```

[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]

                      TRADE PREFERENCES FOR HAITI

=======================================================================

                                HEARING

                               before the

                         SUBCOMMITTEE ON TRADE

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 22, 2004

                               __________

                           Serial No. 108-63

                               __________

         Printed for the use of the Committee on Ways and Means

                    U.S. GOVERNMENT PRINTING OFFICE
99-681                      WASHINGTON : 2005
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                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
E. CLAY SHAW, JR., Florida           FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut        ROBERT T. MATSUI, California
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
PHIL ENGLISH, Pennsylvania           LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona               EARL POMEROY, North Dakota
JERRY WELLER, Illinois               MAX SANDLIN, Texas
KENNY C. HULSHOF, Missouri           STEPHANIE TUBBS JONES, Ohio
SCOTT MCINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia

                    Allison H. Giles, Chief of Staff

                  Janice Mays, Minority Chief Counsel

                                 ______

                         SUBCOMMITTEE ON TRADE

                  PHILIP M. CRANE, Illinois, Chairman

E. CLAY SHAW, JR., Florida           SANDER M. LEVIN, Michigan
AMO HOUGHTON, New York               CHARLES B. RANGEL, New York
DAVE CAMP, Michigan                  RICHARD E. NEAL, Massachusetts
JIM RAMSTAD, Minnesota               WILLIAM J. JEFFERSON, Louisiana
JENNIFER DUNN, Washington            XAVIER BECERRA, California
WALLY HERGER, California             JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania
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 September 22, 2004, announcing the hearing...........     2

                               WITNESSES

Graham, Hon. Bob, a U.S. Senator from the State of Florida.......     6
DeWine, Hon. Mike, a U.S. Senator from the State of Ohio.........     9

                                 ______

Avondale Mills, Inc., Stephen Felker, on behalf of National 
  Council of Textile Organizations...............................    21
J.C. Penney Purchasing Corporation, Janet E. Fox.................    28
Perry Manufacturing Company, William K. Woltz, Jr................    18
UNITE HERE, Mark Levinson........................................    32
Vetements Textiles, S.A., Jean Edouard Baker.....................    25
Yazaki North America, Nigel Thompson.............................    38

                       SUBMISSIONS FOR THE RECORD

U.S. Association of Importers of Textiles and Apparel, statement.    50
Camara Nacional de la Industria Textil, Ciudad, Mexico, statement    52
Haitian Manufacturers Association, Delmas, Haiti, Marie-Claude 
  Bayard, statement..............................................    53
Haitian Project, Inc., Port-au-Prince, Haiti, Patrick Moynihan, 
  statement......................................................    56
National Retail Federation, statement............................    57

 
                      TRADE PREFERENCES FOR HAITI

                              ----------                              

                     WEDNESDAY, SEPTEMBER 22, 2004

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                     Subcommittee on Trade,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 2:08 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
September 22, 2004
TR-6

                       Crane Announces Hearing on

                      Trade Preferences for Haiti

    Congressman Philip M. Crane (R-IL), Chairman, Subcommittee on Trade 
of the Committee on Ways and Means, today announced that the 
Subcommittee will hold a hearing on possible expansions of trade 
preferences for Haiti. The hearing will take place on Wednesday, 
September 22, 2004, in the main Committee hearing room, 1100 Longworth 
House Office Building, beginning at 2:00 p.m.
      
    Oral testimony at this hearing will be from public witnesses. Any 
individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Subcommittee and 
for inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    Haiti is currently eligible for trade preferences under the 
Caribbean Basin Economic Recovery Act (P.L. 98-67, P.L. 106-200, and 
P.L. 107-210), which allows it to:

      Export to the United States duty-free knit (and knit-to-
shape) apparel made from regional fabric made with U.S. yarn, subject 
to a cap for the entire region; and

      Export to the United States duty-free woven apparel made 
of U.S. yarn and fabric, subject to a cap for the entire region.
      
    On July 16, 2004, the Senate passed by unanimous consent S. 2261, 
the ``Haiti Economic Recovery Opportunity Act of 2004,'' to allow Haiti 
to export to the United States duty-free apparel made from inputs 
sourced anywhere in the world, subject to a cap. The cap for such trade 
would be initially set at 1.5 percent of U.S. imports and would 
gradually increase to 3.5 percent after 7 years. This cap is equivalent 
to the third-country fabric benefit established for all sub-Saharan 
African countries in the recently-enacted AGOA Acceleration Act (P.L. 
108-274).
      
    Other bills to grant additional trade preferences to Haiti have 
also been introduced in both the House and Senate, including H.R. 1031, 
the ``Haiti Economic Recovery Opportunity Act of 2003,'' H.R. 4889, the 
``Haiti Economic Recovery Opportunity Act of 2004,'' and S. 489, the 
``Haiti Economic Recovery Opportunity Act of 2003.'' Some of these 
bills would allow Haiti to source inputs for qualifying apparel only 
from U.S. free trade agreement partners and countries participating in 
the African, Caribbean Basin, and Andean trade preference programs. A 
cap also would apply for such trade that would be initially set at 1.5 
percent of U.S. imports and would gradually increase to 3.5 percent 
after 7 years.
      
    The Committee is currently considering all options to grant 
temporary additional trade preferences to Haiti. In addition to the 
bills already introduced, the Subcommittee is interested in receiving 
testimony regarding:

      Adjusting the rule of origin (ROO) for apparel from Haiti 
to allow a value-added rule of origin.

      Differentiating treatment between apparel made of knit 
and woven fabric.

      Allowing a single-transformation ROO for certain apparel 
from Haiti.

      Use of caps for additional benefits.

      Providing additional trade preferences for Haiti in 
products other than textiles and apparel.

      Expanding the cap for certain qualifying apparel under 
the Caribbean Basin Economic Recovery Act, as amended.
      
    The Subcommittee welcomes comment from interested parties on these 
and other options to provide meaningful trade preferences for Haiti. In 
announcing the hearing, Chairman Crane stated, ``Haiti is the poorest 
country in our hemisphere and is facing enormously challenging times. 
One of the best ways to lift a country out of poverty and provide hope 
to its people is to promote economic activity through increased trade 
and investment. I hope to develop a bipartisan bill to provide such 
benefits to Haiti in a manner that benefits American businesses and 
workers as well.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on whether to provide additional trade 
preferences for Haiti and the impact on trade and development in Haiti 
and on the U.S. and regional textile and apparel industries.
      

DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:

      
    Requests to be heard at the hearing must be made by telephone to 
Michael Morrow or Kevin Herms at (202) 225-1721 no later than the close 
of business Friday, September 17, 2004. The telephone request should be 
followed by a formal written request faxed to Allison Giles, Chief of 
Staff, Committee on Ways and Means, U.S. House of Representatives, 1102 
Longworth House Office Building, Washington, D.C. 20515, at (202) 225-
2610. The staff of the Subcommittee 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 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 in lieu of a personal appearance. 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 or MS Word format, 
of their prepared statement for review by Members prior to the hearing. 
Testimony should arrive at the Subcommittee office, 1104 Longworth 
House Office Building, no later than Monday, September 20, 2004 at 
12:00 p.m. The 200 copies can be delivered to the Subcommittee staff in 
one of two ways: (1) Government agency employees can deliver their 
copies to 1104 Longworth House Office Building in an open and 
searchable box, but must carry with them their respective government 
issued identification to show the U.S. Capitol Police, or (2) for non-
government officials, the copies must be sent to the new Congressional 
Courier Acceptance Site at the location of 2nd and D Streets, N.E., at 
least 48 hours prior to the hearing date. Please ensure that you have 
the address of the Subcommittee, 1104 Longworth House Office Building, 
on your package, and contact the staff of the Subcommittee at (202) 
225-6649 of its impending arrival. Due to new House mailing procedures, 
please avoid using mail couriers such as the U.S. Postal Service, UPS, 
and FedEx. When a couriered item arrives at this facility, it will be 
opened, screened, and then delivered to the Subcommittee office, within 
one of the following two time frames: (1) expected or confirmed 
deliveries will be delivered in approximately 2 to 3 hours, and (2) 
unexpected items, or items not approved by the Subcommittee office, 
will be delivered the morning of the next business day. The U.S. 
Capitol Police will refuse all non-governmental courier deliveries to 
all House Office Buildings.
      

WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``108th Congress'' from the menu entitled, ``Hearing Archives'' (http:/
/waysandmeans.house.gov/Hearings.asp?congress=16). Select the hearing 
for which you would like to submit, and click on the link entitled, 
``Click here to provide a submission for the record.'' Once you have 
followed the online instructions, completing all informational forms 
and clicking ``submit'' on the final page, an email will be sent to the 
address which you supply confirming your interest in providing a 
submission for the record. You MUST REPLY to the email and ATTACH your 
submission as a Word or WordPerfect document, in compliance with the 
formatting requirements listed below, by close of business Monday, 
September 27, 2004. Finally, please note that due to the change in 
House mail policy, the U.S. Capitol Police will refuse sealed-package 
deliveries to all House Office Buildings. Those filing written 
statements who wish to have their statements distributed to the press 
and interested public at the hearing can follow the same procedure 
listed above for those who are testifying and making an oral 
presentation. For questions, or if you encounter technical problems, 
please call (202) 225-1721.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item 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 submissions and supplementary materials must be provided in 
Word or WordPerfect format and MUST NOT exceed a total of 10 pages, 
including attachments. Witnesses and submitters are advised that the 
Committee relies 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. All submissions must include a list of all clients, persons, 
and/or organizations on whose behalf the witness appears. A 
supplemental sheet must accompany each submission listing the name, 
company, address, telephone and fax numbers of each witness.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://waysandmeans.house.gov.
      
    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. Good afternoon. This is a hearing of the 
Committee on Ways and Means Subcommittee on Trade to explore 
options to expand trade preferences for Haiti. Haiti is the 
poorest country in our hemisphere and the country is facing 
enormously challenging times. Political and economic 
instability has exacerbated Haiti's lack of development and 
investment and worsened the already-extreme poverty levels. One 
of the best ways to lift the country out of poverty and provide 
hope to its people is to promote economic activity through 
increased trade and investment. Several bills have been 
introduced to grant additional trade benefits to Haiti, and 
Congressman Shaw in particular has been an active advocate for 
Haiti.
    Haiti is quite dependent on the United States for its 
trade. In 2003, over 90 percent of all Haitian exports went to 
the United States, and apparel accounted for nearly 90 percent 
of those exports. At the same time, imports from Haiti barely 
register in U.S. domestic markets. Haiti's textile and apparel 
shipments to the United States last year amounted to less than 
one-half of 1 percent of U.S. market share.
    My goals today are to explore practical options to help 
Haiti become more competitive in textile and apparel production 
and also to find ways to assist Haiti in diversifying its 
exports into other industries outside of textiles and apparel. 
The Subcommittee will explore options to provide meaningful and 
practical benefits to Haiti and also to promote regional 
integration that benefits U.S., Haitian, and regional 
producers. I hope that the discussion today will focus on the 
merits and disadvantages of various proposals and the witnesses 
will avoid staking out all-or-nothing positions. Now, I would 
like to yield to our Ranking Member on the Subcommittee, Mr. 
Levin, for any remarks he would like to make.
    Mr. LEVIN. Thank you, Mr. Crane. I am very glad we are 
holding this hearing. Clearly, we need to address the 
challenges facing Haiti. They are a neighbor of ours and what 
happens there by definition affects the people who reside 
there. It also affects us. As we look at this issue, and quite 
a bit relates to textile and apparel, but beyond, I think we 
need to look at the context directly affecting Haiti and also 
the broader context that affects trade.
    Point one in that regard, in terms of apparel and textiles, 
we know at the end of the year that the quotas are going to be 
eliminated. This is going to have a major impact throughout 
this hemisphere and beyond. So, if we look at the issue of how 
we can assist Haiti, I think we have to keep that in mind and 
also realize that when the quotas come off, there is going to 
be in particular a major influx of products from China and 
perhaps other countries within Asia, but primarily China.
    Second, as we look at this issue in terms of its broader 
context, we need to keep in mind the present Caribbean Basin 
Initiative (CBI) (Trade and Development Act of 2000, P.L. 106-
200) preferences because obviously a change as to one country 
can impact other countries, especially those that are 
neighboring. I would like us--I would hope that we would keep 
this broader context in mind as we understand the urgency--
urgency--of the challenges facing Haiti.
    The third point in this regard is I think we should also 
remember there are other countries which are going to be 
impacted by the end of the quotas and some of them have no 
preferences whatever in terms of access to the United States 
and they include Afghanistan and Nepal, which have small 
exports here in the apparel and textile field. There are 
countries which do and that is Cambodia and Bangladesh.
    The next point I would like to make in terms of the 
context, and the Chairman related to the poverty that is in 
Haiti. If we are going to assist countries to pull themselves 
out of poverty, it is critical that they do so and help to do 
so in ways that the people themselves pull themselves out of 
poverty, that poverty diminishes for the entire nation, but in 
particular for people who are in poverty.
    In that regard, I have been reviewing some of the documents 
that relate to the role of workers within Haiti, including 
those in the apparel and textile industry and we need to, if we 
are going to take steps here, and I hope we do, be sure that we 
do so in ways that will really be beneficial to those who are 
working who are, in most cases, impoverished.
    Today, the dynamic within Haiti is such that workers are 
often threatened, sometimes beaten from information we have. 
When you use that kind of violence, it is often done with 
impunity, in part because of the weak legal structure there. 
So, we are going to hear some testimony, as I understand it 
today, that will address this issue and I hope we will take it 
seriously. Where we have, for example, when it came to Cambodia 
some years ago, improvement was undertaken and it has meant a 
lot to the people there.
    One last point I would like to make in terms of the broader 
context is this. We haven't really had much consideration 
within this place as to the impact of the elimination of quotas 
and we really, I think, have been mistaken in not doing so. Mr. 
Rangel and others and I introduced legislation about a week ago 
that would require this Administration to undertake some action 
that would relate to the dynamics of the removal of the quotas. 
This will have an impact on workers and businesses in this 
country and in the neighboring countries within the Caribbean 
because we have, and I think that is a good idea, an integrated 
apparel and textile market in the Caribbean area.
    So, in a way, Haiti needs to be looked at it by itself 
because of the urgent needs, but also, if we are going to be 
effective in addressing those needs, we are going to have to 
keep in mind the broader context, and the points, if I might 
say so, that I have suggested. Thank you very much, and I look 
forward to the testimony of, I think, two of our most 
distinguished colleagues across--I won't say ``the most'' 
because I will get in trouble with somebody, but two of our 
most distinguished colleagues across the rotunda. Thank you.
    Senator DEWINE. You will get in trouble with your brother.
    Mr. LEVIN. That is what I meant, my brother.
    Chairman CRANE. With that, I would like to welcome Senator 
Graham and Senator DeWine to present their testimony before the 
Committee.

STATEMENT OF THE HONORABLE BOB GRAHAM, A U.S. SENATOR FROM THE 
                        STATE OF FLORIDA

    Senator GRAHAM. Mr. Chairman, Senator DeWine and I 
appreciate the opportunity to discuss this important issue, an 
issue which has become even more urgent in light of the events 
of the past few days. In deference to your time, I will speak 
to the context, the situation in Haiti that we think calls for 
the United States' attention and action and then Senator DeWine 
will discuss the specifics of why we think the legislation that 
has passed the Senate and is before you today is an appropriate 
remedy, or at least the beginnings of a remedy to some of the 
most difficult issues in Haiti. I will, if permissible, 
summarize my statement and submit the full statement for the 
record.
    Mr. Chairman, we have had a recurring series of engagements 
in Haiti in the last 15 years. In the 1990s, a crumbling 
economy and political instability drove many Haitians into the 
ocean to the State that Congressman Shaw and I represent. We 
became the recipient of thousands of people arriving in 
impoverished conditions on leaky and unsafe boats, only more 
fortunate than those who had perished at sea.
    The situation continued to deteriorate. In 1994, the United 
States committed 20,000 troops to an intervention in Haiti. 
Unfortunately, in my opinion, we did not make an adequate 
commitment to helping Haitians rebuild, and 10 years later, in 
2004, we had to send more troops as the Haitian government 
found itself overwhelmed by chaos, unrest, and gang violence. I 
am concerned that if we don't get it right this time and ensure 
that Haiti has the capacity to stabilize, we will find 
ourselves in another 10 years with another intervention into 
Haiti.
    The consequences of a weak and unstable Haiti can be seen 
both inside its borders and among its neighbors. Haiti is one 
of the poorest countries of the world and its people are 
tragically malnourished. The serious internal problems in Haiti 
have made it ill-prepared to deal with short-term crises and 
natural disasters. I just draw your attention to the current 
news reports, which indicate that at least 700 people have been 
lost in Haiti as a result of the recent floods and that there 
are another 1,000 missing with the sad expectation that many of 
those will be added to the list of fatalities.
    Haiti's grinding poverty also has contributed to its 
chronic political instability, which causes large numbers of 
refugees to attempt to enter the United States and other 
Caribbean countries. Particularly affected by that have been 
the Bahamas and the Dominican Republic, both countries which 
could face political destabilization if there was another 
substantial wave of refugees from Haiti.
    It is a reality that the future of Haiti does not lie in 
the United States nor does it lie in any of its neighbors, but 
rather it lies in the Haitian people. Despite incredible 
hardships, the Haitian people have continued to persevere. 
Again, referencing Congressman Shaw, we both had the 
opportunity to see the many Haitians who come to our State and 
their enormous courage and resilience and desire for self-
improvement. If you go to a local community college in South 
Florida, you will see a very large percentage of the students 
being Haitians who are there to try to make their lives better.
    That is why Senator DeWine and I are before you today to 
speak about the Haiti Economic Recovery Opportunity Act of 2004 
(HERO) (S. 2261). This legislation will modify our trade laws 
to allow Haitian manufacturers to ship apparel into the United 
States duty-free and to give them flexibility about the types 
of fabrics that they use. This will, of course, benefit 
American consumers, but the principal impact will be to give 
hope to the people in Haiti.
    Senator DeWine will outline the details of the act, which 
draw heavily upon the African Growth and Opportunity Act (AGOA) 
(Trade and Development Act of 2000, P.L. 106-200), which was 
passed recently by this Committee and by the Congress. Senator 
DeWine and I have worked with our colleagues to pass this 
legislation, which gives Haitians the economic opportunity that 
they so desperately need and desire. We do not wish to stand by 
and watch while a country of 8 million people wrestles with 
horrible poverty and instability just a few hundreds of miles 
off our shore. We feel that we have an obligation to help. We 
believe the HERO Act is one way that we can help the people of 
Haiti and it will also be good for the people of the United 
States.
    [The prepared statement of Senator Graham follows:]

 Statement of The Honorable Bob Graham, United States Senator from the 
                            State of Florida

    As a longtime neighbor of Haiti, I have witnessed firsthand the 
effects that grinding poverty and political instability have had on the 
Haitian people. I have also seen the impact that Haiti's troubles have 
had on its neighbors, including the United States.
    In the early 1990s, a crumbling economy and political instability 
drove large numbers of Haitians to risk their lives in leaky boats, as 
they attempted to cross hundreds of miles of ocean to reach Florida. 
The situation continued to deteriorate, and in 1994 the United States 
was forced to intervene. Unfortunately, we did not make a commitment to 
helping Haitians rebuild, and in 2004 we had to send troops once more, 
as the Haitian government found itself overwhelmed by unrest and gang 
violence. We must be sure to get it right this time, and ensure that 
Haiti is able to stabilize, or we will find ourselves going back in 
2014.
    The consequences of a weak and unstable Haiti can be seen both 
inside Haiti's borders, and among its neighbors. Haiti is among the 
poorest countries in the world, and its people are tragically 
malnourished. The World Health Organization reports that the average 
daily caloric intake for Haitians is the lowest in the western 
hemisphere and compares with the most impoverished countries of Africa.
    These serious systemic problems make Haiti especially ill-prepared 
to deal with short-term catastrophes and natural disasters. Earlier 
this week Haiti was hit by a tropical storm that killed over seven 
hundred people, and the United Nations predicts that this number will 
continue to rise as many people now listed as missing are found. Many 
of these people were killed when their poorly constructed homes were 
destroyed by flood waters or mudslides. Even with the help of the 
United Nations peacekeeping force currently in the country, overtaxed 
Haitian emergency workers are hard pressed to cope with the large 
numbers of people who have been injured or left homeless. According to 
an article in yesterday's Washington Post, the main hospital in the 
large northwestern city of Gonaives faces severe shortages of food, 
water and antibiotics. Health care services are undoubtedly even worse 
in rural areas, and we can expect this to contribute to the rising 
death toll in the days ahead.
    Haiti's grinding poverty also contributes to it's chronic political 
instability, which causes large numbers of refugees to attempt to enter 
the United States or other Caribbean countries. Here in the United 
States we have been challenged to respond to immigration crises 
stemming from Haiti, and this challenge has been even harder for some 
of Haiti's other neighbors. Our friends in the Dominican Republic and 
the Bahamas have struggled to deal with large numbers of Haitian 
entrants, and another large-scale migration crisis could destabilize 
either of these countries.
    There is one hope for the future of Haiti, however, and it lies, as 
you might expect, with the Haitian people. Despite incredible hardship, 
the Haitian people have continued to persevere. Over the past three 
decades, tens of thousands of Haitian refugees have come to live in my 
home state of Florida, and I have been continually impressed by their 
strong work ethic and their determination to build better lives for 
themselves and for their children. If we give the Haitians the 
opportunity to begin rebuilding their shattered economy, they have the 
potential to get their country back on its feet.
    This is why I have crossed the Hill today to come speak to you 
about the HERO, or Haiti Economic Recovery Opportunity Act. This 
legislation will modify our trade laws to allow Haitian manufacturers 
to ship apparel into the United States duty-free, and give them 
flexibility about the type of fabrics they may use. This will of course 
benefit American consumers, but the real impact will be felt in Haiti, 
where apparel manufacturing is one of the few functioning industries.
    A similar provision exists in the African Growth and Opportunity 
Act, or AGOA, which has helped expand economic opportunity to the least 
developed countries in Africa. By giving this same opportunity to Haiti 
we can help the least developed country in our own hemisphere and give 
Haitians an opportunity to begin rebuilding their shattered economy. 
Haiti must not be a place where the only jobs available are with gangs 
and drug traffickers, and by creating inducements for foreign 
investment, we can make it possible for hard-working Haitians to earn 
an honest living.
    Over in the Senate, Senator DeWine and I worked with our colleagues 
to pass a bill that gives Haitians the economic opportunity they so 
desperately need. We do not wish to stand by and watch while a country 
of eight million people wrestles with horrible poverty and instability 
several hundred miles off our coast. We feel that we have an obligation 
to help, and we believe the HERO Act is one way that we can help the 
people of Haiti, and that it will also be good for the people of the 
United States.

