```

[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]

 
  H.R. 984, ``THE CARIBBEAN AND CENTRAL AMERICAN RELIEF AND ECONOMIC 
                          STABILIZATION ACT''

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

                                HEARING

                               before the

                         SUBCOMMITTEE ON TRADE

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 23, 1999

                               __________

                             Serial 106-69

                               __________

         Printed for the use of the Committee on Ways and Means

                    U.S. GOVERNMENT PRINTING OFFICE
66-685 CC                   WASHINGTON : 2000
_______________________________________________________________________
            For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 
                                 20402

                      COMMITTEE ON WAYS AND MEANS

                      BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
BILL THOMAS, California              FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida           ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut        WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana               JIM McDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania      KAREN L. THURMAN, Florida
WES WATKINS, Oklahoma                LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida

                     A.L. Singleton, Chief of Staff

                  Janice Mays, Minority Chief Counsel

                                 ______

                         Subcommittee on Trade

                  PHILIP M. CRANE, Illinois, Chairman

BILL THOMAS, California              SANDER M. LEVIN, Michigan
E. CLAY SHAW, Jr., Florida           CHARLES B. RANGEL, New York
AMO HOUGHTON, New York               RICHARD E. NEAL, Massachusetts
DAVE CAMP, Michigan                  MICHAEL R. McNULTY, New York
JIM RAMSTAD, Minnesota               WILLIAM J. JEFFERSON, Louisiana
JENNIFER DUNN, Washington            XAVIER BECERRA, California
WALLY HERGER, California
JIM NUSSLE, Iowa

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.

                            C O N T E N T S

                               __________

                                                                   Page

Advisory of March 11, 1999 announcing the hearing................     2

                               WITNESSES

Office of the United States Trade Representative, Hon. Richard 
  Fisher, Deputy United States Trade Representative..............    23
U.S. Department of State, Alan Larson, Assistant Secretary for 
  Economic and Business Affairs..................................    30

                                 ______

American Apparel Manufacturers Association, Larry K. Martin, as 
  presented by Stephen Lamar.....................................    93
American Textile Manufacturers Institute, Carlos Moore...........    88
American Yarn Spinners Association, Jim H. Conner................    86
Costa Rica, Republic of, His Excellency Jaime Daremblum, 
  Ambassador.....................................................    63
Dominican Republic, His Excellency Bernardo Vega, Ambassador.....    44
El Salvador, Republic of, His Excellency Rene A. Leon, Ambassador    60
Graham, Hon. Bob, a United States Senator from the State of 
  Florida........................................................     7
Kolbe, Hon. Jim, a Representative in Congress from the State of 
  Arizona........................................................    11
National Cotton Council of America, F. Ronald Rayner.............    83
National Retail Federation, Erik O. Autor........................    98
Nicaragua, Republic of, His Excellency Francisco X. Aguirre-
  Sacasa, Ambassador.............................................    55
Union of Needletrades, Industrial and Textile Employees, Jay 
  Mazur, as presented by Mark Levinson...........................    74

                       SUBMISSIONS FOR THE RECORD

American Apparel Alliance, New York, NY, Seth M. Bodner, 
  statement and attachments......................................   105
Honduras, Republic of, J. Benjamin Zapata, statement and 
  attachments....................................................   109
Nilit America Corporation, Greensboro, NC, Mac Cheek, statement..   116

  H.R. 984, ``THE CARIBBEAN AND CENTRAL AMERICAN RELIEF AND ECONOMIC 
                          STABILIZATION ACT''

                              ----------                              

                        TUESDAY, MARCH 23, 1999

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                     Subcommittee on Trade,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to notice, at 1:10 p.m., in 
room 1100, Longworth House Office Building, Hon. Philip M. 
Crane (Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

                         SUBCOMMITTEE ON TRADE

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE

March 11, 1999

No. TR-5

                       Crane Announces Hearing on

             H.R. 984, the ``Caribbean and Central American

                Relief and Economic Stabilization Act''

    Congressman Philip M. Crane (R-IL), Chairman of the Subcommittee on 
Trade of the Committee on Ways and Means, today announced that the 
Subcommittee will hold a hearing on the trade provisions of H.R. 984, 
the ``Caribbean and Central American Relief and Economic Stabilization 
Act.'' The hearing will take place on Tuesday, March 23, 1999, in the 
main Committee hearing room, 1100 Longworth House Office Building, 
beginning at 1 p.m.
      
    Oral testimony at this hearing will be heard from both invited and 
public witnesses. However, any individual or organization not scheduled 
for an oral appearance may submit a written statement for consideration 
by the Committee or for inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    The Caribbean Basin Initiative (CBI) was established in 1983 by the 
Caribbean Basin Economic Recovery Act (CBERA) (P.L. 98-67). CBERA 
authorizes the President to grant duty-free treatment to the imports of 
eligible articles from designated Caribbean Basin countries. Originally 
proposed by President Reagan, the basic purpose of CBI was to respond 
to political turmoil and economic crisis in the Caribbean and Central 
America by encouraging the development of democratic governments and 
healthy economies through the expansion of trade.
      
    In addition to helping to promote peace and democracy in the 
region, CBI has successfully served to expand U.S. exports. Prior to 
enactment of CBI and during the first three years the program was in 
effect, the United States ran a significant trade deficit with the 
Caribbean Basin region. In the fourth year of the program, the trade 
balance shifted in favor of the United States and has remained in 
surplus since that time. The current annual surplus is $1.2 billion. 
The region is one of the few in the world with which the United States 
has enjoyed a sustained favorable balance of trade. U.S. exports grew 
from $5.8 billion in 1983 to $17.8 billion in 1997.
      
    Benefits under CBI are conditioned on countries continuing to meet 
seven mandatory and ten discretionary conditions, including 
intellectual property protection, investment protection, improved 
market access for U.S. exports, and whether the country is taking steps 
to afford internationally recognized worker rights.
      
    H.R. 984 was introduced by Messrs. Crane, Kolbe, Rangel, and Matsui 
to respond to the immediate and long-term needs of Caribbean and 
Central American nations affected by the devastation caused by 
Hurricane Georges in September 1998 and Hurricane Mitch in October 
1998. The bill would authorize bilateral and multilateral assistance 
for nations in the region. Title I of H.R. 984, the ``United States-
Caribbean Trade Partnership Act,'' offers additional incentives for 
economic development in the region through enhancement of the CBI trade 
program.
      
    Approximately 68 percent of the value of imports from countries in 
the Caribbean Basin currently enter-duty free under CBERA and other 
preferential trade programs. However, a number of products, mainly 
textile and apparel articles, are excluded from CBI duty-free treatment 
all together. H.R. 984 amends the CBERA to provide trade benefits to 
products currently excluded from eligibility for duty-free treatment 
under the existing CBI program. Affecting about 32 percent of the 
imports from the CBI region, the preferential duty and quota treatment 
established by the bill, which is similar to the treatment accorded to 
imports of these products from Mexico, would be in effect for a period 
of five years.
      
    In announcing the hearing, Chairman Crane stated: ``As an ardent 
supporter of CBI, I think it is important that the Subcommittee review 
the state of economic development in these neighboring countries, 
particularly in light of the catastrophic damage done to housing and 
economic infrastructure by the recent hurricanes. If left unaddressed, 
the resulting economic dislocation being suffered in the region 
threatens the future of democratic governments there.''
      

FOCUS OF THE HEARING:

      
    The focus of the hearing will be to examine: (1) the success of the 
Caribbean Basin Initiative, (2) the state of economic development in 
the Caribbean Basin region following Hurricane Georges and Hurricane 
Mitch, and (3) the benefits and costs to U.S. national security 
interests, and to U.S. firms and workers, of enacting H.R. 984.
      

DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:

      
    Requests to be heard at the hearing must be made by telephone to 
Traci Altman or Pete Davila at (202) 225-1721 no later than the close 
of business, Tuesday, March 16, 1999. The telephone request should be 
followed by a formal written request to A.L. Singleton, Chief of Staff, 
Committee on Ways and Means, U.S. House of Representatives, 1102 
Longworth House Office Building, Washington, D.C. 20515. The staff of 
the Subcommittee on Trade will notify by telephone those scheduled to 
appear as soon as possible after the filing deadline. Any questions 
concerning a scheduled appearance should be directed to the 
Subcommittee on Trade staff at (202) 225-6649.
      
    In view of the limited time available to hear witnesses, the 
Subcommittee may not be able to accommodate all requests to be heard. 
Those persons and organizations not scheduled for an oral appearance 
are encouraged to submit written statements for the record of the 
hearing. All persons requesting to be heard, whether they are scheduled 
for oral testimony or not, will be notified as soon as possible after 
the filing deadline.
