Office (GAO),
analyzed labor conditions in Honduras and found that the maquila
industry met or exceeded international labor standards and conditions.
Moreover, three years ago a Commission was established constituted by
members of the Ministry of Labor, organized labor groups, and the
Honduran Textile and Apparel Association, to discuss and resolve
different aspects of problems in our industry. The Commission meets
monthly and has been very successful in its mission.
In addition, Honduras is a signatory of the International Labor
Organization (ILO) and has strict laws on child labor, worker safety,
minimum wage and other worker rights issues which are considered to be
the foundation for a civil society. This is not to say that there have
not been examples of unacceptable conduct by companies. But these
examples are the exception, rather than the rule. The fact is that the
maquilas and the companies that are part of the Honduran Textile and
Apparel Association, are complying with and even exceeding our laws and
standards.
Many of the companies have cafeterias, doctors and nurses on staff,
recreation facilities, and in some instances, day care facilities.
These are modern, safe, and secure places to work. Many companies
provide health care benefits and other fringe benefits which are not
common in other industries. Honduras' maquilas were founded by
Hondurans who saw an opportunity to compete in the world market and
raise peoples' living standards by manufacturing goods and adding value
in the textile/apparel sector.
III. H.R. 984 Allows CBI Countries To Compete
It is my country's position that only H.R. 984, of the existing
proposals, provides for the quota, duty and tariff treatment that
allows the CBI countries to compete. We support allowing the use of
regional fabrics and the inclusion of CBI countries in the world
trading regime through the WTO, as allowed by H.R. 984. Moreover,
unlike other proposals, H.R. 984 will maximize the opportunities for:
(1) creating new jobs, (2) attracting investment, and (3) generating
foreign reserves, which will in turn help to increase the trade
exchange between the United States and Honduras (graph #3).
To be effective, CBI enhancement legislation must address the
existing trade imbalances in tariff and duty treatment between the
United States and the CBI region, as compared to other countries. For
numerous security and policy reasons, this is in the interest of the
United States. The United States has a positive trade balance with
Central America and the Caribbean, unlike its negative trade balance
with Asia. In fact, the statistics demonstrate that in 1997, 73.9 % of
Honduran exports went to the United States and $.61 of every dollar
that Honduras earns by exporting to the United States is spent on
purchasing and importing American goods and services. Trade between the
United States and CBI countries has doubled since 1989 and is now
reaching $18.5 billion as compared to $13 billion in exports to China
during the same period. 1997 was the twelfth consecutive year that the
U.S. has recorded a trade surplus with the CBI countries.
The Honduran textile and apparel industry is the key to our present
economy and the foundation of our future development (the attached
letter from the President of the Central Bank of Honduras discusses the
importance of this sector for the Honduran economy). The industry is
forming the basis of a middle class society and so long as investment
is retained and increased, the maquila sector will be the key to
reconstruction, income parity, and the strengthening of democracy and
civic institutions.
A brief review of Honduras' relative position as compared to other
countries demonstrates the importance of this sector to our economy.
However, Honduras is beginning to lose investment to other regions
because it does not have equal access to U.S. markets in critical
sectors, and because Honduras pays wages 2.5 to 3 times higher than
those in other parts of the world. This trend endangers Honduras' long-
term development and also undercuts Honduras' efforts to be part of the
multilateral regime of which the United States has been a strong
supporter.
We support H.R. 984 because it is a true free and fair trade act.
It avoids the ``unilateral sanction-based approach'' where Honduras'
rights can be overridden by political decisions in the United States.
The ``unilateral sanction based approach'' undermines the world-based
trading system of which both the United States and Honduras form part.
It also destroys the certainty and predictability that is essential to
attract future investment.
Similarly, H.R. 984 avoids proposals that include eligibility
requirements and conditions prerequisite in order to qualify for
``special aid packages'' which require countries to give up their
negotiating positions on very contentious political issues that are
more appropriate for other bilateral forums. These are unacceptable and
violate the very principles of the WTO. Many of these provisions, which
are contained in other proposals, would violate existing WTO
principles.