                                 

STATEMENT OF THE HONORABLE MIKE DEWINE, A U.S. SENATOR FROM THE 
                         STATE OF OHIO

    Senator DEWINE. Mr. Chairman, I want to thank you for 
holding this hearing and thank the Committee. It has been a 
real pleasure to work with Congressman E. Clay Shaw and with 
Senator Graham on this legislation. This bill, as the Senator 
said, is really straightforward. It is modeled after the 
successful AGOA and it would grant duty-free entry to apparel 
articles assembled in Haiti contingent upon Presidential 
certification that the new Haitian government is, in fact, 
making significant political, economic, and social reforms. The 
bill caps the amount of duty-free exports from Haiti at 1.5 
percent of the total amount of U.S. apparel imports, and the 
cap will ultimately grow to the modest amount of 3.5 percent 
over a 7-year period of time.
    Simply put, Mr. Chairman, this bill would allow Haiti to 
use, for example, approved fabric and American buttons, sew it 
all together, and then ship it to the United States duty-free. 
As my colleague has said, Mr. Chairman and Members of the 
Committee, there is a reason for doing this for Haiti. Some 
people may ask, why Haiti and why this bill? I think the answer 
is very clear, besides the obvious humanitarian reasons. The 
answer is it is in our National interest to do it. Senator 
Graham has pointed out, and I know this Committee knows very 
well the tragedy that is Haiti. The Senator has pointed out 
that twice in the last decade, we have had troops down there. 
Every time we commit troops, there is a terrible cost, 
potential loss of life.
    I have visited Haiti now, I think, 14 times in the last 
decade. The poverty of Haiti, as you know, just can't be 
described. It is comparable to the poorest of the poor 
countries in Africa. My wife and I have watched as children 
have died in front of us. It is an ecological disaster. The 
flooding that is going on in Haiti today that is very much 
under-reported because there is very little communication that 
is going to show thousands of people who have died, just 
because the country is an ecological disaster.
    We are liable to see boat people again if the situation 
does not get better. It is only an hour and a half from Miami. 
It is in our backyard. It is our neighbor. If you compare the 
poverty of Haiti versus the poverty of any other country in the 
Western Hemisphere, the poverty is double. It is twice as poor, 
if you could put it that way, of any other country in the 
hemisphere.
    So, it is, I would maintain, and Congressman Levin has made 
a very good case that we have to look at this holistically, and 
I agree. I would also say, as we look at it holistically, Haiti 
is a special case, and I think it is a special case not only 
from a humanitarian point of view, but in our national 
interest. Haiti is in our backyard. We don't want troops down 
there again. There is a fledgling government that, frankly, we 
have an interest in seeing that it does, in fact, survive and 
not go into turmoil and chaos again.
    What does this bill do? I take the Chairman's admonition 
very seriously that we should not be wed to one bill, and I 
hear him. What would the bill that we have been able to pass in 
the Senate do? It would create a lot of jobs in Haiti. I don't 
think any of the experts you are going to hear testify after 
us, and they are the experts, will deny that. It would create a 
lot of jobs. I think if this bill does not pass, with the new 
change in the rules governing quotas, we will see a lot of the 
few jobs that are left in Haiti, the few assembly jobs that are 
left, you will see them very quickly leave. Haiti at one time 
had 70,000 to 90,000 assembly jobs before the embargo. Today, 
it is probably--no one knows for sure--it is probably in the 
neighborhood of 30,000. With this bill, these jobs would take 
off. Without this bill and no change in the status quo, these 
jobs, the 30,000 that they have now will just collapse because 
of the change in the law.
    What will this bill do? If the bill does not pass, these 
jobs are going to go somewhere else and they are not going to 
stay in the region. I think most experts will tell you they 
will go to the Far East. They will go a long, long way away. 
These are not U.S. jobs, and I think we ought to just hit that 
issue right up front. I come from a State that has lost a lot 
of other type manufacturing jobs and I wouldn't be here today 
if I thought the passage of this bill would cost U.S. jobs. In 
fact, I think it will have a benefit for U.S. jobs. Let me tell 
you why. These jobs are either going to be in Haiti or they are 
going to be thousands and thousands of miles away. If they are 
in Haiti, we have the possibility at least that some of that 
product--a button, a zipper, something that is a value-added--
will have to come out of the United States. If they are made 
thousands and thousands of miles away, that will not be the 
case.
    Second, anybody who has been in Haiti knows the vast 
majority of money that is made in Haiti ultimately gets spent 
in the United States. They import most of their food. They 
import most of their products. Most everything comes from the 
United States. So, eventually, we are going to benefit from the 
prosperity of Haiti or just the ability of the Haitians to 
live. We will benefit from that. It will also, finally, help 
stabilize this country that is in our own backyard, and for 
foreign policy reasons, for our own national interest, we have 
an interest in seeing that happen.
    Finally, anybody who has been in Haiti, and I know Members 
of the Committee have been in Haiti, but this is something we 
ought to do for humanitarian reasons. We have some obligation, 
I think, to help people who want to work, to help people who 
want nothing more for their families than you and I want for 
our families, and that is to get them enough to eat everyday 
and possibly even to educate them.
    I have seen, my wife and I have seen, been into these 
assembly factories. I haven't seen them all, Congressman. I 
haven't been in all of them, but I have been in some of them, 
and I will tell you that there are people who are lined up who 
want these jobs. Haitians are hard-working people. They want 
what we want. I think this bill will go a long way to give them 
that opportunity. I thank the Chairman.
    [The prepared statement of Senator DeWine follows:]

Statement of The Honorable Mike DeWine, United States Senator from the 
                             State of Ohio

    Mr. Chairman, thank you for this opportunity to testify before the 
Committee in support of expanded trade preferences for Haiti, and 
specifically in support of the Haiti Economic Recovery Opportunity Act. 
I want to echo Senator Graham's comments.
    I have visited Haiti 14 times over the last decade and have seen--
up-close--the poverty and the potential of this nation and its people. 
Haiti needs our compassion. Haiti needs our support. Haiti needs this 
bill. Why? Because Haitians are dying everyday from diseases and 
abysmal living conditions--conditions that they could improve if they 
had jobs and money for doctors and medicine.
    Senator Graham and I have sponsored this bill because Haiti is the 
poorest country in our hemisphere--it lies in our own backyard--and 
deserves the same preferences we gave the poorest countries in Africa, 
many of which have higher per capita incomes than the people of Haiti.
    Mr. Chairman, our bill is straight forward. It is modeled after the 
successful African Growth and Opportunity Act. It would grant duty-free 
entry to apparel articles assembled in Haiti contingent upon 
Presidential certification that the new Haitian government is making 
significant political, economic, and social reforms. The bill caps the 
amount of duty-free exports from Haiti at 1.5 percent of the total 
amount of U.S. apparel imports, and the cap grows to the modest amount 
of 3.5 percent over seven years. Simply put, Mr. Chairman, this bill 
will allow Haiti to use, for example, Peruvian fabric and American 
buttons, sew it all together, and then ship it to the U.S. duty free.
    There is one specific aspect of this bill that I want to emphasize, 
and that is the importance of providing a third country fabric 
preference for Haiti. Third country fabric preference is a fancy way of 
saying that Haiti can use materials from anywhere in the world and 
still receive duty-free treatment. As you will hear from witnesses 
today, economic analysis clearly shows that third country fabric 
preferences are the only way to truly stimulate the least developed 
countries of the world. This was true in Africa, and it is true for 
this bill.
    Mr. Chairman, there is a mistaken notion that this bill, and third 
country fabric preferences, specifically, would cost U.S. jobs. This 
simply is not the case. Like many of you, I represent a state where the 
manufacturing sector is hurting, and I would not ask any of you to 
choose between U.S. jobs and jobs in Haiti. With the HERO bill, we can 
have both.
    Mr. Chairman, in 2005, the quotas that currently keep countries in 
the Far East, and especially China, from flooding the global textile 
market with cheap products will be removed. This will devastate the 
apparel industry in our hemisphere. Some lucky countries will have the 
benefits of the Central American Free Trade Agreement, but everyone 
else, including Haiti, will lose their industries as companies go to 
the Far East.
    This does not have to happen. If HERO becomes law, the assembly 
industry in Haiti would stay and expand, thereby increasing Haiti's 
demand for U.S. products. This would mean a greater demand for U.S. 
goods, such as elastic and thread from North Carolina companies; and 
bags, boxes, and trim from Florida. But, if HERO does not become law, 
the industry will leave Haiti, and those U.S. companies that export 
these components to Haiti will be short yet another customer.
    It is important to note that HERO's impact would extend beyond the 
U.S. textile and apparel industry. The trade figures show that Haitians 
buy American goods. For every dollar worth of goods the United States 
buys from Haiti,these poor impoverished people buy two dollars worth of 
American products. Think about it--that is a one hundred percent return 
on investment. Now, think about what that return would be if the 
Haitian people have more money in their pockets to spend on U.S. goods. 
This is a prudent investment for the United States. This bill is good 
for Haiti, and this bill is good for the United States.
    Mr. Chairman, while certainly, there are other things we could do 
to help Haiti, at this late date in the Congress, there is only one 
bill that has a chance of passing and providing the assistance that 
Haiti so desperately needs. If the HERO bill does not pass both houses 
by the end of the year, it will be too late. In 2005, once the quotas 
are removed, what little industry remains in Haiti will leave, and it 
will not come back. That means 30,000 more Haitians will be unemployed, 
and what little is left of Haiti's economy will crumble. The jobs in 
the United States that depended on Haiti's apparel industry will be 
forfeited, and all because we failed to act when we had the 
opportunity.
    In closing, I'd like to focus on the bigger picture. We are here 
because just an hour and a half flight off the Florida coast lies a 
country--the least developed in our hemisphere--where 80 percent of the 
people live in abject poverty, and almost as many are unemployed, 
living lives with little hope and opportunity.
    I have been there 14 times. I have watched desperate mothers feed 
their children mud, because they didn't have a job, and didn't have the 
money to buy food. I have seen and held sick, malnourished, dying 
children in my arms. On behalf of the parents of these children--and 
especially for the children, themselves--I am here today urging you to 
do everything in your power to pass this bill. It is simply the right 
thing to do.

                                 

    Chairman CRANE. Let me express my appreciation to both of 
you for your testimony, but most especially for your 
involvement in what to me is a very important issue right now. 
I commend the Senate for the action that it has taken already 
and I am hopeful that we can act on this and have it resolved 
in the House and the Senate before this session breaks up. Does 
anyone else want to make a comment to our distinguished guests?
    Mr. LEVIN. Just briefly. Mr. Shaw, you can go ahead if you 
want to.
    Mr. SHAW. Go ahead.
    Mr. LEVIN. I don't really have any questions. I do hope we 
can work together actively on this, and I think it may be more 
beneficial instead of a lot of back and forth here. I am not 
sure we can write a final product. Maybe we could, but I am not 
sure we can, today. Anyway, we shouldn't be facing each other 
like this but around the table, I think. So, I hope we will be 
able to do that. The time is really short, but we ought to 
utilize whatever time we have to see if we can produce a 
product that addresses these needs and makes good trade sense. 
I look forward to that.
    Senator DEWINE. I appreciate that very much.
    Chairman CRANE. Thank you. Mr. Shaw?
    Mr. SHAW. Thank you, Mr. Chairman, and I ask unanimous 
consent to insert an additional statement into the record.
    Chairman CRANE. Without objection.
    [The information was not received at the time of printing.]
    Mr. SHAW. I also ask unanimous consent to insert a letter 
that I received from Florida Governor Jeb Bush. Governor Bush 
has been very active in seeking aid for Haiti and the Haitian 
people. As a matter of fact, he is in the Capitol today--I just 
left him--and he asked specifically how the HERO legislation 
was going. I told him I would let him know after this hearing, 
but from what I hear already, I think it is going very well.
    [The information was not received at the time of printing.]
    I also ask that a letter from the U.S. Conference of 
Catholic Bishops in support of the trade preferences for Haiti 
be included, as well.
    [The information was not received at the time of printing.]
    Finally, at each Member's desk you will find a copy of a 
December 7, 2003, feature on Haiti conducted by the South 
Florida Sun Sentinel. I think it is one of the most graphic 
snapshots of what was happening down there, and I can tell you 
it has not gotten any better.
    I want to commend both of my friends, Bob Graham and Mike 
DeWine. Bob, we are certainly going to miss you, and I have an 
idea that you are not going to complete retirement. You 
certainly deserve all of the best in sending you off. I know 
both of your dedication to the problems in Haiti and trying to 
work them out. Mike, what you have done with kids down there is 
legendary. I would like the Committee to know that Mike has 
called me at home on the weekend and wanted to know how this 
legislation is getting around. I wanted to ask him how he got 
my telephone number, but----
    [Laughter.]
    In any event, he has been steadfast in working through this 
legislation, and what you all did in carrying it through the 
Senate, I think is phenomenal. Bob, you and your wife, Adele, 
who I went to high school with at Miami Edison, have been very 
active in bringing Haitian art back in order to support the 
high school that Adele and I went to that now is probably 95 
percent Haitian and really a failing school, which it is very 
difficult not to be a failing school when you are a school of 
immigrants, as Miami Edison is today. The proceeds from the 
sale or the auction of these items goes to hire the good 
students as tutors to help the others along, which I think is 
just a marvelous program. Actually, I have tried to duplicate 
that up in some of the areas in Palm Beach County where we have 
a heavy Haitian population.
    The Haitian people are a very gentle people. They are 
hardworking people. They are caring people. They are religious 
people. They certainly deserve a better slice of life than what 
they have gotten. I have said it before and I will say it 
again. You cannot have a democracy where there is no economy, 
and there is no economy in Haiti. There is 70-percent 
unemployment. You have got a textile industry that used to be 
very active that is all but dried up. They need to be spurred 
on. This legislation, and there are two bills that are the 
subject of this hearing. One is identical to the Senate bill 
and the other is a little more restrictive as to where some of 
the supplies come from for putting the apparel together.
    I join the Chairman in expressing the wish that we would be 
expeditious in handling this through. We always blame the 
Senate for being slow. I would hate to lose this opportunity 
not to at least match their speed and seeing that something 
happens with this legislation and that it gets to the 
President's desk before the end of this Congress. It is 
important to us, and I think both you gentlemen have expressed 
it very well in your testimony that this is for our benefit as 
well as the Haitians, and it is a win-win. The tragedy, as Bob 
Graham expressed, of Hurricane Jeanne and the tremendous loss 
of life really brings home how desperate this country is, how 
desperate these people are, and how desperately they need our 
help. As Mr. Levin said, the best thing we can do for them is 
to supply jobs, and these are not exploiting American jobs. It 
is good for Haiti. It is good for the United States. It will 
make this Congress look very good to go ahead and pass this 
very quickly, and I yield back the balance of my time.
    Mr. HOUGHTON. Mr. Chairman?
    Chairman CRANE. Yes, Mr. Houghton? Mr. Houghton, and then 
Mr. Becerra.
    Mr. BECERRA. I will yield to Mr. Houghton.
    Mr. HOUGHTON. Thank you. I can't disagree with what Mr. 
Shaw says, what the Senators say, Mr. Levin. It is a great idea 
to be able to help the Haitian people through getting duty-free 
entry through textiles. Before you have duty-free entry, you 
have got to have an investment. Somebody has got to put up a 
plant.
    One of the things I worry about, and I am sure you 
gentlemen know a heck of a lot more than I do--although I have 
just finished reading that wonderful book about Paul Farmer, 
Mountains Beyond Mountains--there has to be an idea that your 
investment is not going to be jeopardized, and I don't know 
what happens to the election. I don't know whether there is 
going to be a coup. I have no idea. Is there any way to make 
sure that the incentive for people over and above the duty-free 
entry is going to be there to put that investment in so you can 
create those jobs?
    Senator GRAHAM. As Senator DeWine said in his explanation 
of the legislation, it has a condition before these benefits go 
into effect, and that condition is essentially that the 
President of the United States must certify that the country is 
stable and is making progress. I agree with you that that 
stability is a key to long-term success, but it is a little bit 
like the chicken and the egg. If you create the market for 
products such as this will for apparel, then you hopefully will 
create the investment necessary to fill that market. I think 
this bill is well balanced in its recognition of the necessity 
of a stable environment and then the incentive to use that 
stable environment to create jobs.
    Senator DEWINE. Mr. Chairman, if I could just add to that, 
I totally agree. I think we have to move on several different 
tracks. The bill that we just marked up in the U.S. Senate 
Committee on Appropriations contains money to work on the 
judicial system and to work on the police, both of them long-
term problems for Haiti. They are not going to be solved 
overnight and we have to work on them. The Haitians have to 
work on these problems.
    You are absolutely correct, but I think we also have to 
move along economically at the same time, and frankly, there 
are businesses who look at Haiti because of the comparative 
advantages of labor and for other reasons and they will make 
those decisions. I truly believe with the passage of this bill, 
they will make decisions to move forward and to expand in 
Haiti. They have done it in the past.
    Mr. HOUGHTON. Thank you very much.
    Chairman CRANE. Thank you. Mr. Becerra?
    Mr. BECERRA. Thank you, Mr. Chairman, and thank you, as 
well, for quickly bringing this matter to a hearing so that we 
could hear not only from our colleagues on the Senate side, but 
from those who are interested in trying to help move this issue 
along faster for the people of Haiti. I want to extend to the 
two Senators not only a welcome, but our appreciation for your 
efforts, not just now on this issue today but in the past. You 
have been leaders on the issues affecting Haiti and I think 
that the Haitian people probably recognize very well that there 
are two champions here sitting before us trying to help once 
again. So, I thank you for the work that you have done in the 
past.
    I would love to hear a comment that you might have as we 
get ready to hear testimony from some of the panelists who will 
be coming before us. Perhaps you can give us some thoughts. 
There will be testimony from a representative from the Union of 
Needletrades, Textiles, and Industrial Employees, and Hotel 
Employees and Restaurant Employees International Union (UNITE 
HERE), the textile union here in the United States, talking 
about how, because we know that Haiti has had some problems in 
the past with its labor laws--in fact, my understanding is that 
their labor code still extends back from the days of the 
Duvalier dictatorship--that there have been difficulties.
    They will be proposing, if they haven't already proposed in 
the past, that we do something here to try to help ensure that 
the benefits of this expanded trade with the United States, 
which should, I hope, help, along with what I believe the 
gentleman and our friend from New York was saying, that we have 
further investment, but it should help the Haitian people if we 
are able to extend these benefits to Haiti. If you have a 
regime in place which doesn't really allow those benefits to 
get down to those workers who are producing the fabric and the 
apparel and garments, then we ultimately still lose out in 
helping the Haitian people.
    So, I wondered if you could comment. I don't know if you 
had a chance to see the testimony of the gentleman from UNITE 
who will be speaking, Mr. Levinson, but what he in essence 
proposes that we consider doing--let me make sure I don't 
misquote him--a couple of things. One, we initiate a labor 
program in Haiti that would be run by the International Labor 
Organization (ILO). That would be as a condition for this 
additional trade benefit that would, in essence, allow there to 
be a presence of some type of ILO program.
    It wouldn't be--any extended benefits wouldn't be connected 
to whatever the content of these reports would be, but it 
would, in essence, put in place a program that would give Haiti 
additional incentive to try to move forward and would 
complement some of the provisions that are already in the HERO 
Act to try to move Haiti along in progressing with its labor 
laws. Is there any comment on that?
    The second point, which would be to propose having a 
workers' rights ombudsman that would be distinct from the 
government, therefore hopefully not influenced by the 
government, to help us process through some of the issues that 
are affecting the labor laws and folks who work within the 
regime of the labor laws in Haiti. Any comment?
    Senator DEWINE. Congressman, I have not had a chance to 
look at that testimony. I will look at it and I will react. I 
can only tell you what my personal experience has been in 
Haiti, and this was both under--primarily under the Aristide 
government, but also since the Aristide government, as well, 
and that is looking, going actually into some of these assembly 
plants.
    What I saw and what my wife saw on another occasion were 
conditions that were humane conditions and situations where 
people did, in fact, want to work, and where the wage that was 
paid was a much higher wage than certainly the average wage in 
Haiti, and situations where people, when you talk to the 
people, they were supporting many other people in their family.
    So, I think we always have to watch that. I think one of 
the things that you might want to question some of the other 
additional witnesses who you are going to hear from today about 
their plans to go into Haiti and what their plans on how they 
will operate. The big companies that we look at, for example, 
J.C. Penney, they have certain codes of who they buy from, and 
if these companies don't live up to that, they cut them off. 
That is one way of policing. It is not the exclusive way, 
shouldn't be the only way, but that certainly is one way.
    My personal experience of what I have seen in the last few 
years in Haiti is there has been something that I thought, I 
think if you were there or anybody else on the panel was there, 
you would say, yes, that is good. That is okay. These people 
are doing much better than they would have been doing if they 
didn't have a job, and a lot of people want this job.
    Senator GRAHAM. I would have two comments. One is Haiti is 
a member of, and I believe has ratified the core conventions 
of, the ILO. One approach might be to assist Haiti in what is 
missing in most place with the ILO conventions and that is 
enforcement of the standards to which the county has already 
committed itself. I would note that this is not an issue that 
is singular to Haiti. This is probably an issue in many 
countries in the Caribbean Basin area as well as elsewhere.
    Second, I have been going to Haiti on a regular basis since 
the early 1980s and one of the things that they had in place 
before the bad times started about 15 years ago was an 
ingenious system where people would start working in the plant 
that required the least skills, because in many ways, that 
plant was the most effective school that these people had ever 
attended.
    Those who showed the capability and dedication and a good 
work ethic then would move to the plant next door, which had a 
slightly higher skill requirement and compensation. They might 
move from apparel to sewing what at one time was almost a 
Haitian exclusive, American baseballs. Then they would move up 
to a third or fourth or fifth rank so that the employment 
structure served almost as a form of acceptance, graduation, 
and moving forward. I would hope that with this kind of 
legislation, that something analogous to that might be 
reestablished to give Haitians not only the opportunity for the 
first job, but to see the opportunity for a more skilled job 
with higher income for their family.
    Mr. BECERRA. Thank you. Thank you, Mr. Chairman.
    Chairman CRANE. Thank you. Thank you very much, Senators, 
and----
    Mr. LEVIN. Mr. Chairman?
    Chairman CRANE. Yes?
    Mr. LEVIN. I might just add, as long as we are on this 
subject, and we will talk about it subsequently, but I just 
urge everybody to take a look at the most recent U.S. 
Department of State report on human rights practices in Haiti. 
It contains language like, ``frequent verbal abuse and 
intimidation of workers and organizers were problems in the 
assembly sector. Female workers in the assembly sector reported 
that some employers sexually harassed female workers with 
impunity. Workers had access to labor courts set up to resolve 
common labor-management disputes. However, the court's 
judgments were not enforced.''
    So, I hope we can address these issues and move on with 
legislation. I don't think we can do so if we simply ignore the 
issue altogether. The certification processes in the bill 
relate to several areas but don't touch this one. I am not 
suggesting that we expect Haiti to become overnight in full 
compliance in practice with everything they have signed onto, 
but I do think, as we have said, unless there is some assurance 
that the people who work will benefit or the poverty of Haiti 
will remain as deep as it is today, and none of us wants that, 
none of us. Thank you.