      
    Witnesses scheduled to present oral testimony are required to 
summarize briefly their written statements in no more than five 
minutes. THE FIVE-MINUTE RULE WILL BE STRICTLY ENFORCED. The full 
written statement of each witness will be included in the printed 
record, in accordance with House Rules.
      
    In order to assure the most productive use of the limited amount of 
time available to question witnesses, all witnesses scheduled to appear 
before the Subcommittee are required to submit 200 copies, along with 
an IBM compatible 3.5-inch diskette in WordPerfect 5.1 format, of their 
prepared statement for review by Members prior to the hearing. 
Testimony should arrive at the Subcommittee on Trade office, room 1104 
Longworth House Office Building, no later than Friday, March 19, 1999. 
Failure to do so may result in the witness being denied the opportunity 
to testify in person.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Any person or organization wishing to submit a written statement 
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch 
diskette in WordPerfect 5.1 format, with their name, address, and 
hearing date noted on a label, by the close of business, Tuesday, April 
6, 1999, to A.L. Singleton, Chief of Staff, Committee on Ways and 
Means, U.S. House of Representatives, 1102 Longworth House Office 
Building, Washington, D.C. 20515. If those filing written statements 
wish to have their statements distributed to the press and interested 
public at the hearing, they may deliver 200 additional copies for this 
purpose to the Subcommittee on Trade office, room 1104 Longworth House 
Office Building, by close of business the day before the hearing.
      

FORMATTING REQUIREMENTS:

      
    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
Committee.
      
    1. All statements and any accompanying exhibits for printing must 
be submitted on an IBM compatible 3.5-inch diskette in WordPerfect 5.1 
format, typed in single space and may not exceed a total of 10 pages 
including attachments. Witnesses are advised that the Committee will 
rely on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. A witness appearing at a public hearing, or submitting a 
statement for the record of a public hearing, or submitting written 
comments in response to a published request for comments by the 
Committee, must include on his statement or submission a list of all 
clients, persons, or organizations on whose behalf the witness appears.
      
    4. A supplemental sheet must accompany each statement listing the 
name, company, address, telephone and fax numbers where the witness or 
the designated representative may be reached. This supplemental sheet 
will not be included in the printed record.
      
    The above restrictions and limitations apply only to material being 
submitted for printing. Statements and exhibits or supplementary 
material submitted solely for distribution to the Members, the press, 
and the public during the course of a public hearing may be submitted 
in other forms.
      

    Note: All Committee advisories and news releases are available on 
the World Wide Web at `HTTP://WWW.HOUSE.GOV/WAYS__MEANS/'.
      

      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.

                                

    Chairman Crane. Will everyone please be seated? And welcome 
to this hearing on the status of U.S. trade relations with the 
Caribbean Basin region.
    Our special focus today is on the damage suffered in the 
region as a result of Hurricanes Mitch and Georges this past 
fall, and on March 4, I joined with Mr. Rangel, Mr. Kolbe, Mr. 
Matsui, and Mr. Jefferson in introducing H.R. 984, the 
Caribbean and Central American Relief and Economic 
Stabilization Act.
    H.R. 984 is broad, authorizing legislation that responds to 
the debilitating damage, economic dislocation, and severe human 
suffering caused by hurricanes.
    It promotes U.S. economic and regional security interests 
by offering not only the necessary foreign assistance, but also 
meaningful trade incentives designed to promote stability in 
the region through the creation of long-term, enduring 
opportunities for trade and investment.
    Purchasing about 70 percent of their imports from the 
United States or about $17.8 billion annually, Caribbean Basin 
countries already represent a larger export market for U.S. 
goods and services than China. H.R. 984 will accelerate the 
growth in U.S. exports to CBI countries, particularly exports 
of U.S. textile, apparel, cotton, and yarn products, by 
building on the highly successful Caribbean Basin Initiative 
which has tripled exports to the region since it was passed in 
1983.
    Economic dislocation and distress in these small countries 
on our borders means only one thing for U.S. cities and towns: 
declining export markets, mounting illegal immigration, and 
intensified drug trafficking. The United States has poured $17 
billion in foreign assistance into the Caribbean Basin region 
since 1980 in order to stem the forces of civil war and 
political instability in our own backyard.
    As the House considers a supplemental appropriation for aid 
to the CBI region, I urge my colleagues to recognize the 
necessity of including a trade mechanism as part of the U.S. 
response. This is what the countries have told us will help 
them the most.
    H.R. 984 is in our national interest, because it will 
enhance the ability of these small nations to be good customers 
and able partners in securing our common borders.
    In closing, I want to welcome the witnesses and apologize 
that we have only a few hours for today's hearing. Please 
summarize your verbal comments, and your written documents for 
the record if you wish.
    We must stick closely to a 5-minute time limit for each 
witness. And with that, I want to yield to the Ranking Member 
of the full Committee and simultaneously the Ranking Member of 
the Trade Subcommittee, Charlie Rangel and Sandy Levin.
    Mr. Rangel. Well, thank you, my friend, Mr. Crane, as well 
as Mr. Levin. I welcome the opportunity to listen to our 
witnesses on H.R. 984. For the last 5 years, I have been a 
strong supporter for this legislation to our true friends and 
neighbors in this area and supported the President when he 
promised to make certain that the trade legislation was brought 
on parity with our agreement with Mexico under the North 
American Free Trade Agreement.
    Hurricane Mitch and Georges brought terrible destruction to 
this region, a fact I witnessed when I visited the area. The 
First Lady has visited the area--as have many Members of 
Congress--and seen first-hand the terrible toll that it has 
taken on our friends. Waiting is not an option for us. America 
has to respond the same way we would with any neighbor who has 
seen their house washed away--we owe it to ourselves to lend a 
hand to them, and, more importantly, to keep our word.
    In addition to the important CBI parity trade benefits, 
this legislation would provide immediate foreign assistance for 
Central American and Caribbean, including micro credit and 
agriculture assistance, OPIC supports and other forms of 
economic assistance. We have so many Americans that have roots 
in this part of the world, even though they don't exercise the 
same political influence. But I think, because America has 
always enjoyed just doing the right thing, that we should 
expedite this legislation, not only to ease the pain of the 
hurricane, but to fulfill our trade obligations to our friends 
in this part of the world that have been hit hard by the 
advantages that we gave to our neighbors to the south in 
Mexico, and I yield back to the Ranking Member of the 
Subcommittee, Mr. Levin.
    Mr. Levin. I thank you, and thank you, Mr. Chairman. And a 
special welcome to our two congressional colleagues, 
Distinguished Members to say the least.
    We are today going to hear much about the devastation that 
was wrought by Hurricanes Mitch and Georges. They dealt clearly 
a severe blow to the people of this already, at times, 
impoverished region.
    And providing disaster assistance is one of the keys to 
helping them with their recovery. But clearly, aid should not 
be the only component of our assistance. In the long term, I 
think we all agree the most valuable way we can assist this 
region in promoting their own economic development and growth 
is to also encourage trade.
    It is important as we do that, that we are sensitive to the 
impact on American businesses and workers. Economic integration 
between developed and developing economies that usually have 
very different capital and labor markets can have a profound 
impact on all countries, including our own. And as developing 
economies integrate more and more fully and deeply into the 
global trading system, we must take steps to ensure the result 
is to raise the living standards of all the people in those 
nations, as well as a strengthening and not undermining of 
living standards here in our own country.
    These issues have long shadowed the debate over CBI 
expansion. It has languished in Congress for nearly 5 years, 
largely because we have been unwilling to address these issues 
adequately. In the last session, the approaches taken by the 
House and Senate, as we know, resulted in deadlock. In the 
approach taken by the Administration, this session clearly 
attempts to avoid recreating the deadlock of last year.
    In the next few weeks, I hope that we will be able to sit 
down with our colleagues in the Senate as well as with the 
Administration to discuss these issues constructively and to 
work out differences in the various versions of the 
legislation. Early in this session, I urge my colleagues to 
keep this approach in mind as we in Congress and the 
Administration work to build a new consensus that will lead us 
to a renewal of a bipartisan approach on the broader issues of 
trade. And I hope that we can apply this approach to this bill. 
Thank you, Mr. Chairman.
    [The opening statement follows:]

Opening Statement of Hon. Sander M. Levin, a Representative in Congress 
from the State of Michigan

    Thank you, Mr. Chairman for convening today's hearing to discuss 
expansion of the Caribbean Basin Initiative. As my colleagues have 
stated, the devastation wrought by Hurricanes Mitch and Georges dealt a 
severe blow to the people of this already poor region.
    Providing disaster assistance to this region will be key to 
assisting these nations with their recovery. Aid, however, should not 
be the only component of our assistance.