The same is true of proposals that include unilateral quota cut-
backs based on a finding of ``transshipments.'' Again, the unilateral
discretion violates the WTO. Some proposals, instead of using Article 6
safeguard provisions contained in the WTO's Agreement on Textiles and
Clothing (ATC), allow the United States to impose new quotas on CBI
countries. This eliminates the protections of the ATC, eliminates the
review process by the textile monitoring body, and allows the U.S. to
establish a new quota with a base limit based only on the non-
qualifying shipment to the U.S. The dispute settlement mechanisms
outlined in the ATC should be supported so that both the U.S. and CBI
nations have a means of recourse.
The guarantee of no future quotas is very important in terms of
investment and the incentive to U.S. importers to source their orders
in Honduras. At this moment, there are no quotas on Honduran textile
and apparel merchandise. However, the U.S. Government has the option to
place a call (or new) unilateral quota--on Honduras at any time. So the
``threat'' of quotas is still very prevalent and they are a strong
deterrent to increasing production. In business terms, orders can be
placed months or seasons, in advance. Any U.S. call could happen in the
time-span of one to three months. The potential disruption to orders
already in the pipeline is great.
Clearly set duty provisions are also very important in terms of the
future appeal of Honduran manufacturers to U.S. importers. Again, H.R.
984 does an excellent job of clearly stating what future duties will
be. Other trade proposals undercut the United States' perceived role as
a champion of free and fair trade. H.R. 984 or CCARES, is a giant step
in the right direction. It avoids the pit-fall of ``trade enhancement''
as a stalking horse for ``unilateral sanctions.''
IV. Conclusion
In recent testimony, the United States Trade Representative pointed
out to Congress that U.S. trade policy supports and advances the rule
of law internationally by ensuring the enforcement of trade agreements
and U.S. rights in the trading system. She went on to point out the
success that the United States has enjoyed at the WTO. As the United
States has recognized on numerous occasions, trade and growth are
important components in raising standards of living, which in turn are
accompanied by increased standards in areas such as labor and the
environment. We commend you for introducing legislation that will lead
to these developments in the CBI region, including Honduras.
The CBI enhancement program outlined in H.R. 984 or CCARES levels
the playing field for Honduras and the CBI region. The provisions of
H.R. 984 ensure that Honduras will continue to be competitive. They
also allow Honduras to develop value-added as a result of the skills,
creativity and competitiveness of its people in the world market. H.R.
984 ensures that existing investments in the region will not be lost
and that trade will be a major factor in Honduras' reconstruction. For
all of these reasons, the Government and people of Honduras ask that
Congress to support your bill, H.R. 984.
Mr. Chairman, I would like to commend you for your continued
support of free enterprise and the opportunity for the Caribbean and
Central American region to enter the global economy as an equal partner
based on the international multilateral regime in place through the
WTO. Thank you.
Asociacion Hondurena
De Maquiladores
March 9, 1999
President William Jefferson Clinton
The White House
1600 Pennsylvania Avenue
Washington, D.C. 20500
Dear President Clinton:
I would like to take this opportunity to thank you, your
government, and the people of the United States for the support during
the emergency and the reconstruction of our country after the
devastation caused by Hurricane Mitch.
I am writing to you today on behalf of the Honduran textile and
apparel industry. In less than ten years, this industry has generated
more than 110,000 jobs and 455 million dollars in value-added export
revenues.
The textile and apparel industry in Honduras has worked very hard
to meet international labor standards and conditions. The wages in this
industry are almost three times more than those of many Asian
countries. The United States General Accounting Office published a
report last year stating that Honduran Labor Laws met or exceeded
international labor standards.
Our industry has been able to attract United States investment
thanks to the working philosophy that emphasizes the value of our
people and theirs abilities.
Despite all our efforts to stay competitive, recent data shows that
our country is loosing investment to Mexico. This situation is a result
of current United States trade policies favoring Mexico's exports. In
1997, the average duty for our country's exports was 17.7% compared to
2.4% of Mexico, creating an unfair trade condition.