    Chairman CRANE. Thank you. Yes, Mr. Rangel?
    Mr. RANGEL. I will be brief, and thank you for this 
opportunity. I can't let this go by without thanking you two 
for the leadership that you provided in this and other areas, 
especially as it affects the Caribbean. As relates to Haiti, I 
cannot think of any country--maybe Sudan--that would get more 
international sympathy because of the political problems that 
they have faced for decades, the economic problems they face 
today, and then, of course, the tragic effects of the 
hurricane. This might give us an opportunity, if we think about 
it, to try to bring our parties together.
    It has been difficult to mention labor standards without 
people asking, which side are you on? I think what Mr. Levin 
was talking about is that as Americans, we have to have some 
standard. We have to be able to say, not to please our labor 
unions but to please ourselves, that we can't just have a drive 
as to who can hire human beings for the least amount of money. 
My background in history means you can go to slavery if that is 
the standard that you are looking for, how cheap is the labor. 
Again, as Mr. Levin said, we are not thinking about asking them 
to meet American standards. Like most other things that we 
enjoy as Americans, that is the dream. That is an aspiration. 
That is a goal.
    I am certain nobody should be overly impressed with the ILO 
standards. That is a minimum. Then if I heard him correctly, he 
is saying, and they don't have to have that. Just show us what 
we can do so that no matter what level you are working on, that 
you would know that if you are a democracy in your country, you 
can aspire to be the boss of that shop, that there is no cap on 
your thinking. If you don't have anything there except the 
Chief Executive Officer (CEO) determining, how cheap can I get 
the labor, I don't think we should feel proud of being 
Americans and forcing people into this, because in our own 
great Nation, the things that we take for granted were not 
given to us by management but fought for by labor.
    So, I don't know what the situation is over there in the 
other body, but we here hope that we can take this, where we 
have an overwhelming support for the objective, and begin just 
to talk about what do you mean by ILO standards, because it is 
not nearly as fearful as I think some people would want to 
believe that it is. I just thank you for your effort and look 
forward as always in working with you on this and other issues.
    Chairman CRANE. Let me conclude by again expressing 
appreciation to both of you for your leadership and your 
involvement in this very important issue. We hope we can act 
with dispatch.
    Senator DEWINE. Thank you, Mr. Chairman.
    Senator GRAHAM. Thank you.
    Chairman CRANE. Thank you. Now I would like to call our 
next panel, William Woltz, President and CEO, Perry 
Manufacturing Company, Mount Airy, North Carolina; Stephen 
Felker, President, Chairman, and CEO, Avondale Mills, Monroe, 
Georgia, on behalf of the National Council of Textile 
Organizations; Jean Edouard Baker, President, Vetements 
Textiles, Port-Au-Prince, Haiti; Janet Fox, International 
Merchandising Director and Vice President, J.C. Penney 
Purchasing Corporation, Plano, Texas; Mark Levinson, Chief 
Economist, UNITE HERE; and Nigel Thompson, Executive Vice 
President of Planning and Development, Yazaki North America, 
Canton, Michigan.
    If you will all please take your seats, and after you are 
seated, in front of each seat there is a little light that 
gives you an indication of the time. We try and restrict 
presentations to 5 minutes and anything beyond that will be 
made a part of the permanent record. That light will go green, 
and then yellow as the warning signal, and then turn red after 
5 minutes. So, if you can, please try and keep your 
presentations to 5 minutes or less. With that, we will start 
out with Mr. Woltz.

    STATEMENT OF WILLIAM K. WOLTZ, JR., PRESIDENT AND CHIEF 
  EXECUTIVE OFFICER, PERRY MANUFACTURING COMPANY, MOUNT AIRY, 
                         NORTH CAROLINA

    Mr. WOLTZ. Thank you very much for the opportunity to 
address this body. I am William K. Woltz, Jr., President of 
Perry Manufacturing, one of the premier private label 
manufacturers in the United States. I am pleased to be here to 
testify in support of legislation that will provide enhanced 
benefits for the people of Haiti.
    Headquartered in Mount Airy, North Carolina, Perry 
Manufacturing has been in business for over 50 years and has 
operated in a half-dozen countries. Perry Manufacturing owns 
and operates its own factories that produce for some of the 
largest retailers and brands sold in the United States and 
around the world. We know how to build and run successful 
sewing operations, operations that are a source of pride to us 
and to our customers. Our customers are proud to have their 
merchandise sewn in factories that have such a good work 
environment. Wherever we operate, we are the best place to work 
and we are able to attract and keep the highest quality 
workforce. We employ 550 people in Haiti and have a building 
under construction to add another 1,000 people. Haiti is a very 
difficult and poor country to operate in. For years, Haiti has 
had a limited duty-free benefit for garments sewn from U.S. 
fabric without any resulting expansion of its apparel industry, 
proving that the existing restricted benefit has been 
meaningless for the communities in that impoverished state.
    So, why did Perry decide to stay in Haiti and possibly 
expand its operations? It is because of the possibility of 
favorable trade legislation like HERO that will allow Haitian 
apparel to compete on a duty-free basis in the United States. 
The fashion industry is the overwhelming majority of the 
apparel industry, and when the fashion industry establishes 
itself in a country, it has staying power there. It doesn't 
leap from low-cost country to low-cost country. The fashion 
industry builds and requires skills in its labor force. Because 
of its ability to change styles, use different kinds of 
fabrications, knits and wovens, fashion builds a sewing supply 
chain that employs a tremendous amount of people.
    Without the use of third-party inputs, without the ability 
to buy fabric wherever in the world it is most competitive, 
there will be no fashion apparel industry in Haiti, and without 
enhanced trade benefits, when global quotas are lifted on 
January 1, 2005, Haiti will be in a disadvantaged position vis-
a-vis its Asian competitors and can never become the apparel 
manufacturing player that it now has the opportunity to become, 
and as a matter of fact, that it once was. Right now, Haiti has 
a golden opportunity and the prospect of a bright future. With 
legislation like HERO, the United States could act to transform 
this poverty-stricken island into an apparel manufacturing 
player. In order to compete for investments, Haiti must at 
least have as good a deal as Africa, AGOA, in order to have a 
chance to compete.
    With HERO, Haitian factories can be world competitors and 
will have the ability to use the fabrics that are required by 
fashion and the ability to source these fabrics in the most 
competitive manner. With HERO, Haiti becomes an attractive 
market, and as it gains the ability to build a thriving apparel 
industry, the ripple effect will be tremendous in Haiti. 
Hundreds and hundreds of jobs are created in a ripple around 
apparel plants, from feeding the workers to transporting the 
workers to packaging to recapping tires. The list goes on and 
on. The benefits extend to the United States and U.S. industry, 
as well. Haiti can become an apparel center that will buy most 
of its supplies, packaging, trim, and some of its fabric from 
its neighbor, the United States. Haiti can become an apparel 
center whose wages will be for the most part spent buying 
products from the United States.
    I believe that there is another key point. As long as the 
sewing factories are in this hemisphere, the U.S. textile 
industry has a chance to sell to these factories. When these 
factories leave this hemisphere, the U.S. textile industry will 
have no chance to sell to these factories. The HERO does not 
preclude the use of U.S. fabric. As a matter of fact, I prefer 
to buy U.S. fabric. I get 60-day terms when I buy U.S. fabric. 
When I buy foreign fabric, I have to pay with a letter of 
credit.
    We are in a very competitive market in the fashion apparel 
business where our retail customers are committed to delivering 
higher-quality merchandise at lower prices to the American 
consumer. In order to be a supplier to the major retailers and 
major brands, Perry Manufacturing has no choice but to be in 
that value-quality equation. Without the ability to use fabric 
from anywhere in the world, Haiti will not be a part of that 
supply chain. Absent HERO, the factories that are now running 
or under construction in Haiti may or may not stay open or be 
completed, and I speak as a businessman that is faced with this 
very real calculation. The sewing industry will always go where 
it can be competitive. With HERO, that place can be Haiti.
    In closing, I would like to say there is a great 
opportunity for the United States, and Florida in particular, 
to supply all of the material used to build and create and 
operate this industry. The HERO bill would create a viable 
industrial complex just off the coast of the United States that 
will help keep Haitians in Haiti where they will have 
opportunity, create additional markets for American producers 
of everything from cornflakes to batteries, and bring hope and 
opportunity to this impoverished island. Thank you very much. I 
will be pleased to answer any questions that you might have.
    [The prepared statement of Mr. Woltz follows:]

   Statement of William K. Woltz, Jr., President and Chief Executive 
    Officer, Perry Manufacturing Company, Mount Airy, North Carolina

Introduction

    Good afternoon! I am William K. Woltz, Jr., President of Perry 
Manufacturing, one of the premier private label manufacturers in the 
United States, and I am pleased to be here to testify in support of 
legislation that will provide enhanced benefits for the people of 
Haiti.
    Headquartered in Mt. Airy, N.C., Perry Manufacturing has been in 
business for over 50 years and has operated in a half dozen countries. 
Perry Manufacturing owns and operates its own factories that produce 
for some of the largest retailers and Brands sold in the U.S. and 
around the world. We know how to build and run successful sewing 
operations, operations that are a source of pride to us and to our 
customers--our customers are proud to have their merchandise sewn in 
factories that have such a good work environment. Wherever we operate 
we are the best place to work, we are able to attract and keep the 
highest quality workforce.

Perry's Investment in Haiti

    We employ 550 people in Haiti and have a building under 
construction to add another thousand people, but Haiti is a very 
difficult and poor country to operate in. For years, Haiti has had a 
limited duty-free benefit for garments sewn from U.S. fabric without 
any resulting expansion of its apparel industry, proving that the 
existing restrictive benefit has been meaningless for the communities 
in the impoverished island-state.
    So why did Perry decide to stay in Haiti and possibly expand its 
operations? It is because of favorable trade legislation like HERO that 
will allow Haitian apparel to compete on a duty-free basis in the U.S. 
market.

The Global Fashion Industry

    The fashion industry is the overwhelming majority of the apparel 
industry and when the fashion industry establishes itself in a country, 
it has staying power there--it doesn't leap from low-cost country to 
low-cost country.
    The fashion industry builds and requires skills in its labor force. 
Because of its ability to change styles, use different kinds of 
fabrications, knits and woven fabrics, fashion builds a sewing supply 
chain that employs a tremendous amount of people. But without the use 
of third-party inputs, without the ability to buy fabric wherever in 
the world it is most competitive, there will be no fashion apparel 
industry in Haiti. And without enhanced trade benefits, when the global 
quotas are lifted on January 1, 2005, Haiti will be in a disadvantaged 
position vis-a-vis Asian suppliers, and can never become the apparel 
manufacturing player that it now has the opportunity to become and that 
it once was.

Haiti's Golden Opportunity

    Right now Haiti has a golden opportunity, and the prospect of a 
bright future. With legislation like HERO, the United States could act 
to transform this poverty stricken island into an apparel manufacturing 
player. But in order to compete for investments, Haiti must at least 
have as good a deal as Africa (AGOA) to have a chance to compete.
    With HERO, Haitian factories can be world competitive, and will 
have to have the ability to use the fabrics that are required by 
fashion and the ability to source these fabrics in the most competitive 
manner. With HERO, Haiti becomes an attractive market, as it gains the 
ability to build a thriving apparel industry. The ripple effect will be 
tremendous in Haiti; hundreds and hundreds of jobs are created in a 
ripple around apparel plants from feeding the workers to transporting, 
packaging, to recapping tires--the list just goes on and on.

Implications for the U.S. Textile Industry

    The benefits extend to the U.S. industry as well. Haiti can become 
an apparel center that will buy most of its supplies, packaging, trim 
and some of its fabric from its neighbor, the United States. Haiti can 
become an apparel center whose wages will be for the most part spent 
buying products from the United States.
    And I believe that there is another key point: As long as the 
sewing factories are in this hemisphere, the U.S. textile industry has 
a market to sell into. If these factories leave this hemisphere, the 
U.S. textile industry will have to rely on selling to factories in Asia 
or Africa where it will be impossible for them to compete. Indeed, HERO 
does not preclude the use of U.S. fabrics. In fact, I prefer to buy 
fabric from the United States. For one thing, I get terms in the United 
States. Here we have a competitive market where retailers are committed 
to delivering higher quality merchandise at lower prices to the 
American consumer. In order to be a supplier to the major retailers and 
major brands, Perry has no choice but to be in that value/quality 
equation. Without the ability to use fabric from anywhere in the world, 
Haiti will not be a part of that supply chain. Absent HERO, the 
factories that are now running or under construction in Haiti may or 
may not stay open or be completed. And I speak as a businessman faced 
with this very real calculation. The sewing industry must go where it 
can be competitive. With HERO that place can be Haiti.

Conclusion

    In closing I'd like to say it is a great opportunity for the United 
States and Florida in particular to supply all of the material used to 
create and operate this industry.
    The HERO bill would create a viable industrial complex just off the 
coast of the United States that would keep Haitians in Haiti where 
there will be opportunity, create additional markets for United States 
producers of everything from Cornflakes to batteries, and bring hope 
and opportunity to this impoverished country.
    I would be pleased to answer any questions that you might have.

                                 

    Chairman CRANE. Thank you. Mr. Felker?

  STATEMENT OF STEPHEN FELKER, PRESIDENT, CHAIRMAN, AND CHIEF 
 EXECUTIVE OFFICER, AVONDALE MILLS, INC., MONROE, GEORGIA, ON 
    BEHALF OF THE NATIONAL COUNCIL OF TEXTILE ORGANIZATIONS

    Mr. FELKER. Chairman Crane, Congressman Levin, Members of 
the Subcommittee, thank you very much for the opportunity to 
appear before you today. My name is Stephen Felker. I am 
Chairman, President, and CEO of Avondale Mills, a privately-
held diversified textile manufacturer with headquarters in 
Monroe, Georgia. We employ some 5,000 workers in North and 
South Carolina, Georgia, and Alabama, where we spin, weave, 
dye, and finish textiles made primarily of cotton. Our products 
are used in the apparel, home furnishing, and industrial end 
uses. I am also a member of the National Council of Textile 
Organizations and a Vice President of the National Cotton 
Council.
    The U.S. textile industry has experienced a wave of plant 
closings and job losses. In the last 6 years, we have lost some 
220,000 textile jobs, fully 33 percent of our entire workforce. 
We lost 50,000 jobs in 2003 alone. With this in mind, our 
industry is fearful that the Senate-passed HERO would only lead 
to more job losses. We are pleased that the Committee is 
willing to consider alternative approaches to providing 
assistance to Haiti.
    Under the Caribbean Basin Trade Partnership Act (CBTPA) 
(P.L. 106-200), which granted duty-free treatment to garments 
made in the region of U.S. yarns and fabrics, the U.S. textile 
industry has developed mutually beneficial trading partnerships 
with apparel makers in many Caribbean countries. Haiti has been 
a part of the success. In 2002, the value of U.S. textile 
exports to Haiti had risen 176 percent over the 3 previous 
years. In fact, 70 percent of Haiti's garment exports to the 
United States are made from U.S. components.
    We note, however, that U.S. exports to all CBTPA countries 
slowed in 2003 from the 220-percent growth rate over the 
previous 3 years to only 6-percent growth. The CBTPA apparel 
trade, including with Haiti, is off this year, as my written 
statement details. This we attribute in large part to increase 
in imports of Chinese apparel, imports that are, frankly, 
representative of the damage being done around the world due to 
China's enormous disruptive currency manipulation, its enormous 
subsidies, illegal tax rebates, and use of non-performing loans 
to gain competitive advantage.
    Now, how does Congress achieve a win-win solution that 
benefits the workers of the United States and is consistent 
with the fundamentals of CBTPA? Well, the one thing that 
Congress must not do is enact the Senate-passed bill. It will, 
frankly, mostly benefit Chinese and other Asian producers of 
yarn and fabric. The U.S. textile industry and our workers will 
be the losers, as will apparel producers in other CBTPA 
countries.
    Make no mistake, the Senate-passed bill creates an enormous 
and irresistible incentive for apparel makers to shut down 
their operations elsewhere in the Caribbean and Central America 
and move to Haiti, where they can freely utilize Chinese 
fabrics and Chinese yarns and still get the same zero-duty 
access to the valuable U.S. market. Importers and retailers 
will quickly shift their orders to Haiti and the price will be 
paid by U.S. textile workers and by apparel workers in other 
CBTPA countries. From a U.S. perspective, we will not only lose 
our export market in Haiti, but also much of our export market 
in other Caribbean and Central American countries.
    The second problem is that the bill encourages 
transshipment through Haiti. Haiti clearly lacks effective 
legal and enforcement systems, Chinese manufacturers will be 
able to easily transship apparel directly through Haiti in 
order to take advantage of zero-duty benefits.
    Now, let us focus on a solution. The number one challenge 
of conducting business in the entire region is this lack of 
working capital. We urge Congress to consider legislation that 
makes financial and operational services of U.S. export credit 
and financing agencies available to U.S. textile and apparel 
companies. The Overseas Private Investment Corporation, the 
Export-Import Bank of the United States, the Trade Development 
Agency can be brought into this effort. Our industry has had 
difficulty obtaining effective U.S. Government financing of 
exports and overseas activities that utilize U.S. inputs. 
Congress has already authorized preferential treatment for 
garment imports from Haiti utilizing U.S. inputs through the 
CBTPA.
    Congress could further assist Haiti in fully recognizing 
the benefits of this program by helping finance their working 
capital through the guarantee of receivables of U.S. companies 
selling there. Such a program in Haiti could serve as a pilot 
program for similar initiatives in other Caribbean and Central 
American nations and would be very beneficial in helping the 
partnerships our industry has established there as we face 
together the challenges of predatory Chinese market share 
strategies in the years to come. In closing, Mr. Chairman, I do 
believe that there are concrete steps that can be taken to help 
Haiti, actions which will produce a win-win situation for 
Haiti, U.S. textile companies, our workers, and our customers 
in the apparel industry throughout other CBTPA nations. Thank 
you.
    [The prepared statement of Mr. Felker follows:]

 Statement of Stephen Felker, President, Chairman, and Chief Executive 
 Officer, Avondale Mills, Inc., Monroe, Georgia, on behalf of National 
                    Council of Textile Organizations

    Chairman Crane, Congressman Levin, members of the Subcommittee.
    Thank you for this opportunity to appear before you today.
    My name is Stephen Felker. I am chairman, president and CEO of 
Avondale Mills, Inc., a privately held, diversified textile 
manufacturer with headquarters in Monroe, Georgia. We employ some 5,000 
workers in facilities in North Carolina, South Carolina, Georgia and 
Alabama, where we spin, weave, dye and finish textiles made primarily 
from cotton raw materials. Our products are used in apparel, home 
furnishings and industrial end manufacturing. I am also a member of the 
board of directors of the National Council of Textile Organizations and 
a vice president with the National Cotton Council.
    Since the late 1990s, the United States textile industry has 
experienced an unprecedented wave of plant closings and job losses. In 
the last six years, we have lost some 220,000 textile jobs, fully 33 
percent of our entire workforce. We lost 50,000 jobs in 2003 alone. 
With this in mind, our industry is fearful that the Senate-passed S. 
2261 would only lead to more job losses in our industry, and we are 
pleased that the Committee is willing to consider alternative 
approaches to providing economic assistance to Haiti.
    Under the Caribbean Basin Trade Partnership Act (CBTPA), which 
granted duty-free treatment to garments made in the region of U.S. 
yarns and fabrics, the U.S. textile industry has developed mutually 
beneficial trading partnerships with apparel makers in many Caribbean 
countries. U.S. textile exports to the CBPTA countries soared by 220 
percent in the three years beginning in 2000 when the law was enacted.
    Haiti, as a CBTPA beneficiary country, has been part of this 
success. In 2002, the value of U.S. textile exports to Haiti had risen 
approximately 176 percent in the three years since 1999. In fact, 70 
percent of Haiti's garment exports to the U.S. are made from U.S. 
components.
    We note, however, that total U.S. exports to all CBTPA countries 
slowed in 2003 from the 220 percent growth rate over the previous three 
years to only six percent growth, and CBTPA apparel exports to the U.S. 
are down four percent so far this year. Moreover, U.S. textile exports 
to Haiti actually fell by 12 percent in 2003, and Haitian apparel 
imports to the U.S. are subsequently down by nearly 14 percent this 
year. These figures we attribute in large part to increases in imports 
of decontrolled Chinese apparel--imports that are frankly 
representative of the damage being done around the world due to China's 
enormously disruptive currency manipulation, its enormous subsidies, 
illegal tax rebates and use of non-performing loans to gain competitive 
advantage.
    China has taken 72 percent of the U.S. market in products that had 
their quotas removed two and a half years ago. It trounced all 
competitors, including Haiti and Sub-Saharan Africa, which was already 
receiving the benefits similar to those available in the Senate-passed 
Haiti bill. I would note that imports from Haiti in those product 
categories fell 53 percent, from 8.6 million square meters to 4.0 
million square meters in 30 months time. Imports from China during the 
same period of time increased 1 BILLION square meters. Thus, a solution 
for Haiti--and apparel exporters throughout Mexico, the Caribbean and 
the Andean region--must include the use of safeguards against China and 
strong action on unfair trade practices.
    But relevant to today's discussion is--How does the Congress 
achieve a win-win solution that benefits textile manufacturers in the 
U.S. and apparel makers in Haiti, which is consistent with the 
fundamental basis of CBTPA? Well the one thing the Congress must not do 
is enact the Senate-passed bill--this might help some apparel makers in 
Haiti, but it will frankly benefit mostly Chinese and other Asian 
producers of yarn and fabric. And the U.S. textile industry and our 
workers will be the losers, as will apparel producers in other CBTPA 
countries.
    Make no mistake--the Senate-passed bill creates an enormous and 
irresistible incentive for apparel makers to shut down their operations 
elsewhere in the Caribbean and Central America, and move to Haiti, 
where they can freely utilize Chinese fabrics made of Chinese yarn and 
still get the same zero-duty access to the valuable U.S. market. All of 
this, plus Haiti's already incredibly low labor costs, would give Haiti 
an advantage that no country in the region can beat. Importers and 
retailers will quickly shift their orders to Haiti, and the price will 
be paid by U.S. textile producers and our workers and by apparel 
workers in the other CBTPA countries. From a U.S. perspective, we will 
thus not only lose our export market in Haiti, but much of our export 
market in other Caribbean and Central American countries.
    The second problem is that the bill encourages transshipment 
through Haiti. Because Haiti clearly lacks an effective legal or 
enforcement system, Chinese manufacturers would be able to easily 
transship apparel directly through Haiti in order to take advantage of 
zero duty benefits. It is much more difficult to catch transshipments 
when U.S. yarns and fabrics are not required--in fact, Customs' ability 
to do so was severely criticized in a GAO report last year. If this 
bill is passed, a significant portion of the benefits will go to 
unscrupulous Chinese manufacturers who manipulate the system and 
utilize unfair trade practices to gain an enormous advantage.