    In the long term, the most valuable way we can assist this region 
is by promoting economic development and growth in these countries.
    In turn, the path and strategies that have proven the most 
successful are those that provide a framework to ensure that 
development benefits the greatest number of people in the region.
    It is also important that we are sensitive to the impact on 
American businesses and workers. Economic integration between developed 
and developing economies that usually have very different capital and 
labor markets can have a profound impact on all countries. As 
developing economies integrate more and more fully and deeply into the 
global trading system, we must take steps to ensure that the result is 
to raise the living standards of all the people in those nations, as 
well as strengthening, rather than undermining, living standards here 
in the United States.
    These issues have long shadowed the debate over CBI expansion. CBI 
expansion has languished in Congress for nearly five years, largely 
because we have been unwilling to address these issues. In the last 
session, the approaches taken by the House and Senate resulted in 
deadlock; the approach taken by the Administration clearly attempts to 
avoid re-creating deadlock this year. In the next few weeks, I hope 
that we will be able to sit down with our colleagues in the Senate as 
well as with the Administration to discuss these issues constructively 
and to work out differences in the various versions of this 
legislation.
    Earlier in this session, I urged my colleagues to keep this 
approach in mind as we in Congress and the Administration work to build 
a new consensus that will lead us to a renewal of a bi-partisan 
approach on the broader issues of trade. I hope that we can apply this 
approach with this bill.

                                

    Chairman Crane. Thank you, Mr. Levin.
    And now, I welcome our first two witnesses--our 
distinguished Senator Bob Graham from Florida, and the 
Honorable Jim Kolbe from Arizona. And if you gentlemen will 
proceed, and as I indicated before, try and keep oral testimony 
under five, and then all written testimony will be a part of 
the permanent record.

STATEMENT OF HON. BOB GRAHAM, A UNITED STATES SENATOR FROM THE 
                        STATE OF FLORIDA

    Senator Graham. Thank you, Mr. Chairman. My good friend, 
Congressman Kolbe, has deferred and asked me to go first. I 
assume that is a positive step on his behalf.
    I want to express my appreciation for the opportunity to 
testify today on the Caribbean and Central American Relief and 
Economic Stabilization Act, which you and so many of your 
colleagues have introduced. As you suggested, Mr. Chairman, I 
would like to file my full statement for the record and will 
summarize it; and hope to stay within your time constraints.
    Mr. Chairman, there are a number of reasons why we need to 
move expeditiously with the passage of this legislation. The 
first is humanitarian. I know Congressman Rangel has been into 
the region since the devastation of last fall's hurricanes. 
Congressman Becerra and I were in Central America within the 
last 30 days as part of the President's visit to that region. 
We know first hand the extent of devastation, loss of life, 
destruction of infrastructure, destruction of jobs, and 
economic opportunities. So we, as Americans, have a special 
role as the closest neighbors of these devastated friends to 
respond with assistance.
    But this goes beyond humanitarian. It is also very much in 
our own national interest, as, Mr. Chairman, you have just 
said. We know what happens when the situation in the Caribbean 
and Central America turns bleak. We have seen it in the past. 
We have seen it in political instability--a decade of wars 
fought in the region in the 1980's. We have seen it in terms of 
flows of illegal immigrants. We have seen it in the use of the 
island nations and Central American countries as new sites for 
drug transportation.
    We have also seen the positive that can happen when we 
build strong economic relationship. As recently as 1983, the 
United States had a trade deficit with the CBI countries, of 
$700 million a year. Eight years after the enactment of the CBI 
initiative, that $700 million deficit had gone to a $2 billion 
surplus. On a per capita basis, we have the highest level of 
trade surplus with the CBI countries that we do with any other 
region in the world.
    So we have both negatives to avoid and affirmatives to 
expand by virtue of our relationships with the CBI countries. 
But, Mr. Chairman, I want to focus on a new issue which I think 
is extremely compelling and that is demonstrated by these two 
shirts. This shirt is manufactured in China. It is made with 
fabric that was woven in Chinese mills, of yarns spun in China 
from cotton grown primarily in China and other parts of Asia. 
This shirt costs approximately $4.75 to produce.
    This shirt, identical to the Chinese shirt, was produced in 
Nicaragua. It was made from fabric that was woven in United 
States' mills, from yarn spun in the United States, from cotton 
grown in the United States. This shirt costs $5.00 to produce. 
Both of these shirts were imported into the United States for 
sale at U.S. retail stores at a price of approximately $19.50. 
That was the price which the market set for this particular 
type of shirt.
    You might ask, why is there any market for the Nicaraguan 
shirt, when its cost of production is significantly lower than 
the cost of production in China. Well, there are several 
reasons.
    First, transportation costs are less from the Caribbean 
than they are from China.
    Second, the proximity of the Caribbean to the United States 
affords some benefit in terms of quick turnaround to respond to 
changes in the style, desires of the U.S. customer.
    But the most significant reason, the most significant 
reason why there is a market for the higher cost of production 
shirt from the CBI is the fact that China is under a quota 
limit for its shirts. In fact, the quota limit for 1999 from 
China is 2,336,946 dozen of shirts just like this.
    Imports of the shirts manufactured in CBI countries are not 
subject to quota limits. Mr. Chairman, I recognize I am going 
beyond my 5 minutes. I can assure you I am close to the 
conclusion of this analysis.
    The significance of this point is that in the year 2005, 
when the old multi-fiber agreements terminate as a result of 
the Uruguay round of trade talks, there will be no more quota 
limits on shirts that can be imported into the United States 
from China. And the consequence of that is that this region of 
the world faces the prospect of having the tens of thousands of 
jobs that have been created through the CBI initiative eroded 
as shirt and other apparel manufacturers move their production 
from the CBI countries to the low-cost of production countries 
in the Far East.
    And when they move, not only are the jobs lost in the CBI 
countries--lost, but all those jobs in the United States--
growing that cotton, spinning it, producing it into textile, 
cutting it, shipping it to the Caribbean countries, and then 
returning for final assembly in the United States--all of those 
jobs are going to be lost.
    Mr. Chairman, my thesis is that we had a 5-year window in 
which we can help, through informed policy, such as you are 
advocating, to increase the economic efficiency of the CBI 
countries so that when the year 2005 comes, and there is no 
longer a quota restraint on China and other Far Eastern 
countries, that the CBI will be able to survive because it has 
become more economically competitive than it is today.
    The consequences of this are very significant for the 
United States. It is estimated that if we pass the enhancements 
that you have recommended that we will increase to 70 percent 
from the current 50 percent the percentage of our cotton shirts 
that come from the Caribbean. If we fail to pass the CBI 
enhancements, the number is estimated to drop to 30 percent. 
That will mean literally thousands and thousands of jobs in the 
United States and an equal or greater number in our neighbors 
in the Caribbean Basin.
    So, Mr. President, for reasons of humanitarian 
considerations, for reasons that relate to our own national 
self-interest, as seen by past history, and by our national 
self-interest as seen by the future economics of the apparel 
industry, it is very much in America's interest to pass the 
legislation that you have introduced, and I hope that this 
Congress will see those interests and will move expeditiously. 
Thank you, Mr. Chairman.
    [The prepared statement follows:]

Statement of Hon. Bob Graham, a United States Senator from the State 
of Florida

    Good afternoon, Mr. Chairman, Mr. Rangel and Members of the 
Committee. I am pleased to appear before you today to testify on the 
Caribbean and Central American Relief and Economic Stabilization Act. I 
am happy to see the House believes Central American relief, as well as 
CBI enhancement, are essential priorities for the continued economic 
health of our nation and our neighbors in Latin America and the 
Caribbean. I thank you for holding this hearing.
    There are several reasons why it is important that we quickly pass 
this legislation in both the Senate and the House. The first is 
humanitarian. I have made three trips to the region in the months since 
the devastation of Hurricane Georges and Hurricane Mitch. I know that 
many of you have also seen the destruction caused by these hurricanes. 
They have caused a level of death and destruction not seen in this 
hemisphere in over 200 years. You have all heard of the tremendous loss 
of life, economic disruption, and human suffering caused by these 
storms. As a neighbor, a friend, and a great nation, we have an 
obligation to respond with assistance that will help the region to 
recover as rapidly as possible.
    A second reason to pass this legislation is that it is in our own 
interest. Experience shows us that providing trade benefits to the 
Caribbean basin is good for our economy. Following enactment of the 
Caribbean Basin Initiative in 1983, our trade position with the region 
improved from a deficit of $700 million in 1985 to a surplus of $2 
billion in 1993. Between 1984 and 1992, U.S. exports to the region 
nearly doubled, while total imports into the U.S. from the region grew 
by only 10%. On a per capita basis, our surplus with the region has 
consistently out paced our surplus with any other region of the world. 