The only alternative to continue creating quality jobs and
sustained economic growth through our industry is with the
implementation of a trade bill that will allow our exports to compete
under the same conditions afforded to Mexican products. Anything less
could result in lost export revenues and, in turn, lost employment.
For that reason we are asking you, Mr. President to include in your
relief package trade measures allowing duty and access free entry for
the following:
Apparel made in CBI from regional fabrics using yarn made in the
USA.
Apparel knit-to-shape in the CBI (socks, hosiery) using yarn made
in the USA.
Apparel made from 807A and 809 using yarn made in the USA that
permits all post garment operations (oven-baking, stone washing,
printing, embroidery . . .)
Single transformation for bras.
25% de minimus rule for all apparel made in the region to
incorporate findings, notions and trims.
The textile and apparel industry in Honduras is committed in the
reconstruction of our country. We need a new version of CBI that
includes unrestricted and tariff-free access for textiles and apparel
in order to enable us to provide the jobs that our country so
desperately needs.
May God bless you, your government, and the people of the United
States of America.
Sincerely,
Jesus J. Canahuati,
President
Banco Central De Honduras
Tegucigalpa, M.D.C. Honduras, C.A.
January 27, 1999
Mr. Senator:
I wish to thank your interest in promoting a legislation that will
grant the countries of the Caribbean Basin Initiative, similar benefits
as the ones contained in the North American Free Trade Agreement
(NAFTA), opening in this way a trade opportunity for our country that
will be of big support in its reconstruction task.
As I stated in our brief meeting of Sunday, January 17, 1999, the
benefits of this initiative will be of fundamental importance to our
country; allowing it to compensate for the losses in employment and in
foreign exchange generation due to the damages caused by Hurricane
Mitch to the Honduran exporting sector.
For the purpose stated above, it would be of great importance if
the relief act could include:
Apparel made in CBI from regional fabric using yarn made in the
USA.
Apparel knit-to-shape in the CBI (socks, hosiery) using yarn made
in the USA.
Apparel made from 807A and 809 using yarn made in the USA that
permits all port-garment operations (oven-baking, stone washing,
printing, embroidery . . .)
Single transformation for bras.
25% de minimum rule for all apparel made in the region to
incorporate findings, notions, trims.
In the following table you will find the growth projection of the
maquila sector, first without the benefits and second, taking into
consideration the benefits of 1999.
Scenario No. 1.--Projected Growth Without Benefits
----------------------------------------------------------------------------------------------------------------
Real 1997 1998 1999 2000 2001 2002
----------------------------------------------------------------------------------------------------------------
Direct employment............................. ......... 100.1 112.1 123.3 133.1 142.4
(thousands) (Growth in %)..................... 8.7 15.1% 12.0% 10.0% 7.9% 7.0%
Exports in USS (millions)..................... 1,659 1,990.8 2,239.4 2,587.0 2,815.7 3,130.3
(Growth in %)................................. 20% 15.0% 13.0% 10.0% 10.0%
Contribution to the Balance 190.1 377.8 560.9 646.8 735.7 813.9
Payments (Added value in Millions of US$) ......... 22.5% 17.4% 35.3% 12.2% 12.2%
----------------------------------------------------------------------------------------------------------------
Sincerely yours,
Emin Barjum Mahomar
[GRAPHIC] [TIFF OMITTED] T6685.006
[GRAPHIC] [TIFF OMITTED] T6685.007
[GRAPHIC] [TIFF OMITTED] T6685.008
Statement of Mac Cheek, President, NILIT America Corporation,
Greensboro, NC
As President of Nilit American Corporation, I am pleased to provide
this statement on why the Caribbean Basin Initiative parity legislation
(H.R. 984) should be amended to avoid the impairment of bilateral trade
under the U.S.-Israel Free Trade Area Agreement (``FTAA'').
Nilit America is the U.S. subsidiary of Nilit Ltd., an Israeli
company that spins (i.e., produces) fine denier nylon yarns for the
hosiery market. The yarns produced by Nilit Ltd. are sold worldwide.