    Let me quantify this for the Committee--if enacted, this bill would 
ultimately mean that nearly $2 BILLION in apparel exports will shift 
from other Caribbean and Central American countries to Haiti. This is 
twice the size of current exports from Costa Rica and forty percent 
more than what Guatemala even produces. And over time, our industry 
expects U.S. mills to lose almost $1 BILLION in export orders currently 
going to the region, and tens of thousands of U.S. jobs will be lost to 
China.
    I also want to point out that the Senate bill provides for duty-
free benefits retroactive to October 1, 2003. In other words, millions 
of dollars worth of tax rebates will be provided not to Haiti but to 
importers for goods that have entered the country in the past 12 
months. Haitian apparel makers and their workers will not benefit at 
all from these rebates. Only the importers' bottom line will realize 
the profits of this provision and at the expense of U.S. taxpayers who 
are left footing the bill.
    Rather than a single-minded approach that will benefit Chinese 
textile producers at the expense of textile producers and workers in 
the U.S. and other Caribbean countries, I want to suggest a more broad-
based approach. Recent studies by NCTO, by the International Trade 
Commission and by the World Trade Organization, all conclude that China 
will dominate global textile and apparel trade if quotas are permitted 
to expire at the end of this year as currently scheduled. As such, it 
makes no sense to put all the Haitian eggs in a textile and apparel 
basket.
    Instead, we would urge that Congress commit to providing the 
support Haiti needs to diversify its economy. Because our expertise is 
in the textile arena, we are not prepared to recommend specific steps 
or economic interests to pursue, but rather would simply encourage you 
to move in this direction. A one-shot approach to Haiti's economic 
problems is far too risky to provide that nation with the assistance it 
needs for a sustainable economic recovery.
    At the same time, we would encourage Congress to provide Haiti with 
such form of support as you might deem appropriate to help that country 
become more stable. Clearly, the unrest in Haiti is a disincentive to 
any business thinking about re-locating to that country, and we would 
urge that a comprehensive Haitian approach include steps to help 
promote political and social stability there as well. In the absence of 
these fundamental tenets, an environment to support sustained economic 
development will never materialize.
    With regard to the textile and apparel sector, we urge Congress to 
consider legislation that ensures the financial and operational 
services from U.S. export credit and financing agencies are available 
to U.S. textile and apparel companies that choose to do business in 
Haiti. Traditionally, the Overseas Private Investment Corporation 
(OPIC), the Export Import (ExIm) Bank, and the Trade Development Agency 
(TDA) have avoided sensitive industries, including U.S. textile and 
apparel firms and their suppliers. As a result, our industry has had 
difficulty seeking U.S. Government financing of our exports and 
overseas activities that utilize U.S. inputs. Since Congress has 
already authorized preferential access for garment imports from Haiti 
utilizing U.S. inputs through the CBTPA, Congress could further assist 
Haiti in fully realizing the benefits of this program by supporting 
U.S. export and investment financing for the U.S. inputs that go into 
those imports.
    Such a program in Haiti could serve as a pilot program for similar 
initiatives in other Caribbean and Central American nations and would 
be very beneficial in helping the partnerships our industry has 
established there try to withstand the challenges they will certainly 
face from Chinese imports in the years to come. Additionally, since 
many other countries already provide favorable export financing in 
support of their textile and apparel products, we maintain it would be 
appropriate, and mutually beneficial to both the U.S. and Haiti, for 
our government to provide similar tools in support of U.S. textile and 
apparel industries and their workers, as well as workers in Haiti.
    In closing, Mr. Chairman, I do believe there are concrete steps 
that can be taken to help Haiti, actions which will produce a win-win 
situation for Haiti, U.S. textile companies, our workers, and our 
customers in the apparel industry throughout the other CBTPA countries.
    Thank you.

                                 

    Chairman CRANE. Thank you, Mr. Felker. Mr. Baker?

STATEMENT OF JEAN EDOUARD BAKER, PRESIDENT, VETEMENTS TEXTILES, 
                  S.A., PORT-AU-PRINCE, HAITI

    Mr. BAKER. Mr. Chairman, distinguished Members of the 
Subcommittee, it is a privilege to be before your prestigious 
Committee this afternoon. As a Haitian citizen and 
manufacturer, I am conscious of the responsibility that is upon 
me to present and defend an issue that could have tremendous 
impact upon my country. I am here to support HERO, introduced 
in the House by Congressman Clay Shaw. This version was 
introduced in the Senate by your esteemed colleague, Senator 
DeWine, and passed in June of this year. It is the best deal 
for Haiti.
    In the last two decades when Haiti was struggling to emerge 
from dictatorship and political turmoil, there has been one 
element that has never been addressed, the fundamental need for 
long-term job creation as a part of the transition. Can a 
country without a growing economy and vibrant middle class ever 
become a democracy?
    Let me take a moment to address some of Haiti's challenges. 
First, chronic mismanagement by a series of governments. 
Second, overpopulation. Haiti has 9 million inhabitants, with 
the majority concentrated in the cities where jobs are scarce. 
Estimates show that 70 percent of Haiti's working-age 
population is unemployed or under-employed. Third, no 
significant natural resources. Fourth, inadequate and decaying 
infrastructure.
    In the face of these issues, Haiti's once dynamic apparel 
industry is no longer competitive. In the 1980s, Haiti's 
industry supported 60,000 jobs. Now the sector employs only 
20,000 workers. What Haiti needs and what we are hoping to gain 
with the HERO bill as introduced by Representative Shaw are 
AGOA-type incentives. The AGOA recognized that the least-
developed countries of Africa deserve special treatment. As the 
only least-developed country in this hemisphere, I believe that 
granting similar incentives to Haiti is the right thing to do. 
I fully support the Congress's efforts to assist these African 
countries and I take this opportunity to congratulate Chairman 
Thomas and Congressman Rangel for the leadership that they have 
shown on AGOA. Your lesser developed country neighbor deserves 
these benefits, too.
    In light of the quota elimination in January and stiff 
competition in other suppliers, the only way Haitian companies 
can compete is through a duty advantage that provides a simple 
and flexible rule of origin with no tricks that anyone can 
understand and apply. This bill would be a win-win situation 
for the United States. It does not threaten U.S. jobs. In a 
recent U.S. Agency for International Development study, the 
executive summary of which I have submitted with my written 
testimony, it says the following. ``There should be no adverse 
impact on U.S. apparel manufacturers since the type of apparel 
that could conceivably enter from Haiti under the new provision 
of HERO have long since left the United States for offshore 
operations.''
    It should also be noted that by keeping production in 
Haiti, statistics show that 15 to 20 percent of inputs are from 
the United States, even if the main body fabric is from a third 
country. When quotas in China expire at the end of the year, it 
is expected that there will be a massive production shift to 
China. China, unlike Haiti, produces its own inputs. Therefore, 
there would be no increase in U.S. exports to China, but 
instead the net loss as production moves away from countries 
like Haiti.
    I would like to make a few important points before 
concluding. First, as we create jobs and bring stability to 
Haiti, we alleviate the migration problems of Haitians going to 
the Dominican Republic, the Bahamas, and, of course, Florida. 
Second, every job created in the manufacturing sector in Haiti 
has the potential to create one-and-a-half short- and long-term 
jobs in related service sectors. Third, the average Haitian 
worker supports seven dependents. Estimates show that 
production growth could create 100,000 direct jobs over the 
next 5 years. If we factor in the indirect employment, the 
potential impact of this bill on Haiti's economy and society 
would be staggering, giving access to proper nutrition, health 
care, and education to millions. Access to these fundamental 
human rights is a cornerstone of democracy.
    Finally, I have included figures from the U.S. Census 
Bureau and U.S. International Trade Commission showing recent 
U.S. trade statistics with my testimony. The figures for Haiti 
reflect normal trade patterns over the past decade. Haiti 
imports about twice as much from the United States as it 
exports to the United States. Other trading partners show a 
negative balance with the United States. Estimates are that for 
every dollar generated in Haiti, 60 percent is sent to the 
United States. Therefore, a stronger Haitian economy implies 
increased export of U.S. goods and services to Haiti. This is a 
true win-win situation.
    In closing, I want to thank you for allowing me to appear 
before you today. You have the opportunity to do something 
historic in passing HERO as introduced by Congressman Shaw. The 
saying, ``trade, not aid,'' is perhaps not applicable to Haiti. 
We need aid. By passing this bill, perhaps 10 years from now, 
you will have changed the face of a nation to where aid is the 
exception and opportunity is the norm. Thank you.
    [The prepared statement of Mr. Baker follows:]

 Statement of Jean Edouard Baker, President, Vetements Textiles, S.A., 
                         Port-Au-Prince, Haiti

    Distinguished Members of the Sub-Committee:
    It is a privilege to be before your prestigious Committee this 
afternoon. As a Haitian citizen and a manufacturer I am conscious of 
the responsibility that is upon me to present and defend an issue that 
could have tremendous impact upon my country.
    I am here to support the Haitian Economic Recovery Opportunity Act 
of 2004 introduced in the House by Congressman Clay Shaw. This version 
was introduced in the Senate by your esteemed colleague, Senator Mike 
DeWine, and passed in June of this year. It is the best bill for Haiti.
    Many Committee members are long-time friends of Haiti, and like 
many of its citizens you have posed the question: ``Will Haiti ever 
move past its problems?'' I know, as you do, that if hope and good 
intentions could change the course of history, this hearing would not 
be necessary--Haiti would be the thriving, stable neighbor that we 
aspire to being. But we all know that it takes more than this. The 
international community has had to physically intervene too often. In 
the last two decades however, when Haiti was struggling to emerge from 
dictatorship and political turmoil, there has been one element that has 
never been addressed: the fundamental need for long-term job creation 
as a part of the transition. Can a country without a growing economy 
and vibrant middle-class ever become a democracy?
    Let me take a moment to address some of Haiti's challenges:
    First: Chronic mismanagement by a series of governments.
    Second: Overpopulation--Haiti has 9 million inhabitants with the 
majority concentrated in the cities where jobs are scarce. Estimates 
show that 70% of Haiti's working-age population is unemployed or under-
employed.
    Third: no significant natural resources.
    Fourth: Inadequate and decaying infrastructure.
    In the face of these issues, Haiti's once dynamic apparel industry 
is no longer competitive. In the 1980s, Haiti's industry supported 
60,000 jobs. Now the sector employs only 20,000 workers.
    One of the fundamental reasons for this drop was of course the 
international embargo in the early 1990s. And while Haiti was under the 
embargo, the rest of the world was changing. Globalization was 
underway, with China and the rest of Asia emerging as aggressive 
competitors. Countries of the Caribbean Basin had received significant 
development funding to build modern infrastructure including ports and 
airports, roads, electricity and telecommunications. When Haiti emerged 
from the embargo, although the new era was greeted with hope, it 
quickly became clear that the manufacturing sector was not getting the 
support that it needed. And left to fend for itself, it struggled to 
compete internationally.
    What Haiti needs, and what we are hoping to gain with the HERO bill 
as introduced by Representative Shaw, are AGOA-type incentives. The 
African Growth and Opportunity Act, passed unanimously by Congress in 
2000 and renewed this year, recognized that the Least Developed 
Countries of Africa deserved special treatment. As the only Least 
Developed Country in this hemisphere, I believe that granting similar 
incentives to Haiti is the right thing to do. I fully support the 
Congress' efforts to assist these African countries; but your LDC 
neighbor deserves these benefits too. In light of the quota elimination 
in January, and stiff competition with other suppliers, the only way 
Haitian companies can compete is through a duty advantage that provides 
a simple and flexible rule of origin, with no tricks, that anyone can 
understand and apply.
    This will provide critical security and lowered risk for investors 
in Haiti's future--foreign investors and local investors like myself. I 
have five factories in Haiti, and employ 800 people. All of these 
factories were burned down to the ground during the recent looting--
looters even took the roofs off the buildings. My 800 workers had no 
sewing machines to work on, no buildings to go to work to, but knowing 
that they have no other support, I struggle to rebuild my factories. 
Even now, I have only been able to start up one of the factories and 
put 150 people back to work. But I have confidence that with hard work 
and great financial difficulties for my company and my family, I can 
get my factories back on line, but I need to know that there is 
security in my investment, and that there will be the opportunity to 
compete.
    This bill would be a win-win situation for the United States. It 
does not threaten U.S. jobs and a recent USAID study, the executive 
summary of which I have submitted with my written testimony (Attachment 
1), says the following:

          ``There should be no adverse impact on U.S. apparel 
        manufacturers since the type of apparel that could conceivably 
        enter from Haiti under the new provisions of HERO have long-
        since left the United States for offshore operations.'' 
        Furthermore, according to the study as regards to any 
        displacement of U.S. textile mill products: ``If there is any 
        diversion, it is most likely to come at the expense of imports 
        from the Far East made with no U.S. components. . . .''

    It should also be noted that by keeping production in Haiti, 
statistics show that 15-20% of inputs are from U.S.--even if the main 
body fabric is from a third country. Just as an example, my company 
uses a large number of American inputs, including American buttons, 
American thread, American zippers, American labels, and American 
packing materials and my goods are shipped on an American shipping 
line. When quotas on China expire at the end of the year, it is 
expected that there will be a massive production shift to China. China, 
unlike Haiti, produces its own inputs, therefore there will be no 
increase in U.S. exports to China, but instead, a net loss as 
production moves away from countries like Haiti.
    I would like to make a few important points before concluding:
    First: As we create jobs and bring stability to Haiti, we alleviate 
the migration problems of Haitians going to the Dominican Republic, the 
Bahamas, and, of course, Florida.
    Second: Every job created in the manufacturing sector in Haiti has 
the potential to create one and a half short- and long-term jobs in 
related service sectors including construction, food service, etc.
    Third: The average Haitian worker supports seven dependents. 
Estimates show that production growth could create 100,000 direct jobs 
over the next five years. If we factor in the indirect employment, the 
potential impact of this bill on Haiti's economy and society could be 
staggering, giving access to proper nutrition, healthcare, and 
education to millions. Access to these fundamental human rights is a 
cornerstone of democracy.
    Finally, I have included figures from the U.S. Census Bureau and 
USITC showing recent U.S. trade statistics with my testimony 
(Attachment 2). The figures for Haiti reflect normal trade patterns 
over the past decade: Haiti imports about twice as much from the U.S. 
as it exports to the U.S. Other trading partners show a negative 
balance with the U.S. 80% of Haitian imports are from the United 
States, and this will not change. Estimates are that for every dollar 
generated in Haiti, 80% is sent back to the U.S. Therefore a stronger 
Haitian economy implies increased export of U.S. goods and services to 
us. This is a true win-win situation.
    In closing, I want to thank you for allowing me to appear before 
you today. You have the opportunity to do something historic in passing 
HERO as introduced by Congressman Shaw. The saying ``trade, not aid'' 
is perhaps not applicable to Haiti--we need aid. But by passing this 
bill, perhaps ten years from now you will have changed the face of a 
nation to where aid is the exception, and opportunity is the norm.
    Thank you.

                                 

    Chairman CRANE. Merci beaucoup. Ms. Fox?

  STATEMENT OF JANET E. FOX, VICE PRESIDENT FOR INTERNATIONAL 
SOURCING AND INTERNATIONAL MERCHANDISING DIRECTOR, J.C. PENNEY 
              PURCHASING CORPORATION, PLANO, TEXAS

    Ms. FOX. Good afternoon, Mr. Chairman, Members of the 
Committee on Ways and Means. My name is Janet Fox and I am the 
Vice President for International Sourcing for J.C. Penney 
Purchasing Corporation, the global source and arm for J.C. 
Penney stores. J.C. Penney is one of America's largest 
retailers. We have over 1,000 stores and last year had $18 
billion in retail sales. Within my capacity as Vice President 
for International Sourcing, I am responsible for the 
development of our strategic sourcing plans and managing the 
assets to support our global merchandise sourcing. Last year 
alone, J.C. Penney Purchasing international purchase of goods 
were valued at over $7 billion at retail. Our extensive global 
sourcing experience places J.C. Penney in a unique position to 
understand and comment on the proposed Haiti trade legislation 
and its potential impact on the sourcing decision of U.S. 
purchasers.
    I appreciate the opportunity to testify before you on the 
very important issue of helping Haiti, a country which faces 
tremendous obstacles, with its economy under severe pressure 
and its private sector struggling to maintain the nation's 
fragile but critical employment base. J.C. Penney currently 
purchases about $10 million worth of apparel, primarily knit t-
shirts and underwear, from Haiti, or about 3 percent of Haiti's 
current apparel exports to the United States. Frankly, however, 
that is a very small part of our international sourcing, and as 
we plan our business for 2005 and beyond, looking forward to 
the removal of quotas, whether our suppliers in Haiti will 
remain a part of our strategy will depend largely and directly 
upon whether Haiti can overcome the substantial competitive 
disadvantages it currently faces.
    With the elimination of quotas, there will be unprecedented 
consolidation in the industry, a process we expect will evolve 
over the next 5 years. The quota system has bred inefficiency 
and helped bring about an oversupply of manufacturers that 
otherwise would have been noncompetitive. J.C. Penney, like all 
retailers, is addressing how it must change its business in 
response to quota elimination. To compete successfully in this 
new quota-free environment, we will gradually reduce the number 
of suppliers we do business with and grow our business with 
fewer suppliers. In a quota-free environment, we will have no 
choice to be very discriminating as to who our suppliers will 
be, selecting only those who can provide real value to our 
customer. Value does not mean the product with the cheapest 
price. It means the supplier that is able to provide a quality 
product and service, including speed to market and supply chain 
efficiency and reliability.
    Right now, Haiti's prospects once quota are eliminated are 
not good. The uncertain political situation in Haiti and 
potential for supply chain disruption has made some companies 
reluctant to take the risk of even sourcing there. Another 
disadvantage is that, currently, we feel only simple garments 
can be produced in Haiti. More sophisticated products must be 
produced elsewhere.
    The CBTPA does not provide Haiti with a competitive 
advantage. Given the current level of skills and productivity 
for Haitian workers, the higher price point for U.S. yarns and 
fabric makes Haitian-made CBTPA-compliant products 
uncompetitive. To offset the lower skills and productivity in 
Haiti, it makes more sense to use Asian fabric and pay full 
duty. We believe doing business in Haiti is the right thing to 
do, both to help the people of Haiti and in the interest of 
U.S. security, J.C. Penney is closely following the actions of 
the Congress to provide meaningful incentives to retailers and 
suppliers to continue to source and produce goods in Haiti. We 
have carefully considered each of the options noted in the 
Committee's hearing notice, as well as the third-country fabric 
option presented by the HERO Act approved by the Senate, and 
the cumulation concept put forward by Mr. Shaw last year, and 
we have even tried to come up with a few ideas of our own.
    Duty-free access for apparel produced in Haiti for fabric 
produced anywhere in the world would provide the greatest 
incentive for J.C. Penney to continue to purchase from Haitian 
suppliers and perhaps even expand that business. Only with 
third-country fabric can Haitian manufacturers offset the 
limitation of the skills and productivity of their workers. 
However, in our opinion, Haiti would not require the same level 
of benefits as provided to the 40-plus countries under the 
AGOA.
    We are doubtful that Haiti could produce enough garments to 
account for more than 1.5 percent of total apparel imports into 
the United States. Right now, about two-thirds of 1 percent of 
the imported apparel entering the United States comes from 
Haiti. Doubling that would be a significant increase, 
especially in light of increased competitiveness of other 
suppliers once quotas are eliminated. Allowing third-country 
fabric but with a lower cap than AGOA would allow Haitian 
suppliers to remain competitive while realistically reflecting 
the production capabilities of the country.
    We have reviewed a number of the proposed trade preference 
options. Contained within the written testimony we submitted 
are more extensive comments on each of these options and its 
implications to my company. Whether it be preference-based on 
imports, value-added rules, or single transformation, Haiti 
must compete in the world market. Retailers and importers 
operate with economic realities. Haiti's poor infrastructure, 
low sewing efficiencies, will need offsets. With the 
elimination of quota in 2005, the Committee now has a narrow 
window of opportunity to act to create a system of incentives 
for apparel producers to remain in Haiti and for U.S. retailers 
to continue to purchase Haitian products. We believe that the 
Senate bill, HERO, does provide enough incentive to accomplish 
this goal. J.C. Penney very much wants to work with the 
Committee to develop a viable and meaningful program of 
benefits for Haiti. Thank you.
    [The prepared statement of Ms. Fox follows:]

  Statement of Janet E. Fox, International Merchandising Director and 
    Vice President, J.C. Penney Purchasing Corporation, Plano, Texas

    Good afternoon, Mr. Chairman, members of the Ways and Means 
Committee. My name is Janet Fox. I am the Vice President for 
International Sourcing for J.C. Penney Purchasing Corporation 
(``JCPPC''), the global procurement arm for merchandise for sale in 
JCPenney stores, catalog and internet operations. JCPenney is one of 
America's largest department store, catalog and e-commerce retailers 
employing approximately 150,000 associates. As of May 1, 2004, JCPenney 
operated 1,021 department stores throughout the United States and 
Puerto Rico. JCPenney's fiscal 2003 sales were $18 billion.
    I have 18 years experience in international sourcing. Within my 
capacity as Vice President for International Sourcing of JCPPC, I am 
responsible for the development of our strategic sourcing plans and 
managing the assets to support our global merchandise procurement. We 
currently purchase and import merchandise from 55 countries worldwide 
and from all areas of the globe ranging from nearby Mexico to China and 
Southeast Asia to the countries of the Sub-Saharan Africa. Last year 
alone, JCPPC's international purchases of goods were valued at $7 
billion retail. Our extensive global sourcing experience places 
JCPenney in a unique position to understand and comment on the proposed 
Haiti trade legislation and its potential impact on the sourcing 
decisions of U.S. purchasers.
    I appreciate the opportunity to testify before you on the very 
important issue of helping Haiti, a country which faces tremendous 
obstacles, with its economy under severe pressure and its private 
sector struggling to maintain the nation's fragile, but critical, 
employment base. JCPenney currently purchases about $10 million worth 
of apparel, primarily knit underwear, from Haiti, or about three 
percent of Haiti's current apparel exports to the U.S. Frankly, 
however, that amount is a very small part of our international sourcing 
and as we plan our business for 2005 and beyond, looking forward to the 
watershed event of the removal of quotas, whether our suppliers in 
Haiti will remain a part of our sourcing strategy will depend directly 
upon whether Haiti can overcome the substantial competitive 
disadvantages it currently faces.
    With the elimination of quotas, there will be unprecedented 
consolidation in the industry; a process we expect will evolve over the 
next five years. The quota system has bred inefficiency, and helped 
bring about an over supply of manufacturers that otherwise would not 
have been competitive. JCPenney, like all retailers, is addressing how 
it must change its business in response to quota elimination. To 
compete successfully in this new quota free environment, we will 
gradually reduce the number of suppliers we do business with and grow 
our business with fewer suppliers. This will result in the reduction of 
the number of countries and locations where apparel is produced. 