In fact, since 1995, U.S. exports to the CBI countries have increased 
by approximately 22 percent.
    Our interest in reducing the flow of illegal drugs and illegal 
immigrants to the United States is also at stake. Without assistance to 
restart the regional economy and make it possible for people to provide 
for their families, these nations will be susceptible to the scourge of 
drug traffickers. It will also increase the pressure for illegal 
immigration.
    It is critical to the security of the U.S. and the countries within 
the region that the people of the Caribbean Basin have real 
opportunities in the legal economy so they are not forced to turn to 
drug trafficking or illegal immigration to feed their families. There 
is also a risk of renewed political instability if governments are 
unable to respond to the needs of their citizens. The painful lessons 
of the 1980s need not be repeated. We can and must act to prevent it.
    Today I want to focus on another reason why passing Caribbean 
relief legislation that includes CBI enhancement is absolutely 
critical. That reason can best be demonstrated by looking at these two 
shirts. This shirt is made in China. It is made with fabric that was 
woven in Chinese mills of yarn spun in China from cotton grown 
primarily in China or other parts of Asia. This shirt costs 
approximately $4.75 to produce.
    This (other shirt) shirt was made in the Caribbean basin. It is 
made with fabric that was woven in U.S. mills from yarn spun in the 
U.S., from cotton grown in the United States. It costs approximately 
$5.00 to produce.
    Both of these shirts were imported into the United States for sale 
in U.S. retail stores. There is no significant difference between 
either shirt, save the location where the shirts were manufactured and 
the components utilized in the production process. Each shirt sells for 
approximately $19.00 because that is the price the retail market in the 
United States will bear.
    You might ask why there is any market for the Caribbean made shirt 
if the Chinese shirt can be produced at a lower cost. There are several 
reasons why a market for the Caribbean made shirt exists:
     Transportation costs between the Caribbean Basin and the 
United States are less than the transportation costs between China and 
the United States.
     The proximity of the Caribbean Basin to U.S. means the 
transit time for textile products manufactured in the region and 
destined for sale in the U.S. is significantly less than the transit 
time for Chinese textiles. This is particularly important to the 
apparel industry where styles rapidly change.
     But the most significant reason is, Chinese textile 
imports into the U.S. are restricted by quotas. The 1999 import quota 
for Chinese manufactured shirts like this one is 2,336,946 dozen per 
year. Imports of the shirt manufactured in Nicaragua (as well as other 
countries in the Caribbean Basin), with U.S. grown and processed 
cotton, are not restricted by quotas.
    The differences represented by these two shirts will become much 
more apparent in 2005, a watershed year for the textile industry in the 
U.S. and the Caribbean Basin.
    In 2005, import quotas currently applicable to Chinese textile 
products, originally imposed under the Multi-Fiber Agreement, now the 
Agreement on Textiles and Clothing, will be completely phased out. At 
that time, textile production in the Caribbean basin will be placed at 
a distinct and growing disadvantage. Disinvestment in the region will 
occur, reducing the incentive to use any material from U.S. textile 
mills or cotton grown in the United States.
    Mr. Chairman, that is why passing CBI enhancement legislation now 
is critical to the U.S. textile and yarn industries, as well as to the 
U.S. cotton growers. Only by providing some incentives for us to 
develop strong relationships with apparel manufacturers in our 
hemisphere will we have any chance to have a market for U.S. cotton and 
textiles after the quotas are eliminated in 2005. Developing 
relationships with the countries of the Caribbean Basin will promote 
political stability in the region and benefit the U.S. economy.
    The numbers are clear. According to the American Apparel 
Manufacturers Association, without CBI enhancements, U.S. textiles and 
agriculture will be adversely affected and the U.S. economy will 
suffer. Currently, 50 percent of the apparel consumed in the U.S. is 
manufactured with U.S. cotton. Industry estimates indicate this number 
will increase to 70 percent with the enactment of CBI enhancements. 
However, if we fail to produce CBI enhancement legislation, this number 
drops to 30 percent. Currently, the average U.S. cotton content of 
apparel products imported into the U.S. is 20 percent. By passing CBI 
enhancement legislation, we anticipate U.S. cotton content will 
increase to an average of 80 percent. Without these enhancements, U.S. 
cotton content will continue to decline as apparel producers look to 
reduce costs and move towards products made with cheaper labor and 
cheaper materials.
    The impact of the Agreement on Textiles and Clothing and year 2005 
changes on man made fiber industries will be comparable to the cotton 
situation. Without CBI enhancements, the U.S. man made fiber content of 
imported apparel will continue to significantly decline. Without CBI 
legislation and in the face of year 2005 quota reductions, producers of 
man made fibers will be inclined to relocate their production 
facilities in order to take advantage of lower wages and production 
costs. If we begin to work to establish stronger relationships with the 
nations of the Caribbean basin, we will be able to provide incentives 
to sustain these industries in our own hemisphere.
    Inherent in our CBI enhancement efforts are public and private 
investment incentives that will increase productivity and the quality 
of life within the region. We anticipate the textile industry will 
provide investment capital targeted for the construction and 
maintenance of schools, health and child care facilities, and 
technology enhancements to increase the productivity of both workers 
and existing manufacturing facilities. A well trained and healthy 
workforce will be more productive and efficient as Caribbean basin 
producers compete for shares of the international textile market.
    It is also anticipated that, as a result of CBI enhancements, 
industry with interests in the region will provide investment capital 
for public infrastructure development. These funds will likely focus on 
roads, drinking water, waste treatment and electricity. Frequent and 
recurring interruptions in electric service are a significant problem 
in the region. ``Brownouts'' cause production facilities to shut down, 
significantly impacting their productivity. Investment from both the 
public and private sectors, focusing on the construction of electrical 
production facilities, will reduce service interruptions. As 
interruptions in service are reduced and eliminated, textile facilities 
will become more efficient and productive. Increased productivity will 
result in higher wages for employees in the region and enhance the 
competitive position of the Caribbean basin textile industry in 
international commerce.
    We have an unprecedented opportunity to strengthen our economic and 
national security through the enhancement of our trade relationship 
with our neighbors in the region. We must act prior to 2005 to build a 
dynamic, formidable Western Hemisphere trade alliance that encourages 
U.S. industry to invest in the region and to make commitments to 
rebuilding the industrial infrastructure in the region. This alliance 
will enhance the U.S. economy by promoting markets for U.S. 
agricultural and textile products and promote incentives for U.S. 
producers to maintain their operations in the United States and the 
region.
      

                                

    Chairman Crane. Thank you, Senator.
    Mr. Kolbe.

STATEMENT OF HON. JIM KOLBE, A REPRESENTATIVE IN CONGRESS FROM 
                      THE STATE OF ARIZONA

    Mr. Kolbe. Thank you very much, Mr. Chairman. I appreciate 
this opportunity to testify and to be alongside my colleague 
from Florida whose leadership in these issues needs no further 
explanation from me, nor, I might add, Mr. Chairman, does your 
leadership in this--your leadership, along with that of Members 
who are up there--Charlie Rangel, Bill Jefferson, Bob Matsui--
in introducing what I think is extraordinarily important 
legislation.
    Let me put the Caribbean and Central American Relief and 
Economic Stabilization Act--that's a mouthful, so we just call 
it CCARES, in context.
    A decade ago, you had a region that was paralyzed by 
economic stagnation and ideological division. It was fear and 
uncertainty that gripped the region. There was conflict. The 
nations searched for an economic and political paradigm which 
would free them from the chains of poverty and oppression. And 
most of the rest of the world stood by fairly helplessly. At 
best, we could influence change on the margins.
    But today, we see a very different world. For the first 
time in 175 years of independence, the nations of Central 
America are at peace. For the first time, democracy is 
flourishing in Central America. And, until the devastation 
wrought by Hurricanes Mitch and Georges--and Javier Becerra and 
I were down in November on that region. We were advancing it 
for you for your latest trip there with the Vice President's 
wife. But before those hurricanes hit, the Caribbean and the 
Central American economies enjoyed strong economic growth, 
based on free market principles. So it was, indeed, a success 
story.
    But, of course, as we know, that wasn't the end of the 
story. Almost overnight, Hurricanes Mitch and Georges wiped out 
a decade of economic progress. Honduras alone lost 60 percent 
of its infrastructure. Nicaragua lost a quarter of its GDP. 
Hurricane Georges caused more than a billion dollars in damage. 
And so once again, the nations of the world are striving to 
find a way back toward economic growth.
    And that is why this legislation really is so important. 
Yes, we can and we should provide humanitarian relief, foreign 
aid debt relief, but what these countries really need is long-
term economic growth, and that is what this legislation is 
about--extending duty-free treatment to the remaining 30 
percent of the imports from the region that aren't covered by 
other preferential trade regimes. It gives them greater access 
to the largest market in the world so that they can really move 
along the road to recovery.