The United States is an important market for the yarn spun by Nilit
Ltd. Nilit America has established itself in North Carolina as an
important supplier of yarn to the U.S. hosiery industry.
Nilit has no general objection to the extension of additional trade
benefits to the CBI countries. However, one aspect of the current CBI
parity legislation would do irreparable harm to Nilit.
Under current U.S. trade law, the CBI program provides preferential
tariff treatment for textile and apparel products made from fabric
produced in the United States, including fabric knit utilizing Israeli-
origin yarn. However, the currently drafted ``yarn-forward'' rule in
H.R. 984 would change the status quo so that only apparel made from
100% U.S. yarn would be eligible for CBI benefits. As currently
drafted, H.R. 984 would expand CBI preferences to permit the duty free
importation of products assembled in CBI-eligible countries. However,
U.S. knit fabric or apparel components containing Israeli yarn, after
assembly into apparel in a CBI-eligible country, would be ineligible
for duty-free treatment upon reimportation into the United States.
This change in the status quo would harm U.S.-Israel trade, U.S.
apparel manufacturers, and U.S. consumers.
Nilit would be irreparably harmed as the U.S. market accounts for a
substantial portion of its business. Nilit developed this business in
reliance on the U.S.-Israel FTAA. It would be flatly inconsistent with
the purpose and objectives of the U.S.-Israel FTAA to seriously injure
Nilit through an unrelated trade initiative that would have an
immediate and direct adverse effect on Israel's exports to the United
States.
A yarn-forward rule in the CBI that precludes duty-free treatment
for U.S. products knit with Israeli yarn would effectively drive Nilit
out of the U.S. market. Creating an economic barrier to U.S. companies
purchasing Israeli-origin yarn would harm both U.S. consumers and U.S.
manufacturers that depend on inputs from Israel. For this reason, the
National Association of Hosiery Manufacturers is on record supporting
the continued ability of U.S. companies to utilize Israeli yarn without
incurring the loss of CBI trade benefits.
The ``U.S.-only'' yarn-forward rule would cause particular harm in
the U.S. hosiery market. In this market, one domestic supplier with a
domestic market share that exceeds 75 percent dominates the supply of
yarns for the knitting of hosiery. Thus, the U.S.-only yarn-forward
rule would create a virtual monopoly for one U.S. company. Because U.S.
yarn production is highly concentrated, Nilit represents the only
reliable long-term alternative supplier to the U.S. market of high-
quality nylon yarns. The ability of the U.S. domestic hosiery industry
to have an alternative supplier of yarn provides a critical competitive
advantage for the hosiery industry as it seeks to compete with imported
hosiery. U.S. imports of hosiery, such as pantyhose, have been growing
steadily and our understanding of the U.S. market confirms that this
trend will accelerate, especially once U.S. import quotas are
eliminated pursuant to the terms of the WTO Agreement on Textiles and
Clothing.
The U.S.-Israel FTAA was specifically intended to foster bilateral
trade between the United States and Israel. Undermining the U.S.-Israel
FTAA would send the wrong message to the business community--that the
U.S.-Israel FTAA is less than a permanent framework in which to develop
long-term trade relationships.
We have been advised that the Government of Israel has previously
expressed its concerns about the U.S.-only yarn-forward rule to the
Office of the United States Trade Representative. The Government of
Israel noted that the Caribbean legislation can be developed without
damaging U.S.-Israeli trade by determining that Israeli-origin yarn
will, in effect, be treated no less favorably than U.S.-formed yarn.
This Committee has approved other trade measures to preserve U.S.-
Israeli trade under the FTAA. An amendment to eliminate the
disadvantage to Israel imposed by the U.S.-only yarn-forward rule in
H.R. 984 would preserve the status quo and not create any new benefit
for Israeli-origin products. The amendment would consist of a simple
provision that would not disrupt any other aspect of the CBI trade
legislation.
In sum, CBI parity legislation should preserve the integrity and
objectives of the U.S.-Israel FTAA. Any unilateral proposed yarn-
forward rule in the CBI parity legislation should not, and need not,
harm bilateral trade between the United States and Israel.