Currently, we are in the process of narrowing our lists of suppliers in 
each product category. In the new quota free environment, we will have 
no choice but to be very discriminating about our suppliers, selecting 
only those who can provide real value to our customers. Value does not 
mean the product with the cheapest price. It means a supplier that is 
able to provide a quality product and service, including speed to 
market and supply chain efficiency and reliability.
    Right now, Haiti's prospects once quotas are eliminated are not 
good. The uncertain political situation in Haiti and potential for 
supply chain disruption has made some companies reluctant to take the 
risk of sourcing there. Another disadvantage is that currently only 
simple garments can be produced in Haiti; more sophisticated products 
must be produced elsewhere. The Caribbean Basin Trade Partnership Act 
(``CBTPA''), providing duty-free access to a limited quantity of 
apparel produced in the region from U.S. or regional fabrics produced 
from U.S. yarns, does not provide Haiti with a competitive advantage. 
It is not the cap that is the problem. Given the current level of 
skills and productivity for Haitian workers, the higher price point for 
the U.S. yarns and fabrics makes Haitian-made CBTPA compliant products 
uncompetitive. To offset the lower skills and productivity in Haiti, it 
makes more sense to use Asian fabric and pay full duty.
    Because we believe doing business in Haiti is the right thing to 
do, both to help the people in that country and in the interests of 
U.S. security and the security of the Western Hemisphere, JCPenney is 
closely following the actions of the Congress to provide meaningful 
incentives to retailers and suppliers to continue to source and produce 
goods in Haiti. We have carefully considered each of the options noted 
in the Committee's hearing notice, as well as the third country fabric 
option presented by the HERO Act approved by the Senate and the 
cumulation concept put forward by Mr. Shaw last year, and even tried to 
come up with a few ideas of our own. The remainder of my testimony will 
address each of these options and ideas.
    Obviously, duty-free access for apparel produced in Haiti from 
fabric produced anywhere in the world would provide the greatest 
incentive for JCPenney to continue to purchase from Haitian producers 
and perhaps expand that business. Only with third country fabric can 
Haitian manufacturers offset the limitations of the skills and 
productivity of their workers. However, in our opinion, Haiti would not 
require the same level of benefit as provided to the 40 countries under 
the AGOA. We are doubtful that Haiti could produce enough garments to 
account for more than 1.5 percent of total apparel imports into the 
U.S. Right now, about two-thirds of one percent of the imported apparel 
entering the U.S. comes from Haiti. Doubling that amount would be a 
significant increase, especially in light of the increased 
competitiveness of other suppliers once quotas are eliminated. Allowing 
third country fabric but with a lower cap than AGOA would allow Haitian 
suppliers to remain competitive while realistically reflecting the 
production capability of the country.
    A preference system based upon the use of inputs made in countries 
with which the U.S. has free trade agreements or unilateral preference 
arrangements might also provide a limited incentive for sourcing 
apparel in Haiti. There are no textile mills in Haiti but there are a 
few knit textile factories in Guatemala and Mexico that could be a 
source for some fabrics. Unfortunately, Mexico's quality is weak in 
knit fabrics. Colombia and Peru produce yarns and fabrics, but the 
costs and logistics of moving those inputs to Haiti make little sense, 
especially given the types of basic level garments Haitian 
manufacturers are currently capable of sewing.
    We have considered whether a value added rule for determining 
eligibility for duty-free access would provide an incentive for placing 
orders in Haiti. With fabric generally accounting for about 75 percent 
of the cost of producing a garment, and labor accounting for only 25 
percent, the minimum threshold for U.S. or regional content, including 
labor, would probably have to be no more than 35 percent for JCPenney 
suppliers to consider taking advantage of such a rule. You have to keep 
in mind that the garments that can be made in Haiti today are very 
simple ones, things like underwear and t-shirts. There is little more 
than fabric, thread and elastics, as well as packing materials, 
involved, so that provides limited options for fulfilling the 35 
percent minimum local or regional content. A 50 percent minimum local 
or regional content would not be feasible for the type of garments 
Haiti is capable of producing.
    We have also considered whether such a value added rule would be 
more useful if it were based upon overall production over an annual 
period, rather than on a shipment by shipment basis. An annual 
accounting process similar to the one that applies today for brassieres 
under the CBTPA would be extremely unattractive, creating an auditing 
nightmare for any supplier that is not vertically integrated and cannot 
readily obtain the necessary information. For a retailer like JCPenney, 
a purchaser of finished products, we would be required to obtain all 
the necessary cost information from our vendors and their 
subcontractors. The accounting burden on JCPenney would be cost 
prohibitive.
    A single transformation rule of origin for duty-free access for 
selected products also might provide a basis for JCPenney to continue 
to purchase Haitian products after this year, if the right products are 
covered. Obviously, a single transformation rule means third country 
fabric could be used. So long as that were not burdened with additional 
conditions, such as the use of thread sourced from particular locations 
or limitations on the use of foreign origin findings and trimmings, 
such a rule for the products that Haiti is capable of producing is 
clearly worth considering. We would suggest that it must include at a 
minimum all of the basic apparel items, including underwear, knit tops, 
and basic wovens. In fact, we might suggest that if this were the 
approach taken, a negative list might be more appropriate to avoid any 
confusion, so that all products other than those expressly excluded are 
eligible, and only tailored garments, such as suit-type jackets or 
lined dress pants, which are highly unlikely to be produced in Haiti 
anyway, would be excluded. We strongly urge the Committee not to 
structure such a program on a product-specific basis with quantitative 
limits on eligibility set by product. That level of control creates 
increased costs and risks, undermining the value of the benefit.
    The proposed distinction in treatment between knit and woven 
garments is unlikely to provide an incentive to source in Haiti. While 
we would welcome the opportunity to produce woven apparel in Haiti, the 
distinction between knits and wovens created under the CBTPA is 
unfortunate. An opportunity for the Caribbean and Central American 
countries to invest in woven fabric mills was probably lost as a result 
of this distinction and offering incentives for such mills now, with 
quota elimination just a few months away, is likely too late.
    Haiti must compete in a world market. Retailers and importers 
operate with economic realities. Haiti's poor infrastructure, low 
sewing efficiencies, will need offsets. With the elimination of quota 
in 2005, the Committee now has a narrow window of opportunity to act to 
create a system of incentives for apparel producers to remain in Haiti 
and for U.S. retailers to continue to purchase Haitian products. We 
believe that the Senate bill # S. 2261 as written does provide enough 
incentives to accomplish this goal.
    JCPenney very much wants to work with the Committee to develop a 
viable and meaningful program of benefits for Haiti. We know that we 
both want to do the right thing and that we all must be open-minded and 
flexible. I sincerely hope that the thoughts JCPenney has provided to 
the Committee today are the beginning of a fruitful and useful 
discussion, one that we can complete in time to truly help Haiti. Thank 
you.

                                 

    Chairman CRANE. Thank you, Ms. Fox. Mr. Levinson?

    STATEMENT OF MARK LEVINSON, CHIEF ECONOMIST, UNITE HERE

    Mr. LEVINSON. Mr. Chairman, Members of the Committee, my 
name is Mark Levinson. I am the Chief Economist at UNITE HERE, 
a union of 450,000 apparel, textile, laundry, distribution, 
hotel, and gaming workers. The apparel and textile industries 
in the United States are in crisis. Hundreds of plants have 
closed. Communities are devastated. Since January 2001, these 
industries have lost over a-third-of-a-million jobs. Since what 
our members call the so-called economic recovery began, these 
industries have lost 196,000 jobs.
    We recognize that Haiti is an extremely poor country. We do 
not seek to deny jobs and economic advancement to Haiti's 
workers. To the contrary, we believe U.S. policy can induce 
positive change in Haiti and benefit U.S. workers. I want to 
focus on two issues not adequately addressed by HERO, that is 
the expiration of apparel and textile quotas and labor rights.
    In 100 days, all apparel and textile quotas are scheduled 
to expire. If quotas expire, all apparel and textile producing 
countries around the world, with the exception of China, will 
be devastated. Workers in Latin America, the Caribbean, Asia, 
and Sub-Saharan Africa will be thrown into direct, unregulated 
competition with China and millions will lose their jobs as a 
result. It will also further decimate the U.S. industry.
    To get a sense of what this means, in categories where 
import quotas have already been phased out, offers a glimpse of 
what is to come. In the last two-and-a-half years, for the 
apparel products removed from quota in 2002, China has 
increased its market share of these products from 10 percent to 
72 percent. At the same time, Haiti's exports to the United 
States in these same categories declined 53 percent, from 8.6 
million square meters to 4.6 million square meters.
    In response to this kind of problem, we need the kind of 
comprehensive program that is called for in the Textiles and 
Apparel China Safeguard Act (H.R. 5026). That act would ensure 
that the China safeguard will be meaningful for the U.S. 
textile and apparel industry. It will direct the President to 
use the special China safeguard to negotiate a comprehensive 
agreement by immediately entering into formal consultations 
with China over textile and apparel imports that threaten to 
disrupt the U.S. market. It will enforce aggressively U.S. 
rights under the special China safeguard by imposing restraints 
on imports if China does not agree on a mutually acceptable 
solution.
    A word about worker rights in Haiti. Haiti's labor laws 
have been repeatedly criticized by the ILO, the State 
Department, and the International Confederation of Free Trade 
Unions for failing to meet basic international standards. The 
Haitian labor code dates back to the Duvalier dictatorship and 
falls far short of ILO standards in ways that I detail in my 
submitted statement.
    Even where protections for worker rights do exist in law, 
they are only very rarely, if ever, enforced. The result is a 
climate of outright impunity for employers and frightening 
violence and insecurity for workers. Trade unionists are 
threatened, beaten, arrested, and assassinated for their 
activities, and those responsible for the violence go 
unpunished. Workers are subject to verbal abuse, physical 
threats, sexual harassment on the job, with no effective 
protection from the courts or the labor ministry.
    Increased trade and investment can benefit workers and 
reduce poverty in Haiti, but workers' rights must be respected 
in order for those benefits to materialize in the form of 
better jobs and higher wages. The HERO Act that passed the 
Senate recognizes the crucial link between increased trade 
benefits and progress on worker rights by requiring Haiti to 
establish or make continual progress toward establishing 
internationally recognized worker rights in order to receive 
additional trade preferences. The language is borrowed from 
AGOA and it builds upon the worker rights conditions that 
currently apply to Haiti under the Generalized System of 
Preferences (GSP) and CBI programs.
    Under current conditions, Haiti does not meet the worker 
rights provisions of the GSP and CBI programs, much less the 
proposed HERO Act. The Act would apply exclusively to Haiti, it 
provides a golden opportunity to take a more tailored approach 
by linking specific concrete benchmarks on worker rights with 
phased-in market access initiatives. Most importantly, such a 
system will not just set tailor-made labor rights benchmarks 
for Haiti, it will actually enable Haiti to meet them. In my 
testimony, I give two possible examples of how this could work 
that I don't have time to summarize here, one based on the 
Cambodian model, one based on a labor ombudsman model that is 
used elsewhere in the Caribbean for human rights issues, and I 
would urge the Committee to look at those seriously.
    [The prepared statement of Mr. Levinson follows:]

        Statement of Mark Levinson, Chief Economist, UNITE HERE

    I am the Chief Economist at UNITE HERE a union of 450,000 apparel, 
textile, laundry, distribution, hotel and gaming workers. The apparel 
and textile industries in the United States are in crisis. Hundreds of 
plants have closed. Communities are devastated. Since January 2001 
these industries have lost over 357,000 jobs. And since the so-called 
economic recovery began these industries have lost 196,000 jobs.
    We recognize that Haiti is an extremely poor country. We do not 
seek to deny jobs and economic advancement to Haiti's workers. To the 
contrary. We believe U.S. policy can induce positive change in Haiti 
and benefit U.S. workers. But we do not believe that the approach 
embodied in the HERO Act (S. 2261), passed by unanimous consent in the 
Senate, is the right approach. I want to focus on two issues not 
adequately addressed by S. 2261: the expiration of apparel and textile 
quotas and labor rights.

Haiti and the Expiration of the Quota System

    The apparel industry in Haiti is the country's largest single 
source of jobs and export earnings and it relies almost entirely on the 
United States as a market for its output. The apparel share of total 
Haitian exports in 2001 was 83 percent, or $245 million. The Haitian 
apparel industry employed about 27,000 workers in 2002, up from 17,000 
in 1997. The growth of Haiti's apparel industry is constrained by the 
country's underdeveloped infrastructure, high utility, shipping and 
warehousing costs and political instability. Haiti's apparel exports to 
the U.S. consist almost entirely of cotton apparel and manmade-fiber 
apparel--namely T-shirts, underwear, and other pants, shorts and 
nightwear--for which major suppliers are highly constrained by quotas. 
These basic garments are characterized by long and standardized 
production runs, low labor content, and few styling changes.
    This highlights a serious problem. In 100 days all apparel and 
textile quotas are scheduled to expire. Simply granting more tariff 
preferences to countries whose exports will soon be swamped by Chinese 
production is not an effective policy.
    If quotas expire almost all apparel and textile producing countries 
around the world, with the exception of China, will be devastated. 
Workers in Latin America, the Caribbean, Asia and sub-Saharan Africa 
will be thrown into direct, unregulated, competition with China, and 
millions will lose their jobs as a result. It will also further 
decimate the industry in the U.S. 600,000 U.S. workers will lose their 
jobs within several years of the expiration of quotas.
    Categories where import quotas have already been phased out offer a 
glimpse of what is to come. In the last two and one-half years, for the 
apparel products removed from quota in 2002, China increased its market 
share of these products from 10 percent to 72 percent. At the same 
time, Haiti's exports to the U.S. in the same categories dropped 53 
percent, from 8.6 million square meters to 4.6 million square meters.
    If China captures 70 percent of the entire U.S apparel and textile 
market that would result in a net shift of approximately $42 billion in 
trade from other exporting countries to China. The projected export 
losses (assuming losses proportionate to existing market share) for 
countries are: CBI region $6.3 billion, Mexico $5.4 billion, Indonesia 
$1.6 billion, Bangladesh $1 billion, Lesotho $289 million, Mauritius 
$187 million.
    The Senate passed bill would provide an incentive for importers and 
retailers to close their operations in the Caribbean and Central 
America and move to Haiti where they can use Chinese fabrics and yarn 
and get duty free access to the U.S. market. The main beneficiary would 
be Chinese and other Asian fabric producers. U.S. and Caribbean textile 
workers and producers would be hurt.
    We need the kind of comprehensive program that is called for in 
H.R. 5026 the Textiles and Apparel China Safeguard Act. The Act would:

    1.  direct the President to make two changes to the overly 
restrictive rules issued by the Bush Administration to implement the 
China safeguard so that the safeguard will be meaningful for the U.S. 
textiles and apparel industry;
    2.  direct the President to use the special China safeguard to 
negotiate a comprehensive agreement by immediately entering into formal 
consultations with China over textiles and apparel imports that 
threaten to disrupt the American market; and
    3.  enforce aggressively U.S. rights under the special China 
safeguard by imposing restraints on imports if China does not agree on 
a mutually acceptable solution.

    Producers from 52 countries have recently joined together to call 
for an extension of the quota system until 2008. UNITE HERE, along with 
other apparel and textile worker unions from around the world, under 
the auspices of the International Textile Garment Leather Workers 
Federation (ITGLWF), is demanding that the textile and apparel quotas 
be extended, and that phase-out not occur until there are enforceable 
protections for workers' rights in the global trading system. Only with 
such guarantees in place will workers in the U.S. and around the world 
be able to compete on a fair playing field.

Workers' Rights in Haiti

    Haiti's labor laws have been repeatedly criticized by the 
International Labor Organization (ILO), the U.S. State Department, and 
the International Confederation of Free Trade Unions (ICFTU) for 
failing to meet basic international standards. The Haitian labor code 
dates back to the Duvalier dictatorship, and falls short of ILO 
standards in a number of key respects.

      There is no prohibition on anti-union discrimination in 
hiring, allowing employers to bar known union activists from 
employment.
      Though the law does prohibit firing workers for union 
activities, it does not provide reinstatement as a remedy for such 
firings, as required by the ILO. Thus, even if the law were fully 
enforced, employers could fire any workers with union sympathies and 
simply pay the fines required as the cost of doing business and keeping 
unions out.
      The labor law fails to require good-faith bargaining by 
employers with union representatives, and sets a prohibitively high 
threshold for unions to meet in order to compel bargaining. As a 
result, collective bargaining is virtually non-existent in Haiti.
      There are numerous restrictions on the right to strike, 
including compulsory arbitration provisions that have been criticized 
by the ILO.

    Even where protections for workers' rights do exist in the law, 
they are only very rarely if ever enforced. The result is a climate of 
outright impunity for employers, and frightening violence and 
insecurity for workers. Trade unionists are threatened, beaten, 
arrested and assassinated for their activities, and those responsible 
for the violence go unpunished. Workers are subject to verbal abuse, 
physical threats, and sexual harassment on the job, with no effective 
protection from the courts or the Labor Ministry.
    Given the economic and political situation in the country, there is 
hardly a functioning Labor Ministry at all. The problems with 
corruption and rule of law that plague Haiti are particularly acute for 
workers, who have few if any means of resolving disputes with employers 
and exercising their fundamental rights on the job. Only five percent 
of the workforce in Haiti is unionized, and collective bargaining does 
not exist in the private sector. The widespread abuse of workers' 
rights makes it extremely difficult for workers in Haiti to organize 
independent unions and bargain for a fair share of the wealth they 
produce. Though some of the wealthiest clothing brands in the world 
source from Haiti, the minimum wage in the country amounts to less than 
twelve dollars a week.
    For example, at Haitian American Textile Co. in Port-au-Prince, 
which has supplied uniforms to the Cincinnati based uniform rental 
giant Cintas, workers have reported being forced to work long hours to 
meet high daily quotas in order to be paid their daily rate. That wage 
was far below what they needed for basic survival--leading workers into 
a cycle of debt to food vendors and to ``loan sharks.'' Workers at 
Haitian American have reported being unable to address dangerous 
conditions--like sweltering heat that has caused workers to pass out, 
lint and dust-filled air, and machinery lacking safety guards that have 
punctured workers' fingers--because of the constant fear of being 
fired.
    Another recent example of the Haitian workers' struggle to gain 
respect for their basic workplace rights is a free trade zone, financed 
by the World Bank, in Ounaminthe, Haiti. The employer in the zone, a 
Dominican company called Grupo M, has fired workers for union 
organizing, stationed heavily armed security at plant gates, and 
refused to abide by Haitian labor law, much less internationally 
recognized worker's rights. The World Bank, in recognition of the 
likely inability of the Haitian government to adequately protect 
workers' rights in the zone, included its own workers' rights 
conditions in the loan agreements--requiring respect for freedom of 
association and the right to organize and bargain collectively, and 
mandating the creation of a compliance mechanism to monitor workers' 
rights, improve internal management practices, and provide for a 
workers' rights ombudsperson to receive complaints and resolve 
disputes. Though the workers' rights conditions in the loan still need 
to be fully complied with, they have provided important leverage to 
help mediate disputes between workers and Grupo M and provide a basic 
safeguard for workers' fundamental human rights in the zone.

Linking Labor Rights and Trade in Haiti

    Just as the World Bank recognized that additional safeguards for 
workers' rights and a program to help the parties monitor and enforce 
those rights was necessary for apparel production in Haiti to succeed, 
Congress must build a strong structure of support for workers' rights 
in Haiti in order for additional market access to provide any real 
benefits for Haitian workers. Increased trade and investment can 
benefit workers and reduce poverty in Haiti, but workers' rights must 
be respected in order for these benefits to materialize in the form of 
better jobs and higher wages.
    The HERO Act (S. 2261) that passed the Senate recognizes the 
crucial link between increased trade benefits and progress on workers' 
rights by requiring Haiti to establish, or make continual progress 
towards establishing, internationally recognized workers' rights in 
order to receive additional trade preferences. This language is 
borrowed from AGOA, and it builds upon the workers' rights conditions 
that currently apply to Haiti under the GSP and CBI programs.
    But it is unlikely that this conditionality will have much success 
in Haiti unless it is supported by a mechanism that specifically 
addresses the severe obstacles to the exercise of workers' rights that 
exist in the country. This Committee now has an important opportunity 
to shape just such a mechanism that will help lift up Haiti so it can 
meet international labor standards. Writing conditionality into a trade 
preference program is necessary, but not sufficient, in the case of 
Haiti. Haiti cannot meet these conditions on its own. The labor rights 
conditions must be backed up by a strong, independent enforcement 
mechanism that can monitor workers' rights on the ground, assist the 
Haitian government in bringing its laws into compliance with 
international standards, and help build the local institutional 
capacity necessary to provide workers and investors with the confidence 
that workers rights and rule of law will be respected in Haiti.
    Haiti's labor laws fall well below international standards, and 
those protections that do exist are rarely if ever enforced. Under 
current conditions, Haiti does not meet the workers' rights provisions 
of the GSP and CBI programs, much less the proposed HERO Act. Because 
the Act would apply exclusively to Haiti, it provides a golden 
opportunity to take a more tailored approach by linking specific, 
concrete benchmarks on workers' rights with phased-in market access 
incentives. Most importantly, such a system will not just set tailor-
made labor rights benchmarks for Haiti, it will actually enable Haiti 
to meet them.
    One model worth examining for the HERO Act is the bilateral textile 
and apparel agreement with Cambodia. The Cambodia agreement requires 
Cambodia to meet core labor standards, and factories must agree to ILO 
monitoring of labor rights conditions in order to benefit from the 
export quotas established by the accord. The ILO must certify 
compliance with these conditions each year before the annual quota 
increase of 18 percent is granted under the bilateral agreement. The 
Cambodia agreement created concrete incentives for factory owners and 
the government to improve workers' rights, and provided them with the 
means to meet these goals by laying out specific goals on workers' 
rights and creating and funding an independent monitoring program. The 
ILO reports that the agreement has led to real improvements in workers' 
rights in Cambodia.
    Another model which is not linked directly to trade, but which has 
helped to address the rule of law failures and corruption problems that 
create impunity for human rights violators in Central America, is the 
ombudsperson model. Central American governments have agreed to create 
human rights ombudsmen that are independent of existing government 
ministries, can receive and investigate complaints about individual 
human rights cases, and can issue recommendations for structural 
reforms needed to address more systematic abuses and bring the country 
into compliance with international human rights norms. While the 
political will to accept these recommendations is sometimes lacking, 
the ombudsman mechanism has provided an independent party that can 
bypass dysfunctional institutions, effectively investigate and verify 
human rights abuses, and make authoritative recommendations for 
systematic reforms.
    Some combination of these two models could help improve workers' 
rights in Haiti. The HERO Act should create and fund a mechanism that 
contains the following elements:

      Establish a workers' rights ombudsperson that is 
independent of Haitian officials and political parties, who can receive 
and investigate complaints of workers' rights abuses and verify whether 
or not internationally recognized workers' rights have been violated in 
individual cases.
      Authorize the ombudsperson to recommend solutions in 
individual cases of abuse, and require individual factories to 
implement relevant recommendations in order to benefit from increased 
market access under the Act (companies can sign up to participate at 
the beginning of the program, and their exports will receive 
preferences unless the ombudsperson reports that they are out of 
compliance with recommendations).