    For us, nothing could really be better. Our historic ties 
to the region are deep. They are longstanding. And when they 
prosper, we prosper. When they falter, we feel the pain through 
increased immigration and drug trafficking.
    And let us not forget our stake in continued democratic 
growth in the region and the consequences of inaction on our 
part. It was, in large part, the political fallout from the 
1972 killer earthquake in Nicaragua that helped sweep the 
Sandinistas into power. We cannot let us not let a decade of 
progress disappear. We cannot repeat the mistakes of the past.
    Let me just emphasize on one other thing here that has 
already been mentioned by Senator Graham, and that is this 
question of textiles. The heart of every political debate that 
we have about trade for Central America always seems to center 
around this issue. But even as we debate this, even as the 
debate rages in this country, we seem to forget that in 6 short 
years, no protection regime based on quotas will make any 
difference. And that is because, as Senator Graham has said, 
the multi-fiber agreement eliminates all national-based quotas 
by the year 2005. So the consequence, as he has pointed out so 
ably to you and I think by illustrating this way with the 
shirts, is going to be a shift in production to the lowest cost 
producers. And that would be likely to be Asia. And that is not 
in our best interest. It is far better to keep the production 
in this region, where our fabric, cotton, yarn and other 
inputs, are generated and integrated into the production 
process. Passing CCARES will enhance the competitive position 
of our neighbors vis-a-vis other regions of the world. By doing 
so, we enhance the competitiveness of our own region.
    Mr. Chairman, this is a win-win bill. Whether we like it or 
not, we live in global economy. As a result, U.S. textile 
production is moving. It is going to move somewhere. There is 
nothing we can do about that. But we can enhance the 
competitive position of our neighbors to the south and help 
ourselves at the same time. It helps eliminate poverty and drug 
trafficking in this region. It helps stop the flow of 
immigration by providing opportunities at home for thousands of 
workers in Central America. And it helps us expand economic 
opportunities in our own country.
    In conclusion, let me just read a couple sentences from a 
letter I just received today from Haiti Advocacy. It is a non-
profit, NGO organization that assists the people of Haiti. In 
this letter, they wrote these words:

    CCARES enables the economies of the region to grow by removing 
onerous tariffs and trade barriers to their products. It is shameful 
that the United States of America should maintain trade barriers 
against some of the poorest countries in the hemisphere. Trade relief 
for the poor is not just a commercial issue, but a humanitarian one 
that resonates deeply with the American people. Haiti Advocacy has 
received over 3,000 letters from its correspondents throughout the 
country, asking their representatives to eliminate trade barriers to 
the region.

    Mr. Chairman, I will include with my testimony a list of 
over 200 organizations, from Erie, Pennsylvania, to Miami, 
Florida, to Gering, Nebraska, all asking for some kind of trade 
relief for the people of Central America and the Caribbean. 
There is broad support for this legislation, and I commend you 
for your work in bringing it to the Congress. And I urge the 
Committee, the Subcommittee, and all of our colleagues to 
support this bill and bring it speedily to a conclusion and to 
the President's desk. Thank you.
    [The prepared statement and material follow:]

Statement of Hon. Jim Kolbe, a Representative in Congress from the 
State of Arizona

    Mr. Chairman, thank you for the opportunity to testify today.
    The Caribbean and Central American Relief and Economic 
Stabilization Act, or CCARES, is an important and visionary legislative 
initiative. I commend your leadership, and the leadership of 
Representatives Charlie Rangel, Robert Matsui, and Bill Jefferson, in 
sponsoring this legislation and holding hearings today to help 
illuminate the plight of our Central American and Caribbean neighbors.
    Mr. Chairman, we could not lessen the winds or stop the waters that 
wrought devastation on our Caribbean and Central American neighbors 
last year. We could only watch helplessly as natural fury destroyed 
small but burgeoning economies throughout the Caribbean Basin. We could 
grieve for the loss of life and lament the material losses. And when 
the fury subsided, we did as Americans do, we extended our hand. Our 
government, working in harmony with secular charities, church groups 
and international organizations, took swift and vigorous action to 
blanket the cold and shelter the homeless. We should be justifiably 
proud of our response.
    Now is time for us to show that our reaction goes beyond sympathy 
and charity. It is time for us to take nature's fury and declare it a 
catalyst. A catalyst to offer the smaller, protected economies of the 
Caribbean region an opportunity to participate with the United States 
in the magic of a free-trade economy.
    Lets put CCARES in context. A decade ago, Central America was 
paralyzed by economic stagnation and ideological division. Fear and 
uncertainty gripped the region, as nations searched for an economic and 
political paradigm which would free them from the chains of poverty and 
oppression. The most powerful nation on earth, the United States, stood 
powerless. At best, we could influence change on the margins. We could 
provide tools and economic opportunities, such as the Caribbean Basin 
Economic Recovery Act, but the real choices had to be made by the 
people of Central America themselves.
    Today, we see a very different world. For the first time in the 175 
years of independence, the nations of Central America are at peace. For 
the first time, democracy flourishes. And, until the devastation 
wrought by Hurricanes Mitch and Georges, the Caribbean and Central 
American economies enjoyed economic growth, based upon free market 
principles. This is indeed a success story.
    But it is just part of the story. Almost overnight, Hurricanes 
Mitch and Georges wiped out a decade of economic progress. Honduras 
alone lost 60 percent of its infrastructure. Nicaragua lost a quarter 
of is GDP. Hurricane Georges caused more than a billion dollars in 
damage. Once again, the nations of the region must strive to find their 
way back to economic growth.
    That is why this legislation is so important. We can, and should, 
provide foreign aid and debt relief. But these nations need long-term 
economic growth. The legislation extends duty-free treatment to the 
remaining thirty percent of the imports from the region not already 
covered by other preferential trade regimes. It gives them greater 
access to the largest market in the world, so they may begin the long 
road to recovery.
    For the United States nothing could be better. Our historic ties to 
the region are long and deep. When they prosper, we prosper. When they 
falter, we feel the pain through increased immigration and drug 
trafficking. And let us not forget our stake in continued democratic 
growth in the region and the consequences of inaction. It was in large 
part the political fallout from the 1972 killer earthquake in Nicaragua 
that helped sweep the Sandinistas into power. We cannot repeat the 
mistakes of the past. We cannot let a decade of progress disappear.
    Let me just address the question of textile production in the 
United States. The multi-fiber agreement eliminates all national-based 
quotas by the year 2005. The likely consequence will be a shift of 
production to the lowest cost producers. Most likely, this will be 
Asia. Clearly, this is not in the best interest of the United States. 
It is far better to keep production in the region, where our fabric, 
cotton, yarn and other inputs are integrated into the production 
process. Passing CCARES will enhance the competitive position of our 
neighbors vis-a-vis other regions of the world. By doing so, it 
enhances the competitiveness of our own producers.
    Mr. Chairman, this is a win-win bill. Whether we like it or not we 
live in a global economy. As a result, U.S. textile production is 
moving. There is nothing we can do about that. But we can enhance the 
competitive position of our neighbors to the south. This helps us. It 
helps us eliminate poverty and drug trafficking in the region through 
market-led economic growth. It helps us stop the flow of immigration by 
providing opportunities at home for thousands of workers in Central 
America and the Caribbean. And it helps us expand economic opportunity 
at home. The more the countries of the region grow, the wealthier they 
become. And the wealthier they become, the better able they are to buy 
our cars, computers, and candy. In the end, we all win.
    I urge my colleagues to support this bill. Help the people of 
Central America and the Caribbean help themselves.
    Thank you.
      

                                

                                       Haiti Advocacy, Inc.
                                       Washington, DC 20003
                                                     March 23, 1999
The Honorable Jim Kolbe
2266 Rayburn House Office Building
Washington D.C. 20515

Re: The Caribbean and Central America Relief and Economic Stabilization 
Act (H.R. 984)

    Dear Congressman Kolbe:

    Thank you for co-sponsoring the Caribbean and Central America 
Relief and Economic Stabilization Act (H.R. 984 or ``CCARES''). As you 
know, Hurricanes Mitch and Georges piled catastrophe atop poverty and 
misfortune besetting our neighbors in this hemisphere. Nevertheless, 
their commitment to democratization and reform has not wavered. As the 
people of region struggle with the challenges of moving forward, they 
deserve our help.
    CCARES responds to this challenge with generous foreign assistance 
but, more importantly, it enables the economies of the region to grow 
by removing onerous tariffs and trade barriers to their products. It is 
shameful that the United States of America should maintain trade 
barriers against some of the poorest countries in the hemisphere. I 
trust that Congress will overcome special interest protectionism and 
corporate welfare lobbies in order to remove these obstacles.