      Authorize the ombudsperson to recommend more 
comprehensive reforms to address systematic workers' rights problems--
labor law reforms, judicial and administrative reforms, etc.--with 
specific benchmarks for the implementation of the recommendations. U.S. 
and international funding and technical assistance should be made 
available to help the Haitian government implement the recommended 
reforms.
      Each year, the annual increase in imports under the Act 
will only occur if the ombudsperson certifies that the government is 
making sufficient progress in implementing the recommended reforms and 
specific benchmarks have been met.

    Members of UNITE HERE and the hundreds of thousands of apparel and 
textile workers who have lost their jobs, many of them from the 
Caribbean including Haiti, support a trade policy that would help the 
impoverished--whether in Haiti, the Caribbean, China or the United 
States--to improve their standard of living and generate new domestic 
demand in a virtuous cycle of equitable development, while providing 
new markets for overseas investors and workers, including those in the 
United States.

                                 

    Chairman CRANE. Thank you very much, Mr. Levinson. Now I 
would like to ask our colleague, Thaddeus McCotter, to come 
forward to introduce his constituent, Nigel Thompson.
    Mr. MCCOTTER. Thank you, Mr. Chairman. I am here today to 
introduce Mr. Nigel Thompson. As you know, Mr. Thompson is 
Executive Vice President of Planning and Development with the 
Yazaki Corporation. In this capacity, Mr. Thompson is 
responsible for information technology, research and 
development, marketing, and product planning.
    Yazaki North America, which is based in Canton, Michigan, 
employs roughly 1,500 people in my district and supplies our 
automotive companies with electronics, instrumentation, and 
wiring systems. As a tier-one automotive supplier and employer 
in the Canton area, Yazaki is an integral component in 
Southeastern Michigan commerce and I am pleased Mr. Thompson 
could appear before you as an important representative of our 
industry from my district. I am also very happy that he is here 
because Yazaki embodies what the right trade policies can do to 
bring jobs to our Nation and to districts like mine in the 
manufacturing arena. Thank you, Mr. Chairman.
    Chairman CRANE. Thank you, Thaddeus. Mr. Thompson?

   STATEMENT OF NIGEL THOMPSON, EXECUTIVE VICE PRESIDENT OF 
    PLANNING AND DEVELOPMENT, YAZAKI NORTH AMERICA, CANTON, 
                            MICHIGAN

    Mr. THOMPSON. Mr. Chairman, Members of the Committee, 
Congressman McCotter, thank you very much for that 
introduction. Thank you very much for giving me the opportunity 
to talk here about something other than textiles.
    [Laughter.]
    Yazaki Corporation, that I represent, is a major global 
automotive supplier. We supply a range of products, 
instrumentation, electronics, as was already said, and 
particular wire harnesses to pretty much all of the vehicle 
manufacturers in the world and we produce those products also 
all over the world and in the Americas, particularly in Mexico, 
Nicaragua, Haiti, Brazil, Colombia, and Argentina. The reason I 
mentioned wire harnesses is because we would like to propose, 
and my testimony is on this basis, to extend the scope of HERO 
to include automotive products, and in particular wire 
harnesses, a product that is not being produced in the United 
States for several decades, principally due to the intense cost 
reduction pressure within the auto industry.
    To clarify this proposal, I guess I should probably first 
explain a little bit about what a wire harness is. I think we 
probably all know and have a picture in our minds about 
textiles and t-shirts and so forth. The wire harness represents 
perhaps the nervous system of a motor car. A modern motor car 
has a great deal of electrical equipment. All this electrical 
equipment is connected together by the vehicle wiring system. 
It typically could have as many as 500 or 1,000 circuits on a 
modern car. This is a complex assembly of wires, connectors, 
terminals, fuse boxes, relays, electronics, for which the final 
assembly process is both complex and employs large numbers of 
people. To give you an example, for a high-volume production 
vehicle, a typical U.S. market minivan or pickup truck produced 
in, say, 400,000 or 500,000 units per year, there might be as 
many as 5,000 people employed in producing the wire harnesses 
for such a vehicle.
    A Yazaki-affiliated production company has had a pilot 
plant in Haiti for about the last 15 months, currently 
employing around about 300 people, with very good experiences. 
We believe Haiti has significant growth potential for this 
product sector, and clearly, that potential would be 
significantly assisted by being able to import into the United 
States without duty. The existing trade arrangements require 35 
percent local content, which, as many of my colleagues have 
testified here, in a country really without industrial 
infrastructure, such as Haiti, cannot be met. The majority of 
the components and raw materials used in an automotive wire 
harness actually come from the United States or Mexico. So, 
allowing those components to count as local content would then 
allow Haiti to compete with Mexico, or actually rather more 
importantly to compete with Southeast Asia and particularly 
China.
    In the textile industry, as has been testified here, that 
is clearly seen as a major impact or a major threat to Haitian 
development. It is also true in the automotive industry. One of 
our objectives is to develop a regional strategy for production 
here, which allows production in this region to compete 
effectively with Southeast Asia and particularly China, long-
term. Allowing HERO to expand its scope to include such 
products would clearly support our objectives.
    Haiti has certain advantages. It has a logistics advantage 
because of its location in the region, a much shorter supply 
pipeline than Southeast Asia or China. It has a disadvantage, 
of course, in duty and in infrastructure, as has been 
mentioned. If we can remove at least one of those obstacles, 
then with further economic development, the infrastructure will 
develop and we can expect Haiti to be able to grow as part of 
this region.
    In conclusion, I would say if HERO is intended to help the 
Haitian economy and its people, and clearly from all of the 
testimony we have heard this afternoon that has been a common 
thread, then adding another product classification to broaden 
the industrial base that provides good jobs linked to a major 
U.S. manufacturing industry, the auto industry, with no impact 
on U.S. jobs, with an opportunity for U.S. component suppliers 
to supply into Haiti, that would seem entirely consistent with 
the original aims of the Act. I have been to Haiti. Clearly, 
many people here have been to Haiti. This is about the poorest 
country in the Western Hemisphere and we have all seen the news 
over the last few days. Anything we can do, not just in terms 
of short-term aid but in long-term economic support and 
development, must be the right thing to do and has to be worth 
doing. Thank you for giving me the opportunity.
    [The prepared statement of Mr. Thompson follows:]

 Statement of Nigel Thompson, Executive Vice President of Planning and 
          Development, Yazaki North America, Canton, Michigan

    Submitted by Yazaki North America, Inc. (YNA) on behalf of The 
Yazaki Group in Support of the Haitian Economic Recovery and 
Opportunity Act.

Background
    Yazaki Corporation was founded in 1929 and incorporated in 1940, 
and is a global, tier-one automotive supplier with operations in 37 
countries. North American operations were established in 1966 and are 
now conducted by Yazaki North America, Inc. (YNA), based in Canton, 
Michigan, where we employ 1,500. Core commodities for YNA include 
automotive electronics, instrumentation, components, and wiring 
systems, the latter of which is a primary focus. An automotive wire 
harness is the vehicle's electrical skeleton--an assembly of wires, 
coverings, connectors, modules and other components which accomplishes 
all of the electrical connectivity requirements in an automobile. The 
nature of the product means that the assembly process is highly labor 
intensive, and employs significant numbers of people.
    As Yazaki has expanded around the globe, the company has sought 
opportunities to locate facilities in lesser developed and developing 
countries. This has been good for our business, but we also take very 
seriously our responsibility to be a good corporate citizen. As a 
result, we have been able to provide jobs and economic opportunity, and 
contribute to improving the communities in which we do business.
    Arnecom (a Yazaki affiliated company in Mexico) established a wire 
harness pilot plant in Haiti about 18 months ago, recognizing at that 
time the potential in the country and the needs of its people for 
employment and economic opportunity. This pilot operation now employs 
approximately 250 people.
    We believe expanding the scope of products covered by HERO to 
include labor-intensive automotive products like wire harnesses will 
provide additional benefits to the Haitian people entirely consistent 
with the original intentions of the Act, with no adverse impact on U.S. 
employment.

HERO--Related Key Points
    In order to keep pace with domestic car maker's cost targets for 
wire harness products, manufacturing operations moved out of the United 
States several decades ago. Consequently, there are no domestic 
automotive suppliers who assemble wire harnesses in the U.S. Therefore, 
expanding HERO to include wire harnesses poses no threat to the U.S. 
automotive job market. Additionally, there are aspects of an expanded 
HERO, which could contribute to job growth in the U.S.
    Existing trade preference programs such as GSP and CBERA cap the 
U.S. content allowed for meeting local content requirements. In a 
country like Haiti, which has very little industrial infrastructure, it 
is not realistic to expect that it could meet local content 
requirements without imported materials. Therefore, allowing NAFTA or 
U.S. content to be counted will benefit suppliers from both countries 
and quite possibly provide new employment opportunities in each. Many 
of the components used in wire harnesses, like wire, connectors, 
terminals, plastic resins, and grommets are made in the U.S., including 
for Yazaki plants in Michigan, Georgia and Texas.
    In our case, if the Congress includes wire harness assemblies among 
expanded trade preferences for Haiti, Yazaki expects to significantly 
increase its investment in the Arnecom plant in Port au Prince. YNA 
currently supplies U.S. automakers with wire harnesses produced in 
China and SE Asia, as well as in Mexico, Haiti and Nicaragua. Haiti has 
a much shorter supply route than do operations in Asia. The combination 
of lower logistics costs and tariff relief would significantly improve 
our cost competitiveness, and hence that of our U.S. customers, some of 
whom we currently supply from Haiti.
    This plan poses no threat to the competitive landscape relative to 
NAFTA or other regions. Additionally, in keeping with the intent of 
HERO, if Congress provides this incentive, we will be better poised to 
expand our investment in Haiti, which may grow employment by as many as 
five times the current level.
    Further information on Yazaki may be found at www.yazaki-na.com.

                                 

    Chairman CRANE. Thank you, Mr. Thompson. Now, Mr. Rangel 
has an appointment at 3:30 but he has one question he would 
like to put to the panel before he departs. Mr. Rangel?
    Mr. RANGEL. Thank you, Mr. Chairman. I thank all of you for 
showing that this interest in a country that embarrassingly is 
in our hemisphere that we haven't done enough for, but 
certainly each time there is another tragedy there we commit 
ourselves to do better, and this gives us another opportunity 
for Democrats and Republicans to come together.
    As most all of you know, the reputation, and I say 
reputation, in Haiti is that it has a violent anti-union 
atmosphere and that it is very difficult for us who are not 
Haitians to really know the degree in which people have some 
type of human rights and assembly and organizing. The ILO has 
taken the very basic non-controversial standards and saying, 
give them a chance to do something, and it has been recommended 
that one of the possible solutions might be to have an 
ombudsman, a monitor, something with international prestige, 
not to negotiate higher wages but to make certain that there is 
an opportunity for people to be trained to move forward and 
ultimately achieve what we were able to do in the United 
States, a viable middle-class would certainly help society no 
matter where it is.
    Mr. Baker, since you are Haitian, and Mr. Woltz, since you 
have done business there, could you share with me or give me 
any sense as what is acceptable in terms of being included in 
an international agreement with international responsibility, 
not to be the equivalent of our American Federation of Labor-
Congress of Industrial Organizations, but what do you just 
think is fair and what are you willing to accept so that we can 
take this to other people who just don't like the term 
``union'' because they have had bad experience, but it would be 
called decency and the opportunity to organize, to assemble, to 
negotiate. Mr. Baker, as a Haitian, what is the atmosphere for 
that today?
    Mr. BAKER. Thank you. I think there are three things that 
are happening in Haiti that can help us along that issue. The 
first thing is that, as you know, most retailers are requiring 
today that the plant that is producing for them meets certain 
internationally-recognized standards. Indeed, a lot of plants 
today in Haiti are moving toward becoming members of Worldwide 
Responsible Apparel Production (WRAP). This oversees the 
conditions, the working conditions inside the plants and the 
procedures that are used inside the plants. Most plants in 
Haiti today are moving toward WRAP.
    The second thing that I think could be very helpful is the 
fact that within the law, this bill, it was adopted the same 
conditions which was set into the AGOA bill, and we are hoping 
that the same principle could apply also for Haiti. The third 
and most important thing is what the Haitians are doing today 
on this issue. The Ministry of Social Affairs have invited 
private sector associations and labor union to meet and 
organize a tripartite Committee to first look at the old labor 
accord that indeed dates back to Duvalier, to see how we can 
modernize it, how we can actualize it and adopt 
internationally-recognized conditions, and we are all committed 
to work toward that goal.
    In this sense, I think the bill that is today, which gives 
the U.S. Administration the right to come and oversee what we 
are doing in terms of progress, is a way for you to supervise 
what we are doing, because having good intention is one thing 
but delivering is another thing. We are committed to try to 
deliver. We are committed to try to reach standards that are 
here today in the United States. It would be unrealistic to 
think that we can change Haiti overnight, but we are all 
committed to make a serious effort to move forward.
    Mr. WOLTZ. One of the ways that Haiti does change, and not 
overnight but very, very quickly, is the kinds of people that 
are encouraged to make an investment in Haiti. We are a private 
label manufacturer, which means that we don't have our own 
brand. We sell to J.C. Penney, to Sears, to Dillard's, to 
whoever. We are never going to put millions of dollars worth of 
investment at risk by having one of our customers embarrassed 
by something that happens in one of our facilities, and I think 
you will find that is, by and large, what drives most people.
    We want to do what is fair and right to attract the best 
workers we can. We make money in the apparel business when we 
operate efficiently. Trying to see how little you can pay 
somebody is a totally self-defeating strategy. You want to set 
up an operation where people are incentivized to make as much 
as they can, that you attract the best workers that you can. 
The best workers are not going to work somewhere where they are 
not treated well. So, that is something that when these plants 
go in, when people invest their own money in a plant, they will 
themselves be policed by their customers, by the government, 
but also by their commitment to protect their investment.
    Mr. RANGEL. That is very encouraging. Your company, UNITE 
used to be the International Labor Women, but they had 
something called, ``look for the union label.'' The whole idea 
was that these standards that Mr. Baker and you are talking 
about, it meant that you don't have to go beyond that. If the 
label is there, they are fair. They are equitable. They do 
treat their workers right. Do you think there would be any 
objection to the ombudsman concept where not the United States, 
but some international person would be there where you can 
stamp, ``approved by the ILO.'' I am not saying it could work, 
but I gather from what you are saying is that you would be 
proud to be a part of something that was fair and equitable for 
the workers. Would you accept an ombudsman under the 
suggestions that some people have made from the ILO?
    Mr. WOLTZ. We would be, frankly, leery of an ombudsman 
because of the mechanism of who you select and some history 
that ombudsmen have had a political agenda that goes sometimes 
beyond the workers in a particular plant. If there is some kind 
of vetting process where everybody gets involved in who you 
pick--I think your point of how you get somebody, a statute 
that somebody can say, okay, this person is above the fray. 
They don't necessarily have a political bent to this job. I 
think----
    Mr. RANGEL. I think we could work that out, because I would 
be just as concerned as to what kind of politics they would 
have anyway. Thank you so much. Thank you, Mr. Chairman. Thank 
you, Committee Members, for allowing me this courtesy.
    Chairman CRANE. Happy to do it. Now, I would like to put a 
question, or more than one question, to the entire panel. The 
first, one bill that has been introduced to give additional 
trade preferences to Haiti would allow Haiti to source fabric 
from any U.S. Free Trade Agreement (FTA) partner as well as 
countries participating in the African, Caribbean Basin, and 
Andean preference programs. I would like you to comment on what 
kinds of fabric are and are not commercially available in these 
countries. Does anyone wish to respond?
    Ms. FOX. I will respond to that.
    Chairman CRANE. Ms. Fox?
    Ms. FOX. J.C. Penney, as you know, we source all over the 
world, and in regards to your question, we have actually tried 
doing CBTPA-sourced fabrics, and unfortunately, it has become 
evident to us that it is quite uncompetitive, and it is not 
just the price. It is not the price that is the sole issue. It 
is that price combined with the inefficiencies of the 
production capabilities of the worker in Haiti make it 
uncompetitive.
    In regards to other countries in the region, Mexico, 
Guatemala, as I said, we produce primarily knit underwear and 
very basic t-shirts, so I am primarily addressing knits, and 
that is really the strength of Haiti in the apparel industry. 
In looking at Mexico, Guatemala, the quality and consistency 
out of those countries for that type of fabric is not where it 
needs to be now. Maybe in the future, it will get up to that 
standard. Looking at Peru, Colombia, and other places, the 
logistics of moving it make it become uncompetitive in regards 
to the pricing and things like that. So, we have taken a look 
at that and we have tried to figure out if it is economically 
feasible, and our industry is so hyper-competitive that every 
nickel affects our retail cost, and so far, we have been unable 
to feel that we are competitive enough using those options.
    Chairman CRANE. Is Mexican fabric available and 
competitive?
    Ms. FOX. Mexican fabric is available, but the quality is 
not to what we are looking for. The pricing is okay, but it is 
more the quality that we are concerned about.
    Mr. WOLTZ. I don't think that there is anywhere near the 
capacity to supply the needs available in this hemisphere, just 
pure capacity.
    Chairman CRANE. Mr. Felker?
    Mr. FELKER. Yes, Mr. Chairman. My segment of the industry 
would be very supportive of an effective short supply 
availability system, whereby if the fabrics are not available 
from the U.S. origin, then there would be an efficient and 
commercially viable means and system for allowing those fabrics 
to come in from other sources.
    Chairman CRANE. Yes, Mr. Baker?
    Mr. BAKER. Mr. Chairman, you mentioned the original bill 
and why did we come up with a second bill, and really the 
shortcomings of the first bill were really two-fold. First, the 
countries that already have a FTA with the United States, most 
of them do not have fabric or do not have the quality that the 
buyers are looking for. Second and most important, I think the 
first bill was studied in looking at Haiti as a part of the 
CBI. Frankly, when you look at it, when you try to compare 
Haiti, you cannot compare Haiti with Honduras and Guatemala. 
You more have to compare Haiti with Lesotho and Mozambique and 
we feel that what was really fair for Mozambique and Lesotho is 
what really Haiti needs today.
    Chairman CRANE. Thank you. Now for the entire panel again, 
several of you suggested that if Haiti isn't given the ability 
to buy fabric from anywhere in the world, the country cannot be 
competitive. There are a variety of options that differ from 
the HERO bill but could provide equally meaningful benefits and 
I would like you to comment on several ideas that have been 
raised.
    First, those of you who produce in Haiti mentioned that you 
tend to purchase many American imports, such as thread, 
packaging, trim, buttons, labels, and some fabric. If you 
combine the value of these items with the value added in Haiti 
and the possible flexibility of cumulating fabric sourced from 
any U.S. FTA partner or a preference beneficiary country, what 
would be an acceptable percentage level for a value-added rule 
of origin for apparel? Secondly, would providing increased 
flexibility to fulfill this test through annual aggregation 
versus a per-garment test be workable? Third, would a single 
transformation rule for some specific apparel items be useful? 
Finally, would a trade preference level for specific types of 
fabrics be meaningful?
    Mr. WOLTZ. I would like to take the first shot at answering 
that if I could, Congressman Crane.
    Chairman CRANE. Absolutely.
    Mr. WOLTZ. Any time that you specify, you wall off, you 
limit, you block, you keep people from building flexible 
manufacturing plants, you limit the amount of investment. Right 
now, a content agreement that might have been worked out 
several years ago, we are going to start making next week in 
Central America a poncho, a knit poncho that has very little 
labor or input in it, something that I don't think anybody in 
the fashion industry even foresaw 2 or 3 years ago. We don't 
know right now what we are going to be sewing as a fashion item 
2 or 3 years from now. We don't know whether we are going to be 
making long skirts out of synthetics or short skirts out of 
denim. We don't know what the fashion apparel market is going 
to be.
    If we set up rules and we set up tests that we are going to 
have to go through, short-supply mechanisms, all of those 
things have been tried in the past and they have all resulted, 
all resulted in a steady exodus of jobs from places that have 
those restrictions to places that don't have those 
restrictions. If there are a lot of restrictions put on Haiti, 
people that are going to do anything but make a very narrow 
commodity are not going to want to invest their money in Haiti.
    Chairman CRANE. Mr. Felker?
    Mr. FELKER. Yes, Mr. Chairman. I think we have to look at 
the dynamics of world trade as it is today. The prices--cost 
and prices are confused. The prices coming out of Asia will 
undercut U.S. fabric prices if our labor costs were zero. These 
are predatory pricing tactics where the industry, specifically 
in China, is out to take market share and to destroy an 
industry, and once it destroys the industry, then it will be 
free to utilize different pricing strategies if it wishes to.
    So, I think to allow a short-term disruptive mechanism that 
is being practiced in global trade to wipe out an industry that 
will never be rebuilt is short-sighted. So, we need to take 
these precautions to keep this market share grab from 
undermining permanently an industry in the United States.
    Chairman CRANE. Ms. Fox?
    Ms. FOX. Addressing the value-added concept, I think that, 
again, the kind of products that we are having produced in 
Haiti are very basic and anything more than 35 percent would be 
prohibitive for us. We are making t-shirts. It is little more 
than fabric. I think one of the other points you made was about 
the annual counting concept in there and cumulation. For a 
retailer, that would be very difficult in that the accounting 
of it is something we don't do. We are not a manufacturer. So, 
being able to keep the accounting would be a nightmare for 
retailers.
    I think we talked about single transformation, which would 
basically mean third-country fabric would be allowed, but it 
would be okay as long as we didn't put additional limitations 
on things, for instance, that it had to be thread made in the 
United States or it had to be any other kind of trims made 
somewhere else. I think without those limitations, that would 
work for us. Inputs, as we talked before, from other countries 
for us is limited incentives because, as Mr. Woltz commented, 
the capacity to produce a lot of the things for fabrics is not 
there. The quality, as I mentioned, is not there. So, those are 
issues that we are facing.
    I think that the one thing that we need to be fully aware 
of is that there is really a need to keep it simple. With the 
elimination of quota, the marketplace is wide open and any type 
of bill or act that makes it difficult for us to source makes 
it hard for us to understand, because some of these things are 
very difficult for the average sourcing person to understand. 
We won't go there. I think that that is one thing that I would 
plead with everybody, is to try and keep this as simple as 
possible in order to give the greatest potential benefits to 
Haiti.
    Chairman CRANE. Thank you. Another panel question. Would 
improved access for Haitian apparel provide more opportunities 
for certain U.S. industries, such as cotton yarn, bindings, and 
trimmings, to sell into Haiti, particularly if the program is 
designed to give preferential treatment to regional inputs over 
other third-country inputs, and how could we design such a 
program? Yes, Mr. Felker?
    Mr. FELKER. Mr. Chairman, I think if preferential treatment 
for Haiti exists to a significant degree with the CBTPA, but 
yes, if there are--if we can overcome some of the difficulties 
of conducting business in Haiti, and I mentioned the primary 
one is the lack of working capital and the difficulty of 
understanding how you can collect the receivable from Haiti, 
but yes, I think there is tremendous opportunity for expanded 
trade with U.S. manufacturers of yarn and fabrics and other 
inputs in Haiti if we can build an infrastructure there and a 
legal system and if we can get through the initial stages of 
understanding how the money will flow and if it will flow.
    Chairman CRANE. My final question is for you, Mr. Thompson. 
In your testimony, you suggest that if the local content 
requirements were more flexible for auto parts to allow Haiti 
to source more inputs from the United States or North American 
Free Trade Agreement (NAFTA) (P.L. 103-182) countries, then you 
expect Yazaki to increase its investment and employment level 
in Haiti. This is exactly the goal we are trying to achieve for 
Haiti. So, would you please elaborate on Yazaki's potential 
plans for Haiti, and do you envision the increased sales from 
Haiti coming at the expense of other producers in the region or 
from other producers in Asia?
    Mr. THOMPSON. Thank you for the question, Mr. Chairman. To 
take your last point first, do we see expansion in Haiti coming 
at the expense of other producers in this region, the answer is 
basically no. As I mentioned in my testimony, our objective is 
to keep our production in this region comparative with Asia and 
particularly China. If were to expand in Haiti, those jobs 
would otherwise almost certainly end up in China or Southeast 
Asia.
    The first part of your question relates to using increased 
component input from the United States and Mexico. Certainly, 
we can see that looking at our existing production, if we were 
able to expand that in an environment that didn't have the duty 
associated with it, using our existing sourcing from suppliers 
of components such as wire, connectors, terminals, and so 
forth, some of which we make in the United States, some of 
which other suppliers make in the United States and Mexico, we 
could meet the local content requirements currently as 
specified--if we allowed the full value of imported components 
from the NAFTA region.
    Chairman CRANE. Thank you. Mr. Levin?
    Mr. LEVIN. The last answer is straightforward and is less 
complex than the rest of what we have discussed here today. It 
has been an interesting panel, because I think it shows how 
these are not simple issues and any attempt to try to simplify 
them, for example, talking win-win, is misguided because it 
impacts. So, let me just follow that up. Mr. Woltz, you have 
some facilities in Central America, don't you?
    Mr. WOLTZ. Yes, sir. We have an extensive facility in El 
Salvador.
    Mr. LEVIN. That is what I thought. What is the name of the 
facility?
    Mr. WOLTZ. Primo.
    Mr. LEVIN. Exactly. This isn't the time to talk about 
Primo, Mr. Woltz. I think you and I have----
    Mr. WOLTZ. You and I have met on Primo----
    Mr. LEVIN. We surely have.
    Mr. WOLTZ. I think that you have been very pleased with how 
that whole situation has resolved itself.
    Mr. LEVIN. I don't think so.
    Mr. WOLTZ. Okay.
    Mr. LEVIN. I am not sure. I surely wasn't--it surely 
demonstrated earlier the problems that exist when there is an 
effort of workers to exercise their rights, and maybe I will 
have to remember exactly where the situation is now. Let me 
just ask you if third-country fabric were allowed without 
limit, just give us a reasonable estimate over the next 5 years 
what percentage you think of your fabric would come from third-
country sources.
    Mr. WOLTZ. Last year, Perry Manufacturing bought roughly 30 
percent of its fabric from the United States and the CBI 
region. It bought 54 percent of its fabric from China. We would 
see probably the same kind of mix going forward as different 
products, as different mills are started in Central America and 
as the fabric prices in China, we feel like will probably 
continue to go up. As quotas come off in China, the demand for 
Chinese fabric is going to expand and we are going to have to 
compete more with Chinese manufacturers for that fabric. So, I 
think there is an opportunity for that mix to kind of stay just 
about the same, near term.
    Again, one of the big things that gives a chance for growth 
in Haiti is right now, nobody sews synthetics in Central 
America because of the 33-percent duty rate. If duty comes off 
of synthetics, there is a whole other category of fabrics that 
may be sourced in the region. As you said, it is not a very 
simple thing. Every time you take one peel of the onion, there 
is a whole other question.
    Mr. LEVIN. So, let me be clear, because in your testimony 
you say, without the ability to use fabric from anywhere in the 
world, Haiti will not be part of that supply chain.
    Mr. WOLTZ. Right.
    Mr. LEVIN. I thought I heard you say that you didn't think 
there would be any basic change in where you source----
    Mr. WOLTZ. Without being able to get about half of our 
fabric, like I said, 54 percent, we would not be able to run 
those factories.
    Mr. LEVIN. You are now getting that fabric from China?
    Mr. WOLTZ. Last year, we bought 54 percent of fabric we 
consumed from China, 30----
    Mr. LEVIN. So, you are doing that now. So, why do you 
need----
    Mr. WOLTZ. When quotas come off, in order to be competitive 
with garments manufactured in China, India, Pakistan----
    Mr. LEVIN. Okay.
    Mr. WOLTZ. Other places, our prices are going to have to be 
lower. China is a threat, but it is also in some categories not 
the threat that Pakistan and India are. In order for us to 
compete in this region, we are going to have to have a low-
cost, duty-free base. In order to maintain our other 
manufacturing in other Central American countries----
    Mr. LEVIN. Then if I understand what you are saying, it 
would seem to me you are saying that you would have to source 
more fabric from outside of the United States to be 
competitive.
    Mr. WOLTZ. Right now----
    Mr. LEVIN. No, but in the future, to compete with China, 
you would have to then source more fabric from outside of the 
United States.
    Mr. WOLTZ. As we grow our business--if we stay the same 
next year, I said we would probably consume the same 
percentages of fabrics. Again, I don't know next year what my 
customers are going to want to buy. I don't know whether they 
are going to want to buy thin skirts made out of synthetic. I 
don't know whether they are going to want to buy short skirts 
made out of denim. Those are decisions that are not made by me, 
that are made by, heck, Ralph Lauren and the fashion designers 
that are going to set the trends. In order for me to service 
those customers, I have got to be free to satisfy their needs 
at the quality they require and the price, and I don't know 
where I am going to buy that fabric. If I could buy it all in 
the United States, it would be better----
    Mr. LEVIN. Yes, and I am not being critical----
    Mr. WOLTZ. Last year, I couldn't.
    Mr. LEVIN. I am just trying to understand. I am not being 
critical.
    Mr. WOLTZ. Okay.
    Mr. LEVIN. It seems to me you are saying that you need to 
increase the amount of fabric that you buy other than from the 
United States. In simple terms, it seems to me when you say, 
without the ability to use fabric from anywhere in the world, 
Haiti will not be a part of the supply chain----
    Mr. WOLTZ. That is true.
    Mr. LEVIN. So, you must be saying that there is going to be 
a shift of your purchases over time from the United States to 
someplace else.
    Mr. WOLTZ. There very well may be.
    Mr. LEVIN. Okay.
    Mr. WOLTZ. As I said, we bought 13 percent of our fabric in 
the United States, 17 percent in the region. So, it is already 
down to 13 percent.
    Mr. LEVIN. What was the 34 percent that you mentioned?
    Mr. WOLTZ. Excuse me, 34 percent from the region. Basically 
17 and 17.
    Mr. LEVIN. Seventeen in the United States and 17 in the----
    Mr. WOLTZ. In the region, Honduras----
    Mr. LEVIN. In this region. Okay.
    Mr. WOLTZ. El Salvador.
    Mr. LEVIN. All I suggest is that we try to be----
    Mr. WOLTZ. The balance is some rayon prints from Korea, 
because that is the only place that they make rayon prints.
    Mr. LEVIN. I think in order for us to address this, and I 
am in favor of doing so, we need to be clear with each other 
what the potential impact is and not try to assume that there 
won't be. Mr. Felker is urging there will be an impact, and 
when I press you, I think you are essentially acknowledging 
that over time, there is likely to be an impact in terms of the 
fabric that you buy made in the United States, and then we will 
go on from there. We will have an intelligent discussion about 
it. Mr. Baker--by the way, I think there is some inconsistency. 
We are not clear. Ms. Fox, you say you buy simple garments from 
Haiti. Mr. Woltz, you talk about specialty. You are in the 
specialty line, right?
    Mr. WOLTZ. Yes.
    Mr. LEVIN. So, you are involved with different products, 
right?
    Mr. WOLTZ. I think the definition of simple, we make a 
variety of styling that is not tailored clothing, it is not 
curtain waistband slacks, it is not those kinds of things----
    Mr. LEVIN. Not underwear and t-shirts.
    Mr. WOLTZ. We are not in the underwear business. We make 
placket shirts like golf shirts, jogging suits, turtlenecks, 
mock turtles, styled tops, that kind of thing, which I think 
Janet would classify as more simple sewing.
    Ms. FOX. That is what we would call basic, as opposed to 
fashion. That region is really not capable of making fashion at 
this time. That business is in China, and----
    Mr. LEVIN. Mr. Woltz makes them.
    Ms. FOX. His products aren't really--we would consider that 
more of a basic item as opposed to a fashion item with a lot of 
detailing and tailoring taken into it, things with linings and 
what not. Those are not the kind of things that Perry 
Manufacturing makes. They are more of a conservative, more 
basic producing supplier. We would not go to them for high 
fashion.
    Mr. WOLTZ. The difference is ``high.''
    [Laughter.]
    The difference is high. We make what we consider fashion 
because it changes every season.
    Ms. FOX. Yes.
    Mr. LEVIN. Okay. I have some questions, but the time is up. 
Mr. Baker, I would like to ask you some questions. I will 
submit them to you----
    Chairman CRANE. In writing?
    Mr. LEVIN. In writing.
    [The information was not received at the time of printing.]
    Chairman CRANE. Very good. All right. Mr. Shaw?
    Mr. SHAW. Thank you, Mr. Chairman. Coming into this 
hearing, and after listening to the Senate panel, it seemed 
like a very simple solution, which you people have shot down. 
We do not want to make an agreement or file a law that would 
make Haiti simply a platform for China, and we certainly don't 
want to impact upon the other trade agreements that we have 
with other countries. Mr. Felker, you hit on that. If we give 
Haiti the only, the country that has the advantage of being 
able to export without duty items made from fabrics from China, 
we certainly would in the long run be doing that, even though 
with our FTA with Africa, there is a certain amount of that in 
the short term, but that phases out in the long term. However, 
we want to be sure that there is quality material available so 
that we can have a quality product coming out of Haiti.
    Does anyone on the panel have information as to exactly 
where we are with the technology? How far down the line do we 
have the Mexicos or the Caribbean countries or Central American 
countries or possibly even down into South America, where we 
are negotiating FTAs now, how far down the line would they be 
in being able to manufacture quality textiles that would be 
able to make it where you would invest in Haiti and produce the 
employment that we are after? Does anybody want to take that? 
Mr. Felker?
    Mr. FELKER. Yes. I have been in many textile plants 
throughout the region that you have described and the 
technology is largely there. The application of the technology 
varies from location to location. Certainly in the United 
States, many mills, the surviving mills, I should say, are 
state of the art and have the ability to produce very, very 
high quality.
    Now, quality can be measured in terms of flaw level and 
also in terms of intrinsic values. There are certain products 
that are not produced in the United States that would qualify 
as very high-quality products, and I think there does need to 
be a system that does allow these--a short-supply system that 
works, is commercially viable, that allows access to these 
products that are not available in the United States. As far as 
the ability to produce world competitive, flawless-type fabrics 
and yarns, the technology is there. I hope that helps your 
question.
    Mr. SHAW. The technology is there here in the United 
States.
    Mr. FELKER. It is here in the United States, and the 
technology is available and in place to a very significant 
degree in the Andean region and in Mexico----
    Mr. SHAW. How long would it take for the capital investment 
in order for them to gear up to be able to manufacture the--it 
is one thing to say the technology is there, but we also need 
the capital resources.
    Mr. FELKER. To gear up for the infrastructure, the 
infrastructure is largely there, not so much in the Caribbean, 
but in Mexico and in the Andean nations. The economics of 
manufacturing in the Caribbean are--for the yarns and fabrics, 
for wovens, is somewhat questionable.
    Mr. SHAW. Are you saying that the countries that we have 
FTAs with can compete quality-wise with China right now?
    Mr. FELKER. Yes, not across the board with all companies, 
but yes.
    Mr. SHAW. Does anybody have a contrary view? Ms. Fox? What 
does J.C. Penney say?
    Mr. FELKER. Well, I disagree with that. I think that if you 
look at the types of yarns that are spun here, and we are 
talking about knits because that is what the conversation is, 
because really wovens is not really something that is strong in 
this region, if you look at the type of yarns that are spun in 
the United States and also spun in Mexico, it is not the same 
quality, tightness. The finishing is different. So, that is why 
J.C. Penney primarily sources most of its fabric, not from 
China, China, Korea, India, Pakistan, and I think to Mr. 
Woltz's comment, Pakistan actually has a much greater threat to 
the knit industry than will China. The products that we are 
talking about for Haiti are really not the type products that 
were produced in China.
    Mr. SHAW. I think what is facing this dilemma, and I will 
wrap it up now because my time is almost up and it has been a 
long afternoon, but I think the dilemma facing us right now is 
that we want to pass a bill that we will be able to conference 
with the Senate, but we have to be very careful on how that is 
going to impact on other manufacturers in other countries that 
we have FTAs with, so we have got our work cut out for us and 
we are going to have to move forward.
    I was hoping that we could get a bill passed before we 
adjourn. I still hope we can, but this issue has certainly 
complicated the road to the passage of a bill. Also, the 
question still remains and will always remain when you're 
dealing with our friends over in the Senate is that if we 
change anything, can we ever get it back on the Senate floor 
and get it off, and that is a problem. We don't want to be very 
reckless just in order to expedite the process. Thank you all, 
and I yield back.
    Chairman CRANE. Mr. Thompson, did you have a question?
    Mr. THOMPSON. Thank you very much, Mr. Chairman. If I might 
just make a small contribution from the viewpoint of the auto 
industry, Congressman Shaw's question was about how fast you 
can implement technology in Haiti. From the automotive industry 
viewpoint and looking at wire harnesses, we would confidently 
expect that wire harness production in Haiti would deploy 
exactly the same technology and the same processes that produce 
extremely high-quality product in all of the other countries in 
the world in which we operate and we could do that within the 
period of 1 to 2 years.
    Chairman CRANE. Thank you very much. I want to express 
appreciation to all of you for your participation, giving of 
your time so generously. Your contributions play a very 
important role in our decisionmaking here and you folks are all 
on the frontlines and we can't thank you enough for your 
involvement. As I have told folks many times, keep the faith, 
fight the fight, but remember the war is eternal. Thank you. 
The hearing stands adjourned.
    [Whereupon, at 4:07 p.m., the hearing was adjourned.]
    [Submissions for the record follow:]

   Statement of U.S. Association of Importers of Textiles and Apparel

    The U.S. Association of Importers of Textiles and Apparel, USA-ITA, 
strongly supports legislation to provide enhanced trade preferences to 
apparel manufactured in Haiti, as a means of ensuring that orders are 
placed in Haiti after 2004. Given the extraordinary disadvantages Haiti 
currently faces, it is unlikely that U.S. importers and retailers will 
include Haiti in their future business plans, unless significant 
additional incentives are provided. Apparel importers and retailers 
will need a strong and compelling reason to be in Haiti after this 
year; the Haiti Economic Recovery Opportunity Act approved by the 
Senate and under consideration in the House would give them that 
reason.
    The poorest country in the Western Hemisphere, Haiti is also among 
the most destitute nations in the world. With an average life 
expectancy of 53 and literacy rates at only about 50%, over 80% of 
Haiti's population lives in extreme poverty and, according to official 
statistics, which could be understated, more than 16% of the population 
is unemployed. The Haitian economy continues to stagnate after a period 
of political upheaval, and its economy grew at an anemic 0.7% in 2003, 
which resulted in a net per capita loss when one factors in population 
growth. However, as a report by the U.S. Agency for International 
Development recently stated, ``one bright spot is exports (mainly 
apparel and textile),'' with the United States serving as Haiti's 
largest trading partner. Without immediate and meaningful help from the 
U.S. Congress, that one bright spot is likely to disappear in 2005.
    A program that will effectively entice American importers and 
retailers to do business in Haiti next year absolutely must be 
commercially sound, with rules that do not add prohibitive costs and 
risks. Simplicity is key. Rules that are too complicated and too 
confusing will destroy any incentive for business to go to Haiti. 
Simply put, business should not need a Ph.D. to establish a compliant 
duty-free program; while companies may have tolerated added compliance 
burdens while quotas were in place, once those quotas are gone and 
unlimited options around the world are finally available, that patience 
will be gone.
    Regrettably, the Caribbean Basin Trade Partnership Act has not 
served to bring significant new orders to Haiti; instead, the presence 
of quotas on other suppliers is probably the primary reason Haiti is 
producing any apparel for the U.S. market today, with CBTPA providing 
some incentive as well. Over half of what Haiti ships to the U.S. 
market today is knit shirts--35 percent of the apparel exports are 
cotton knit shirts and 18 percent are man-made fiber knit shirts. 
Approximately 68 percent of the Haitian-made apparel entering the U.S. 
qualifies for duty-free access under CBTPA. Another 20 percent enters 
the U.S. under other provisions reserved for goods containing some U.S. 
content (the so-called ``807'' provision), thereby qualifying for a 
small duty reduction. While U.S. importers therefore have used the 
CBTPA to produce garments in Haiti, their willingness and reason for 
continuing to do so after December 31, 2004, is extremely limited. Once 
quota costs are eliminated for other suppliers, producing CBTPA 
compliant garments in Haiti simply will not be justified in terms of 
cost, especially given the simple garments produced there.
    Recognizing this reality, the Senate-approved Haiti Economic 
Recovery Opportunity Act, S. 2261, and its House counterpart, H.R. 
4889, would establish a trade preference program similar to the one 
established for the least developed countries of sub-Saharan Africa 
under the African Growth and Opportunity Act. The parallel is clearly 
appropriate. Haiti is as poor as these sub-Saharan nations and the 
obstacles to its future success in apparel production are painfully 
similar. While Haiti has the advantage of a closer location to the 
United States and therefore can meet the important speed to market 
demanded by retailers today, it shares the lower productivity levels 
and more limited skills, as well as the lack of adequate and 
competitive supplies of essential inputs, including yarns and fabrics. 
Only with the ability to obtain duty-free treatment for apparel 
produced from third country fabrics will Haiti be able to produce 
garments that are competitive with garments produced elsewhere in the 
region or in Asia.
    USA-ITA appreciates the Committee's desire to identify whether 
there are alternative origin rules that would encourage apparel 
manufacturing orders to be maintained or added in Haiti. However, our 
members' review of the suggested alternatives concludes that it is 
highly unlikely that anything less than a single transformation rule--
allowing the use of third country yarns and fabrics--would result in 
serious consideration of Haiti as a source for apparel after 2004. 
Efforts to ``tweak'' existing programs, such as CBTPA, will not be 
sufficient. With that in mind as well as with a strong understanding of 
the ways in which companies are restructuring in response to the 
elimination of quotas, USA-ITA has two recommendations beyond the 
Senate-passed bill.
    First, it is worth considering the idea of a single transformation 
rule for ``certain apparel.'' However, USA-ITA urges the Committee, if 
it proceeds with the idea of a single transformation rule for ``certain 
apparel,'' it must not burden such a rule with separate product-by-
product caps or with additional paperwork burdens. Such complications 
will only destroy any incentive for U.S. importers to explore that 
option. The program must include those products Haiti is capable of 
producing and any cap on duty-free access must be based upon commercial 
reality and viability; a level that is too low creates a risk that 
companies will not participate at all.
    Second, although clearly not as attractive to U.S. apparel 
importers and retailers as a more straight-forward third country fabric 
provision, application of the Generalized System of Preferences program 
to apparel would be a possibility. The idea is not new or unique; the 
European Union includes apparel within its GSP program. USA-ITA members 
advise that a value-added rule based upon the GSP program, namely 35 
percent value added plus substantial transformation plus direct 
shipment to the U.S. market, with other countries in the region and 
U.S. inputs allowed to help make up that 35 percent threshold, might 
provide a small incentive to place some orders in Haiti. Expressly 
placing Haiti apparel under the GSP program also carries with it the 
conditions and standards that are part and parcel of the U.S. GSP 
program, including affording internationally recognized worker rights.
    USA-ITA also urges the Committee not to perpetuate an inappropriate 
distinction between apparel made of knit and woven fabric. As a 
practical matter, only knit fabrics are produced in the Caribbean and 
Central American region; wovens are virtually non-existent. The more 
limited benefits for woven apparel under CBTPA, requiring that the 
fabrics be formed in the U.S. from U.S. yarns (while knit apparel can 
use fabric woven in the region from U.S. yarns), has effectively 
undermined any incentive for investment in such mills in the region. 
Continuing that distinction would only serve to eliminate the ability 
of Haiti to shift into other products. Creating an incentive for 
investment in woven fabric production now, by providing benefits for 
apparel made from fabrics woven in the region, while noble, is truly 
too late, particularly in light of the amount of production capacity 
already in place in the world.
    Adjustments in the caps on benefits under CBTPA would be largely 
tantamount to rearranging the deck chairs on the Titanic. While Haiti 
might benefit from its own non-underwear t-shirt cap, if it were set at 
a commercially viable level, it is not the caps that will prevent Haiti 
from maintaining the interest of U.S. importers or winning more orders 
from U.S. buyers next year. With Haiti accounting for only 0.67 percent 
of the apparel imported into the United States in one year period 
ending July 2004, and the overall CBTPA cap never filling, it is 
apparent that other issues are behind the trends. Only the non-
underwear t-shirt cap fills early. Ultimately, the issue is how to make 
apparel, including more types of apparel, produced in Haiti 
competitive. The way to do that is to allow it to reduce costs 
sufficiently to offset its lower productivity levels.
    USA-ITA does commend the concept behind H.R. 1031, which would 
encourage U.S. free trade agreement partners and unilateral preference 
partners to use inputs produced in any of these countries and regions. 
While our members do not yet view this as a viable option for Haiti, 
because too few of the U.S. partners produce sufficient quantities of 
cost competitive yarns and fabrics or have the logistics in place to 
allow timely movement of inputs from one location to another, the goal 
of integrating productive capabilities among our preferential trade 
partners is clearly the right direction. At some point in the future, 
when our preference regions include more yarn and fabric producers, the 
inclusion of such cumulation benefits could be a winning business plan.
    USA-ITA respectfully urges the Committee to quickly approve 
legislation that will give U.S. importers a real reason to do business 
in Haiti. With very little time left for legislative action, we ask the 
Committee to pass meaningful and substantive legislation. Time is of 
the essence. Haiti is already losing business as the end of the decades 
of quotas nears. The most recent trade data shows that the month-to-
month and quarter-to-quarter data are falling much faster than the 
year-ending data. That signals that orders are moving, primarily to 
other Central American countries, and portends the difficulties Haiti 
will face unless the Congress acts now to provide substantial benefits 
to justify the placement of business in Haiti.