    Trade relief for the poor is not just a commercial issue but a 
humanitarian one that resonates deeply with the American people. Haiti 
Advocacy has received over 3000 letters from its correspondents 
throughout the country asking their representatives to eliminate trade 
barriers to the region. As you can see by the attached list, the 
organizational affiliations of these correspondents span a wide range 
of more than 200 religious congregations and civic organizations.
    Nationals of the region who are working in the United States and 
sending money to help their families back home are also shouldering a 
great deal of the burden of economic relief to the area. Many 
originally fled their homelands during periods of widespread violence 
and political instability. Measures to normalize their immigration 
status would round out the comprehensive package of CCARES.
    Thank you very much for taking a stand for people who have 
sacrificed so much!
            Yours,
                                              Merrill Smith
                                                           Director

Organizational Affiliations of Endorsers of Elimination of Trade 
Barriers to

Central America and the Caribbean

(as of March 20, 1999)

Adrian Dominican Sisters, Garner NC

Adjunct Faculty Association of NYSUT Local #4896, Suffern NY

Alliance of Love/Alliance d'Amour, Topsham ME

American Friends Service Committee, Immigrant Rights Project, Newark NJ

American Immaculate Heart of Mary Province, Inc., Missionhurst 
C.I.C.M., Arlington VA

Annarundel Peace Action, Annapolis MD

Apostolado Hispano de Berks County, Reading PA

Archer, Senatus & Associes, Boston MA

Arts of Haiti Research Project, Ithaca NY

Associated Catholic Charities, Oklahoma City OK

Ayuda, Inc., Washington DC

Baltimore Action for Justice in the Americas, Baltimore MD

Becker & Poliakoff, P.A., Miami FL

Benedictine Sisters of Erie, Erie PA

Benedictine Sisters of Virginia, Bristow VA

Beyond Borders, Philadelphia PA

Bienveillance Barber Shop, Hempstead NY

Blessed Sacrement Catholic Church, Oakland City IN

Casa Multicultural, Raleigh NC

Casa Reina, Gallup NM

Catholic Center, Diocese of Bridgeport, Bridgeport CT

Catholic Diocese of Richmond, Richmond VA

Catholic Family Services, Inc., Lubbock TX

Catholic Social Services, Tucson AZ

Catholics for Justice-Latin American Task Force, Shawnee Mission KS

Center One, Ft. Lauderdale FL

Center for Constitutional Rights, New York NY

Centro Romero, Chicago IL

Chicago Metropolitan Sanctuary Alliance, Chicago IL

Children's Home Society, Miami FL

Church of St. Francis, Rochester MN

Church of St. Francis Xavier, South Weymouth MA

Coalition Against U.S. Intervention, New Haven CT

Community Alliance for Youth Action, Washington DC

Congregation of the Holy Ghost Provincialate, Bethel Park PA

Congregation of Sisters of the Immaculate Heart of Mary, Roosevelt NY

D.H.M. Christian Church, Indianapolis IN

E.W. Vedrine Creole Project, Dorchester MA

East Bay Sanctuary Covenant, Berkeley CA

Ecumenical Program on Central America and the Caribbean, Washington DC

Eglise Ste. Camilus, Rockville MD

Elizabeth House, Bernhards Bay NY

Episcopal Diocese of North Carolina, Raleigh NC

Ethical Culture Society, Brooklyn NY

Evangelical Lutheran Church in America, Deleware-Maryland Synod, 
Baltimore MD

Evangelical Lutheran Church in America, Southeastern Iowa Synod, Iowa 
City IA

Evangelical Lutheran Church in America, Southwestern Pennsylvania 
Synod, Pittsbugh PA

Farm Workers Association of Florida, Apopka FL

Federation of Communities, Big Stone Gap VA

First United Methodist Church of Coral Gables, Coral Gables FL

Florida Coalition for Peace and Justice, Jacksonville FL

Florida Immigrant Advocacy Center, Ft. Pierce FL

Florida Immigrant Advocacy Center, Miami FL

Florida Fair For All, Apoka FL

Fonkoze USA, Philadelphia PA

Foundation for International Community Assistance, Washington DC

Friends of Haiti, Oakland CA

Friends of the People of Haiti, Moline IL

Georges William Enterprises, Miami FL

Grassroots International, Boston MA

Great Lakes Asian Center for Theology and Strategies, Evanston IL

Greater Boston Legal Services, Boston MA

Haiti Advocacy, Inc., Washington DC

Haiti Communications Project, Cambridge MA

Haiti Outreach Project, Grand Rapids MI

Haiti Parish Twinning Program, Nashville TN

Haiti Solidarity Network of the Northeast, Newark NJ

Haiti Solidarity Group, Bowling Green OH

Haitian American Alliance, New York NY

Haitian American Tribune, Somerville MA

Haitian Studies Association, Valley Cottage NY

Helping Other People Everywhere, St. John's Church, Grafton ND

Holy Cross Church, Fort Branch IN

Holy Rosary Church, Alliance NE

Holy Spirit Church, Memphis TN

Holy Trinity Church, Peachtree City GA

Immaculate Heart of Mary, Monroe MI

Institute for Deep Ecology, Santa Rosa CA

Interfaith Coalition for Immigrant Rights, San Francisco CA

Interfaith Community Services, New York NY

Interhemispheric Resource Center, Albuquerque NM

International Human Rights Law Group, Washington DC

International Institute of Erie, Pennsylvania, Inc., Erie PA

Irish Immigration Center, Boston MA

John XXIII Center, Hartford City IN

Jubilee Partners, Comer GA

Kenny Scharf Studios, North Miami FL

Laura Korkin & Associates, P.C., Boulder CO

Law Offices of Allan Ebert & Associates, Washington DC

Law Offices of Alan S. Gordon, P.A., Charlotte NC

Liturgical Conference, Silver Spring MD

Loretto Community Latin America/Caribbean Committee, Englewood CO

Lutheran Family Services in the Carolinas, Greensboro NC

Lutheran Peace Fellowship, New York NY

Marianist Community, Baltimore MD

Maryknoll Fathers & Brothers, East Walpole MA

Maryknoll Sisters, Concord CA

Maryknoll Sisters, San Diego CA

Matrix Theater Company, Monroe MI

Medical Mission Sisters, Washington DC

Medical Mission Sisters, Philadelphia PA

Mennonite Central Committee, Miami FL

Michigan Committee for a Democratic Haiti, Southfield MI

Michigan Human Rights Committee, Detroit MI

National Lawyers Guild/National Immigration Project, Boston MA

National Minority Supplier Development Council, New York NY

National Safe Kids Campaign/APF in Haiti, Washington DC

Nebraska Association of Farmworkers, Gering NE

New England American Friends Service Committee, Cambridge MA

New England Haitian Chamber of Commerce, Mattapan MA

New Jersey-Haiti Partners of the Americas, South Orange NJ

Norfolk Catholic Worker, Norfolk VA

Oaks Project, Colma CA

Oblate Conference, Washington DC

Ocean of Glory Community-Crofton, Gambrills MD

Office of the Americas, Los Angeles CA

Our Lady of Grace Church, Chelsea MA

Our Lady of Hope Church, Coal Township PA

Our Lady of the Lake Church, Hendersonville TN

Partners of the Americas, Rockland Community College, Suffern NY

Partners with Haiti, Barrington RI

Pax Christi, Bristow VA

Pax Christi New Jersey, Highland Park NJ

Pax Christi New Jersey, Morristown NJ

Pax Christi New York North Country, Clifton Park NY

Pax Christi Norfolk/Catholic Worker, Norfolk VA

Pax Christi Radford, Radford VA

Pax Christi St. Louis, St. Louis MO

Pax Christi USA-Haiti Task Force, Clifton Park NY

Pax Christi USA-Haiti Task Force, Huddleston VA

Peace Action, Washington DC

Peace and Justice Commission, Countryside IL

Peace and National Priorities Center, Orchard Lake MI

Pexi Overseas, Miami FL

Proyecto Adelante, Dallas TX

Radio Soleil d'Haiti, Brooklyn NY

Rainbow Express, Worcester MA

Refugee and Immigration Services, Catholic Diocese of Richmond, 
Richmond VA

Refugee and Immigration Services, Norfolk VA

Rehn & Fore, CPA, East Setauket NY

Religious of Jesus and Mary, Mt. Ranier MD

Sacred Heart Church, San Antonio TX

Sacred Heart Rectory, Brockton MA

St. Alphonse Rectory, San Leandro CA

St. Bernard Church, Louisville KY

St. Cecilia Church, Glen Carbon IL

St. Francis Xavier's Parish, South Weymouth MA

St. George Church, West Falls NY

St. Henry Church, Saint Henry OH

St. Ignatius Loyola Church, Denver CO

St. John the Evangelist Church, Evansville IN

St. John's Church, Grafton ND

St. Joseph the Worker, Berkeley CA

St. Joseph's Church, York, PA

St. Joseph's Proto Cathedral, Bardstown KY

St. Jude Catholic Church, Christiansburg VA

St. Leo Church, Detroit MI

St. Martin Church, Chrisney IN

St. Martin de Porres Church, New Haven CT

St. Martin de Porres House, Hartford CT

St. Mary's Church, Anderson IN

St. Mary's Church, Evansville IL

St. Mary's Church, Greensboro NC