                                 
                    [BY PERMISSION OF THE CHAIRMAN:]

  Statement of Camara Nacional de la Industria Textil, Ciudad, Mexico

    Camara Nacional de la Industria Textil (CANAINTEX) appreciates this 
opportunity to submit for inclusion in the record our views on 
legislation according certain U.S. trade preferences to Haiti.
    Canaintex is the national association representing more than 400 
manufacturers of textiles (yarns, fabrics and non wovens) in Mexico. 
The fiber, textile, and apparel sector accounts for 7.5% of Mexico's 
manufacturing GDP and employs more than 800,000 Mexicans.
    Canaintex firmly believes that the future of the textile industry 
in the hemisphere--in the U.S. as well as in Mexico and the Caribbean--
depends on the extent to which countries in the region eliminate trade 
barriers and create an integrated, efficient regional textile market. 
Market based, regional integration will allow suppliers in the 
hemisphere to deliver a ``total package'' regional product to our 
apparel customers in the United States at competitive prices, delivery 
times and quality standards. We believe this is ultimately the only 
basis on which Western Hemisphere textile producers will be able to 
successfully compete with Asian suppliers.
    In line with this approach, member companies of Canaintex have made 
substantial investments in capital equipment and technology to position 
Mexican companies as price competitive, reliable suppliers of high 
quality inputs to regional apparel producers.
    At the same time, the Government of Mexico has worked to negotiate 
Free Trade Agreements to open up regional markets to Mexican textile 
products and, equally important, to expose Mexican textile companies to 
market disciplines and ensure we remain competitive.
    We believe the results speak for themselves. In the highly 
competitive U.S. market, the Mexican textile industry was able to 
establish itself as the number one foreign supplier in a broad range of 
products. At the same time, Mexico grew to become the number one export 
market for U.S. textile manufacturers and U.S. cotton growers.
    Moreover, in the past year, we have worked with U.S. trade 
negotiators and our colleagues in the region to introduce the concept 
of textile cumulation into trade agreements with Central America and 
the Dominican Republic, and we are seeking wider cumulation in on-going 
negotiations with the Andean countries. Cumulation is a powerful tool 
for rationalization of the hemispheric textile market, and an important 
building block in constructing a Free Trade Area of the Americas 
(FTAA).
    In this context, Canaintex believes that the original HERO 
concept--to provide Haiti with the opportunity to incorporate inputs 
from countries with which the United States has Free Trade Agreements--
is the most effective means of achieving the twin goals of promoting 
apparel production in Haiti and strengthening the regional textile and 
apparel industry. There is a real possibility that expanding the range 
of qualifying sources to include Asian suppliers--including China--
could create incentives to dislocate existing production in the 
hemisphere, widen the threat to U.S. and regional textile producers 
from unfairly traded product, and increase the opportunities for 
illegal transhipments of Chinese textiles. These effects would 
exacerbate the employment and other economic effects associated with 
the ending of textile quotas in January 2005 which have been documented 
by the International Trade Commission.
    Canaintex believes that quality inputs required to support 
expanding Haitian apparel production are available from FTA supplier 
countries in the volumes needed, at highly competitive prices and with 
short delivery times, making the expansion of preferences to non-FTA 
suppliers unnecessary. This would be particularly true if the U.S. 
Congress were to take early action to approve the trade agreement with 
Central America and the Dominican Republic.
    In the case of Mexico, the fact that Mexican producers currently 
supply more than $88 million worth of knit fabric to the United States 
market stands as clear evidence that we have the available capacity to 
supply Haiti with high quality knit fabric in the quantities required.
    Canaintex would welcome an opportunity to work with the Committee 
to ensure that the needs of Haiti's apparel industry can be met within 
this hemisphere.

                                 
                    [BY PERMISSION OF THE CHAIRMAN:]

 Statement of Marie-Claude Bayard, Haitian Manufacturers Association, 
                             Delmas, Haiti

    My name is Marie-Claude Bayard. I am President of the Haitian 
Manufacturers Association (ADIH) and it is an honor to present my 
personal perspective and that of our Association to your prestigious 
Committee.
    My professional activities in the textile sector began in 1975 and 
we employed over 1,400 people at peak times in 3 factories. Today, we 
operate only 1 plant employing approximately 600 people working for 
Wal-Mart and JCPenney via SaraLee and Perry Manufacturing. The 
downsizing resulted mostly from the migration of our children's wear 
suppliers towards cheaper production lines in the Far East with which 
we could not compete.
ADIH
    The Manufacturers Association represents a very large group of 
industrial enterprises and related businesses with one-third of its 
members operating in the textile sector.
    Quite concerned by the new threats and challenges posed by the 
prospects of a world shaped by globalization, ADIH began to search for 
ways to assist its members in their adjustment programs and to help 
propel Haiti on the path of substantial increase from its low level of 
production. The results of our search were conclusive: our best and 
only choice for a fairly quick response to the dire needs of the 
country in investments and job creation was, and still is, the textile 
assembly industry with its huge potential for massive employment of 
unskilled labor and its demands for reasonable financial investments.
    We applauded Congress when it passed the AGOA bill with special 
provisions given to the least developed countries in Africa. It was a 
fair gesture and it confirmed our belief that we could also expect the 
same fairness towards Haiti, the least developed country of the 
Americas and one of the United States closest neighbors.
    We are very grateful to the U.S. Congress for taking the time to 
look for ways to assist Haiti and support the Haitian garment industry 
and its workers. We are also grateful to all the U.S. firms like Perry 
Manufacturing, JCPenney, Wal-Mart, Tropical Manufacturing, A&E Threads, 
the American Apparel and Footwear Association, the U.S. Chamber of 
Commerce, the American Chamber of Commerce in the Dominican Republic, 
the Associacion de Zonas Francas de la Republica Dominicana, and so 
many others who put their faith in our small and troubled country and 
sided with our efforts.

HAITI NEEDS HELP
    While we gather here to discuss issues related to the HERO bill, 
our country is at a crossroad that brings both serious concerns and 
great hopes. Concerns, because institutions are still weak and the 
extreme poverty and level of unemployment render the task of nation 
building more difficult and troublesome. At the very moment that we 
should be paying respect to the memory of our ancestors who achieved a 
remarkably successful revolution, we are faced with Haiti's disastrous 
position in two important classifications: ranking 80th in the Global 
Competitiveness Report, and 145th in the Human Development Index. It is 
a worrisome story: the income per is less than $400 a year and will 
remain low unless the course is radically altered. The common citizen 
is wrestling between electricity shortages, lack of potable water, of 
minimum healthcare, of schools and daily meals for all children. 
Unemployment or underemployment among those of working age is far in 
excess of 70%. It is therefore evident that building democratic 
institutions is extremely problematic under such conditions.

HERO
    Only by enhancing Haiti's attractiveness can we hope for 
substantial business investments. CBTPA did not fulfill the 
expectations because of its limitation to U.S. fabrics, more expensive 
than most of the world, or because of knit regional fabric not readily 
available or delivered on time, also for not allowing the use of 
regional woven fabric. This is what HERO, as passed by the Senate, 
would in fact correct. By allowing production from third country 
fabric, HERO would create the opportunity for all manufacturers to 
compete with the low production costs of Asia and set the base for 
Haiti to become a garment production center for the region.
    Quoting the USAID report of 2003: ``HERO will stimulate production 
in Haiti of apparel from both U.S. and third country fabrics. If there 
is any diversion, it is most likely to come at the expense of imports 
from the Far East made with no U.S. components or imports from U.S. 
preferential trading partners who will see their textile mill products 
incorporated into apparel in Haiti as opposed to within their own 
countries.''
    We are very grateful to the U.S. Congress for taking the time to 
look for ways to assist Haiti and its workers. ``There are some very 
impressive well-managed companies, consciously striving for the 
American model, run by young men with a strong U.S. background, with 
full computerization of production planning and accounts, and in some 
cases also, marketing plus product development.''
    The type of assembly carried out in Haiti would have minimal or no 
impact on employment in the United States. Again as quoted in the USAID 
report, ``there should be no adverse impact on U.S. apparel 
manufacturers since the type of apparel that could conceivably enter 
from Haiti under the new provisions of HERO have long-since left the 
United States for offshore operations.'' In fact, it would encourage 
the emigration of jobs away from the Far East and back to our own 
hemisphere.
    It would also create new jobs in the United States since unlike in 
the Far East, most of Haitian foreign exchange earnings are utilized to 
purchase American products and, furthermore, many components included 
in garments would be purchased in the United States.
    Growth in Haiti will also benefit the whole state of Florida. Haiti 
has a high propensity to import products and services originating in 
Florida and increased export earnings will augment this propensity.

SOCIAL IMPACT
    We have all witnessed the human misery represented by disadvantaged 
Haitians risking their lives in perilous sea voyages to reach the shore 
of Florida where they literally have to swim to shore with absolutely 
nothing. It is only by creating employment opportunities in Haiti, as 
will happen through HERO, that we can reduce this flight. And on the 
basis that one formal job in Haiti feeds 6 mouths, such employment 
could conceivably support over 15% of the entire population.
    The private sector of Haiti has become increasingly conscious that 
the new rules and norms in our global environment also require a 
complete new approach to the business of growth. The Haitian 
Manufacturers Association has, for some time now, endorsed the World 
Responsible Apparel Production or WRAP standard. A new social 
conscience has matured not only to create the most favorable investment 
climate through the promotion of proper public policy framework but 
also and foremost by ensuring the best working environment and social 
conditions for our workforce conducive to personal growth.
    Again quoting the USAID report: ``This `social conscience' of some 
employers is distinct from the ruthless drive for productivities and 
cost reductions in textile companies around the world, especially in 
Asia and the former Soviet satellite countries of Eastern Europe. . . . 
A strong element of compassion and care is very apparent in some of the 
larger and more successful Haitian-owned companies.''
    It must also be noted that 75% of employees in the Haitian sector 
are female.
    With great pride, we have seen some of our workers become quality 
managers, line supervisors, production managers and head mechanics and 
their children graduate from high school and go to college to become 
doctors, nurses and engineers. Many of the workers have gone from using 
the services of loan sharks to enjoying the facilities of the formal 
banking system for their personal savings or private loans to build 
their homes or start their personal businesses. Haiti's manufacturers 
strive to serve the best interests of both their workers and their 
consumers' Social Responsibility.

CONCLUSION
    If things proceed the way the United States wishes, the Free Trade 
Agreement of the Americas will be a reality in the near future. We are 
convinced that there is no way for a small country like Haiti to 
prevail by itself. We realize that our whole Caribbean region is 
particularly vulnerable. Integration, if conducted properly, represents 
the appropriate method by which we can benefit to the maximum from the 
winds of globalization and set sail towards the future model of 
competitive development. However, the participation of small economies 
is imperative for the success of the FTAA. We are ready to move towards 
strategic alliances with partners of the region and foremost with our 
next door neighbors.
    Sadly enough, there is no quick fix to the problems of poverty and 
underdevelopment. The purpose of HERO is to help improve the economic 
and political situation in Haiti through trade and thereby allow Haiti 
to better be able to confront its serious economic and social problems. 
For once, our LDC status can be considered a strategic advantage, 
presenting enormous opportunities for Haiti and for business people 
willing to seize them. The HERO bill approved by the Senate, the new 
Investment Code and the new Law on Free Zones offer great advantages to 
investors willing to export from the Haitian platform. New industrial 
parks are being built under specs that are fully congruent with the 
most stringent international environmental norms.
    Haiti needs HERO. As business people, we need HERO to enhance our 
contribution to the welfare of the Haitian society, by creating much 
needed stable jobs to jump start the economy. In the new world of the 
Americas, the walls of prejudice, poverty, and protectionism can be 
toppled by extending a helping hand to a small country like Haiti and 
connecting through the bonds of freedom and prosperity. The U.S. free 
trade agenda can help a fragile democracy in the Americas, just as U.S. 
trade policy after World War II helped secure democracy and hope in 
Western Europe and Japan.
    There is, as yet, no fabric or yarn manufacturing facility in 
Haiti. With China, the fourth largest trading nation in the world, now 
in the WTO, if left unattended, Haiti will face devastating global 
competition. This must not be allowed to happen. A solid legislation 
like the HERO bill is a valuable instrument for energizing key actors 
to attain socio-economic and political progress and help nurture 
economic development initiatives. Expectations that HERO would find its 
way through Congress unopposed has itself reinforced the current 
momentum in the sector in Haiti. We are therefore convinced that 
employment and exports could increase by approximately 30% in the short 
to medium term.
    Haiti is only two hours' travel time away from the U.S. as opposed 
to the long hours needed to reach the Far East or China: businesses 
will respond favorably to the opportunity of HERO to avail themselves 
of the best possible insulation for the future, within the national 
constraints.
    With growth, finally Haiti will be empowered to draw on its art, 
its traditions and culture to reinvent itself through the open-
mindedness, hard work and perseverance of its people. Our citizens 
dream of a life free of despair and this extraordinary city of 
Washington can play a leadership role to hearten our citizens through 
an adequate legislation that will unlock the country's potential. The 
challenges are genuine. We should not minimize their significance. But 
we can learn from one another while also perceiving special needs and 
circumstances in a bond of mutually beneficial exchange.

                                 
                    [BY PERMISSION OF THE CHAIRMAN:]

 Statement of Patrick Moynihan, Haitian Project, Inc., Port-au-Prince, 
                                 Haiti

    My name is Patrick Moynihan, and I am grateful for this opportunity 
to submit this statement to the Subcommittee in support of legislation 
for trade preferences for Haiti. I am the President of the Haitian 
Project, Inc. and Director of Louverture Cleary School, an independent 
Catholic secondary school for economically underprivileged, 
academically gifted students in Port au Prince, Haiti.
    Given that I am an educator rather than a textile or trade expert, 
it may not be readily apparent why I would request to speak on behalf 
of the HERO Act. Since 1996, I have directed Louverture Cleary School, 
The Haitian Project's free secondary school for academically gifted 
children from the poorest regions of Haiti. The objective of the school 
is to form our young, talented students into civic-minded, productive 
leaders for Haiti--a country that has suffered far too long from the 
instability created by an economically divided society easily exploited 
by mercurial and divisive leaders who find little challenge in 
manipulating the country through threats of revolution and oppression 
simultaneously. Therefore, as an educator, my interest in the HERO Act 
is very pragmatic. Haiti needs a stronger, larger middle class to buoy 
its nascent democracy. Therefore, its people need jobs. Specifically, 
our graduates need jobs if they are going to make a difference.
    Simply put, our mission of educating economically disadvantaged 
students to become the future leaders in their country cannot be 
realized unless there are opportunities for gainful employment at the 
end of their education. It is critical for our students to have job 
opportunities such as those offered by the apparel industry in Haiti. 
In order for those jobs to be created and available to our students, 
Haiti must be provided trade preferences such as those in the HERO Act.
    Part of my responsibilities as the president of Louverture Cleary 
and The Haitian Project is to work with the business community of Haiti 
to find meaningful employment for our graduates as they pursue their 
university education. This activity has provided me with the 
opportunity to visit, on numerous occasions, factories in Haiti 
involved in production ranging from textiles to electronics. While many 
of our students are employed in retail companies and others are 
studying medicine at the top universities in Haiti, a significant 
portion work in industrial settings as quality control managers, 
accountants and inventory managers.
    I must say that my visits, which are frequent and unannounced, have 
never left me with the impressions that I hear stated by some of your 
colleagues in the name of protecting the Haitian worker. This leads me 
to wonder if the negative descriptions, which have at times been very 
personal condemnations, used to describe the working conditions in 
Haiti are motivated more by politics than a true interest in helping 
the Haitian worker. I suppose I would believe the sentiments of those 
who oppose Haiti being assisted in finding work for its people through 
trade acts such as this one, if those same politicians would propose 
opening our borders to allow all the unemployed Haitians, over 60% of 
the country, to move here and compete for jobs. At the very least, I 
can say that their words have little basis in reality given my 
experience in Haiti.
    Certainly, salaries in Haiti are very low--too low for the 
missionary-minded like myself. However, how will wages ever increase 
without competition? We are not counting on altruism in this country to 
improve laborer's pay--we should not expect to find it doing so in 
other countries. With increased employment comes training and increases 
in productivity. Increases in productivity provide laborers with the 
chance to organize into unions and demand more of the profits their 
work produces. Increased employment also creates stability and funds 
infrastructure advancements both of which reduce the risk for investors 
backing companies looking for new locations for their factories. This, 
in turn, increases the number of companies willing to compete for 
Haitian labor--the last natural resource Haiti has to bring to the 
global market. We can continue to pour money into Haiti through USAID 
and other non-self-sustainable programs, or we can provide ways for 
Haiti to develop an economy.
    We also know that this trade initiative comes with significant 
requirements that must be fulfilled in order to ``merit'' the 
advantage. These requirements will encourage improvements in the 
treatment of labor in Haiti as well as positively motivate the 
government of Haiti to improve itself. It is easier to invite a horse 
to water than push him there. The HERO Act invites social and political 
responsibility by offering a tangible reward for doing the hard work of 
maturing a country from revolution into statehood.
    I also believe extending the HERO Act to Haiti will benefit the 
United States. It is in our best interest to work cooperatively with 
all our brothers and sisters in the Americas to create a more stable 
and economically healthy region. No offense to Mr. Frost, Trade Acts, 
not walls, will make better neighbors and neighborhoods in the end.
    As a final point, each day I am approached by at least five people 
who are looking for work in Haiti. Depending on their circumstances and 
education, their plea ranges from desperation caused by hunger to anger 
caused by frustration. It is not easy to watch a country undergo the 
industrial revolution starting at its most basic, manual and rigorous 
level. Yet, it is more painful to think that people will always starve 
in Haiti and go without education with only the hope of getting out to 
console them. I ask that you pass this trade act. Let's give Haitians 
of all economic levels a working chance by giving them a chance to 
work.

                                 
                Statement of National Retail Federation

    The National Retail Federation (NRF) submits this statement to the 
Ways and Means Trade Subcommittee to express the U.S. retail industry's 
strong support for a trade preference program for Haiti. NRF is the 
world's largest retail trade association, with membership that 
comprises all retail formats and channels of distribution including 
department, specialty, discount, catalog, Internet and independent 
stores as well as the industry's key trading partners of retail goods 
and services. NRF represents an industry with more than 1.5 million 
U.S. retail establishments, more than 23 million employees--about one 
in five American workers--and 2003 sales of $3.8 trillion. As the 
industry umbrella group, NRF also represents more than 100 state, 
national and international retail associations.
    NRF welcomed the passage of S. 2261--the Haiti Economic Recovery 
Opportunity Act of 2004 (``HERO'')--in the Senate. We also applaud 
quick action by the Ways and Means Committee to help ensure House 
consideration of the initiative before the end of the 108th Congress. 
In order to assist the economic recovery and development of Haiti, the 
most impoverished country in the Western Hemisphere, the HERO bill 
focuses on incentives necessary to build a viable apparel industry, 
using the African Growth and Opportunity Act as a model. Like AGOA, the 
HERO bill employs a flexible rule of origin that provides duty free 
treatment to clothing made in Haiti from third-country yarns and 
fabrics.
    This flexibility to use third-country inputs in apparel production 
is absolutely essential to the success of any trade initiative for 
Haiti, due to two trends that are creating a paradigm shift in the 
competitive landscape for textile and apparel production and sourcing. 
The first is the end of the global system of textile and apparel quotas 
on January 1, 2005. Once textile and apparel quotas end, the cost of 
quota will no longer be a factor in production and sourcing decisions. 
The chief beneficiaries from this change will be the most competitive 
Asian producers, who have, heretofore, been the most severely 
restrained by quota restrictions.
    The second event is a fundamental change over the past decade in 
the way apparel is manufactured, from the old ``cut-and-sew'' model to 
so-called ``full package'' production. While labor costs remain a 
competitive factor under this system, it is, at best, secondary, and is 
certainly not as important a consideration as in the past. Indeed, in 
full package production, apparel producers who are the most competitive 
share a certain number of characteristics. In general, they are able to 
provide their customers a range of services, including the ability to 
work closely with designers, adaptability in the face of rapidly 
changing demand, and the ability to maximize speed to market. But 
perhaps the most important trait they share is access to the widest 
range of yarns and fabrics.
    Again, this situation favors manufacturers in Asia over those in 
the Caribbean Basin region, like Haiti, who have found themselves bound 
to the cut-and-sew model and over-reliant on high-priced U.S. yarn and 
fabric as a result of the inflexible rules of origin under the 
Caribbean Basin Initiative and the Caribbean Basin Trade Partnership 
Act. The compliance costs created by these programs often negate the 
duty preference and have made it more difficult for Haitian and other 
regional producers to compete effectively against the most efficient 
Asian manufacturers. The end of the quota will only exacerbate this 
competitive handicap.
    In addition, the political and economic instability in Haiti has 
created yet another significant competitive obstacle for that country. 
In sum, without strong incentives to encourage apparel retailers, 
importers, and manufacturers to do business in Haiti, the prospects for 
the apparel sector there are bleak. Conversely, a strong package of 
incentives that will enhance the advantage of proximity to market that 
Haiti does have, as well as provide apparel retailers and manufacturers 
a commercially-viable environment in which to do business will 
encourage trade, development, and the creation of desperately-needed 
jobs in the country.
    The HERO bill is commercially viable in the sense that it includes 
the necessary incentives to overcome the risks for apparel retailers, 
importers, and manufacturers to do business in Haiti, and to achieve 
its ultimate objective of promoting trade, investment and job creation 
in Haiti. Given the short time left to this Congress and the imminent 
end to the quota system, it certainly makes sense for the House to 
consider passage of the Senate bill as quickly as possible. If the Ways 
and Means Committee and the House conclude that a different approach is 
warranted, it should still be guided by the considerations discussed 
above to craft a commercially viable bill with simple and flexible 
rules of origin. Simplicity and flexibility are key. Retailers simply 
will not use any program that handcuffs them with rigid, complex rules.
    Other approaches that meet the simplicity/flexibility test have 
been proposed in other pieces of legislation. For example, the Middle 
East Trade and Engagement Act, which has been introduced with 
bipartisan support in both the House and Senate, adopts for apparel the 
simple, straightforward rule of origin under the Generalized System of 
Preferences. The GSP system provides preferential treatment to articles 
that undergo at least 35 percent value added production in the 
beneficiary country.
    Finally, in debate on the Haiti initiative, some have suggested 
that limiting imports from China is necessary to ensure that countries 
like Haiti can continue to export to the United States in the post-
quota world. This argument is a red herring. The simple fact is that 
there is no guarantee that any trade diversion created by limiting 
imports from China will benefit countries like Haiti. Rather, it is 
more likely to shift to other Asian producers that are not subject to 
any quantitative restrictions. Secondly, limiting imports from China 
does nothing to build the competitiveness of Haiti or any other 
producer. Conversely, however, providing the right package of trade 
incentives and crafting an initiative for Haiti that meets the 
``commercial viability'' test will help build a more competitive 
apparel sector in that country. This in turn will help spur trade, 
investment, and job creation, and ultimately better political stability 
in Haiti, an outcome that is clearly in the interests of the United 
States.

                                  
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