St. Michael Church, Remus MI

St. Patrick Church, Kokomo IN

St. Patrick Parish, Cedar Falls IA

St. Peter Catholic Church, Linton IN

St. Peter Church, South Beloit IL

St. Peter Claves, Philadelphia PA

St. Pius X Catholic Church, Conyers GA

St. Rose Convent, La Crosse WI

St. Simon's Church, Ludington MI

St. Theresa Church, Evansville IN

St. Thomas Church, Alpharetta GA

St. Thomas the Apostle, Naperville IL

Save Pine Bush, Albany NY

Seattle Voices for Haiti, Bainbridge Island WA

Seifert Law Offices, Olympia WA

Sisters of Charity, Chicago IL

Sisters of Charity, Detroit MI

Sisters of Charity of Nazareth, Nazareth KY

Sisters of the Holy Cross, Area III, Austin TX

Sisters of the Holy Cross, Nashua NH

Sisters of Mercy of the Americas, Burlington VT

Sisters of Mercy of the Americas, Regional Community of Connecticut, 
West Hartford CT

Sisters of St. Benedict, Piedmont OK

Sisters of St. Francis, Assisi Heights, Rochester MN

Sisters of St. Joseph, Springfield MA

Sisters of St. Joseph, St. Louis MO

Sisters of St. Joseph of Peace, Bellvue WA

SNJM Justice-Peace Committee, Santa Clara CA

Social Justice Ministry, Catholic Diocese of Syracuse, Syracuse NY

Society of the Precious Blood, Carthagena OH

South Texas Immigration Council, Harlingen TX

Southern Arizona Legal Aid, Inc., Tucson AZ

TapTap Restaurant, Miami Beach FL

Thomas Merton Center, Pittsburgh PA

Transfiguration Catholic Church, Marietta GA

Transfiguration of Our Lord, Goshen KY

La Troupe Makandal, Inc., Brooklyn NY

True, Walsh & Miller, Ithaca NY

Tulsa Pax Christi, Tulsa OK

Tuscon Ecumenical Council Legal Assistance Project, Tucson AZ

Unitarian Universalist Service Committee, Cambridge MA

Unitarian Universalist Service Committee, Somerville MA

United Faculty of Florida, Miami FL

U.S.-Africa Free Enterprise Education Foundation, Inc., Tampa FL

Washington City Church of the Brethren Soup Kitchen, Washington DC

Wayland United Methodist Church, Wayland MI

Witness for Peace-Mid-Atlantic Board, Willow Grove PA

Women's Commission, International Rescue Committee, New York NY

                                

    Chairman Crane. Thank you, Mr. Kolbe, and I want to commend 
both of you for your leadership on this issue. Both of you 
traveled to the Caribbean Basin region since the hurricanes, 
and you have witnessed first-hand the devastation there. How 
much infrastructure has been lost?
    Senator Graham. Well, in the case of Honduras, between 200 
and 300 bridges, which served as the network to bind one region 
of the country to the next. A substantial percentage of their 
schools; their health care facilities; significant damage to 
their road system. For a long time, their seaports were 
substantially degraded and unable to be the point of entry of 
the goods that were necessary to start the relief effort.
    Mr. Kolbe. I would just add at least 100 percent of their 
banana production in Honduras has been wiped out for at least 
the next year, and a smaller proportion for the years 
thereafter. But it will take at least a year and a half for the 
banana crop to come back.
    Senator Graham. And because of the loss of roads and 
bridges, those agricultural areas that are still in production 
are having difficulty getting their crops to the market.
    Chairman Crane. As you know, we have had differences with 
our two bodies in trying to address legislation that would 
provide not only relief and help to those developing republics, 
but simultaneously would be beneficial to consumers here, and I 
know that there are differences that are still outstanding 
between the House and the Senate. I am aware that the President 
has transmitted a CBI proposal to Congress, although no Member 
on the House side has introduced it. Have you reviewed the new 
Administration proposal?
    Mr. Kolbe. Mr. Chairman, I have read the summary of his 
proposal, and I think your bill, our bill, is much better. It 
is much more expansive. I mean, I think the key thing, again, 
is this textile issue. And I think you have got to not 
absolutely restrict it to fabrics that are grown in the United 
States or made in the United States. The natural course will be 
that we will have more of it if we do that. But that should not 
be the issue. We should not be hung up on that.
    Senator Graham. Clearly, apparel is the focal issue. In 
Honduras, for instance, where there are approximately 100,000 
people employed in industries that benefit by the CBI, over 95 
percent of them are employed in the apparel assembly industry. 
That is the significant target if the goal is to provide some 
early economic relief through diversification from the high 
levels of previous reliance on agriculture in Honduras and 
other countries.
    I think this issue of 2005 has fundamentally change the 
argument. The issue to me is what do we need to do in our 
national self-interest in the next 5 years in order to increase 
the relative competitive position of the CBI countries in--
specifically in apparel vis-a-vis the Far East. Because if we 
don't use this 5 years in a constructive way to narrow that 
competitive disadvantage, 10 years from now we won't have 
anything to talk about, because all the shirts are going to be 
produced in the Far East and not only will those almost 100,000 
people in Honduras be out of a job, but a lot of American 
cotton farmers, a lot of American textile workers will also be 
out of a job.
    Chairman Crane. On three different Presidential trips, the 
Administration has promised the CBI region that it would work 
to try and develop CBI enhancement legislation. Based upon what 
you have seen thus far coming from the White House, do you 
think they are acting seriously on this issue?
    Senator Graham. Mr. Chairman, I was with the President in 
Honduras, Nicaragua, and Salvador, and he certainly made strong 
statements in each of those countries of his commitment to the 
goal of the United States not only providing humanitarian 
relief, but also assisting in the form of economic relief which 
CBI enhancement would provide. So I think the President is 
personally committed, has directed his people at the U.S. Trade 
Representative's Offices and those who deal with the Congress 
to give this a high priority.
    Chairman Crane. Well, Senator, did you read his proposal 
that he has sent to Congress? I am curious as to whether you 
think it bridges the gap between House and Senate differences?
    Senator Graham. In all candor, Mr. Chairman, I have not 
read the President's proposal. My feeling is that what we need 
to do is to get some bill passed here in this distinguished 
body, some bill passed in the Senate, and then let us get to 
conference. And if we in conference can focus on this question 
of what kind of bill will use this next 5 years most 
efficiently in order to help us survive economically in the 
apparel industry in the western hemisphere and specifically in 
North America and the Caribbean after the year 2005. I think we 
can come out with a very constructive result.
    Mr. Kolbe. Mr. Chairman, if I might just add, in my view 
the President's proposal doesn't really help to bridge the gap 
between the two bills. The House bill is over here. The Senate 
bill is over here, and the President's bill is just off over 
there to the side a little bit.
    I do believe the President is committed to this thing, but 
he really needs to put his shoulder to the wheel and that of 
everybody at USTR and in the White House on this, and work up 
here on Capitol Hill to get a piece of legislation that the two 
sides can agree on. And I think the President really needs to 
get involved in doing that.
    Chairman Crane. Thank you. Mr. Levin.
    Mr. Levin. I thank you very much, and I very much agree 
that we need to work on this and see if we can bring it to a 
conclusion. Senator Graham, let me suggest an alternative 
approach to our passing a bill here, and then your passing bill 
there, and then see if the twains can meet in conference.
    There is a substantial difference in the textile apparel 
provisions between the House and the Senate. In a word, to my 
friend, Jim Kolbe, the Senate bill doesn't accept your 
statement toward the end of your testimony, U.S. textile is 
moving. There is nothing we can do about that. The Senate bill 
suggests there is something we can do about it, and that is 
that there be requirements for the materials that are used we 
know what is in the Senate bill. And it is a serious position. 
And essentially what the President--I think, I haven't talked 
to him directly about it--I think the decision was to introduce 
or to present a bill that would suggest that we break the 
deadlock on this by coming out closer to the Senate provision 
than the House provision. And the fact that quotas will be 
eliminated in 5 years, it doesn't mean tariffs will be.
    And I think essentially, Senator Graham, that what the 
President's approach does is to adopt your suggestion that 
these are 5 critical years, and that we have to develop strong 
relationships between the producers of the materials here and 
other facets of it, and those who are essentially putting it 
together elsewhere in the Caribbean. And I think you argue 
strongly, and I think quite persuasively, that these are 5 
critical years.
    Now, we can try to resolve--there are other issues in the 
CBI bill, but this, I think you will agree, is the most 
sensitive one. And I don't think we can resolve it by being 
insensitive to a sensitive issue. And I just want to suggest, I 
don't pretend to have any crystal ball on this or anything 
close to it, as the Chairman of the Subcommittee and I 
discussed a few months ago, an alternative strategy would be 
for us to see if we could have some discussions on this piece 
of the bill and perhaps others before it goes through here, 
because otherwise, I think, it might involve itself in a major 
battle, a major confrontation that would not necessarily help 
the eventual disposition, the eventual resolution of this bill. 
We clearly need to help Central American countries develop 
economically. They are showing they can evolve democratically, 
a dramatic contrast from a long time ago, when my father used 
to go to Central America, and it was in those days counselor 
general from a totally unknown country in Michigan--that was 
the Republic of Honduras. It was a pure dictatorship. They have 
evolved into democracies.
    We have all kinds of reasons to try to be helpful, and I 
just want to throw out the suggestion that instead of just kind 
of playing, doing our thing here, and then doing your thing 
there, that we see if we can have some constructive discussions 
beforehand, because the two of you sit there united in your 
feeling we have to act, but with some differences as to what 
the content would be. And I don't think we will resolve the 
issue by trying to blur it or trying to evade it or finesse it. 
We need to meet it, I think, head on. And my own judgment is 
the sooner the better. I don't know if you want to comment on 
that, Senator or Mr. Kolbe, just to suggest.
    Senator Graham. Mr. Congressman, to tell you the truth, I 
have been introducing CBI enhancement legislation almost since 
I have been in the Senate. I will take any train that will get 
us to the destination of passage of a bill that will make a 
significant difference, particularly will allow us to be 
competitive after the year 2005. And your suggestion of maybe 
using the next few weeks, and I agree with you--the emphasis 
ought to be on the few to see if an agreement can be reached 
that both houses and the White House would agree will be the 
basis of our moving forward. I would like to buy a ticket on 
that train.
    Mr. Kolbe. Mr. Levin, I would just say that I don't think 
there is any real fundamental disagreement at all on any of 
this among us here. We all want to get a bill passed. We are 
trying to strategize as to how we can do that. And if 
negotiations before we pass a bill on either side can help us 
do that, that is great. My only plea would be to downtown--to 
the White House to please get involved in that process. I think 
they can help us do that, and I just--and I am not trying to be 
critical, because I have worked with the Administration on this 
legislation and other trade legislation, as you know, but I 
just don't think they have been really engaged yet on this. We 
need their help. We are not going to do it unless we get their 
help.
    Mr. Levin. I think your constructive feeling about that, 
however you describe their role up to this point, I think is 
very useful, and I hope we can proceed on that basis. Thank 
you, Mr. Chair.
    Chairman Crane. Mr. Houghton.
    Mr. Houghton. Well, Mr. Chairman, just very briefly. 
Clearly, our region is taking on a different hue. We need some 
legislation. We are not going to resolve the difference between 
the House and the Senate here. I agree with Senator Graham that 
almost any train is worth it, to hop on it, and we ought to do 
it. And I support the legislation which ultimately will come 
out of this Committee. Thank you.
    Chairman Crane. Mr. Rangel.
    Mr. Rangel. Thank you, Mr. Chairman. Thank both of you for 
your interest over the years. It seems like the equitable thing 
to do is after we have gone into a treaty agreement with our 
friends in this region that if, indeed, the NAFTA agreement 
gave them a disadvantage, that we would try to place them on 
parity. But I suspect that your offices, like mine, have 
received some opposition to this bill, indicating that No. 1, 
excuse me--that there has been no loss of trade with the 
Caribbean countries as a result of NAFTA, and No. 2, that this 
bill will cause an increase in the loss of American jobs if 
enacted into law.
    Could I hear comments from both of you on that subject?
    Mr. Kolbe. I'll begin this time. I have frankly not had a 
lot of letters or calls from people on this. This has been a 
fairly low-key issue, at least in my area. But I just would 
reject, Mr. Rangel, the argument that we are going to lose jobs 
as a result of it. I think the point that we need to keep 
making over and over again is that in 2005, all of these 
protections come off, and you will have no ability to control 
where it comes from. If we can now, in these interim years, 
give this kind of relief to Central America, it will help 
stimulate the investment in those countries that will make it 
possible for more of the jobs to be saved in this country, as 
we do make the fabric or the yarn or the thread here in this 
country.
    So I do think that we can save jobs.
    Senator Graham. Mr. Congressman, in reference to the first 
question, I think the statistics which I would like to secure 
and submit for the record are quite persuasive that since the 
adoption of NAFTA, which has given to Mexico an eight to 10 
percent differential in the cost of importing apparel products 
into the United States, that there has been a significant 
slowing of the investment in the CBI region and a commensurate 
rapid acceleration of investment in Mexico.
    Second, in terms of jobs, I think we have got to look 
through the front windshield, not through the rear view mirror. 
And the front windshield looks out 5 years to what are the I 
think almost inevitable consequences if we do nothing, and that 
is that there will be such a competitive disadvantage between 
the Caribbean Basin and the Far East with no quota restrictions 
on importations of apparel from the Far East that there will be 
a strong incentive to relocate jobs from Honduras to 
Bangladesh, and that when that happens not only will the jobs 
be lost in Honduras, but all of the support industries, from 
the farmer to the textile worker in the United States will have 
their jobs and income affected.
    Mr. Rangel. And I suppose we should take in consideration 
the balance of trade with the increase imports coming from the 
United States into these neighboring countries. And that 
tradition has been over the years.
    Mr. Kolbe. Mr. Rangel, could I--staff just handed me these 
figures. Since the introduction, since the implementation of 
NAFTA, there has been a 548 percent growth of apparel from 
Mexico into the United States. As a percentage of total exports 
to the United States--the CBI has always had more than Mexico. 
But Mexico's exports to the United States as a percent of CBI's 
exports to the United States have grown from 28 percent in 1993 
to 75 percent in 1998. So I think the clear effects of NAFTA 
can be seen from that.
    Mr. Rangel. Thank you.
    Chairman Crane. Ms. Dunn.
    Ms. Dunn. Thank you, Mr. Chairman. I want to tell you two 
gentlemen that I do agree and support your bill. But I want to 
ask you a couple of questions.
    If we don't extend enhanced CBI benefits to the Caribbean 
Basin, aren't we, in some way, undermining democratic 
governments that have been established in this region by 
further undermining their economic stability?
    Senator Graham. Absolutely, Madam Congresswoman. I think 
one of the, one of the disturbing questions about the western 
hemisphere is the fact that the two oldest democracies on the 
continent of South America are Colombia and Venezuela. And if 
you would ask most informed observers today which are the 
nations that are in the most difficulty, it would be Colombia 
and Venezuela.
    To me, one of the lessons from that is that it is not 
enough to have an election which are important to democracy and 
one of those is an economic system that will give people a 
sense of participation and hope in a more prosperous future for 
themselves and their families. And that is exactly the 
challenge before these new democracies throughout the 
hemisphere, but particularly those democracies which so 
recently were engaged in violent civil conflict, such as 
Guatemala, Salvador, Nicaragua. And building that economic base 
probably as much as any single factor will determine whether 
they continue on the path of democracy or revert back to the 
instability of civil violence.
    Mr. Kolbe. My one word answer is yes. It would.
    Ms. Dunn. Thank you. Also since passage of CBI, United 
States exports to the region have tripled to about $18.5 
billion. Would enactment of your bill, H.R. 984, ensure that 
United States exports to the region would remain at high 
levels?
    Mr. Kolbe. Ms. Dunn, I think my answer to that would be 
yes. I mean--none of us can predict with absolute certainty and 
certainly all of us have I think made errors in some 
predictions we have made about trends of trade after the 
adoption of GATT, the Uruguay Round of GATT, or after the 
adoption of NAFTA; and so I would be hesitant about making 
these--those predictions with absolute certainty. But I think 
the answer is yes, it does help to assure that the United 
States can continue to export the kind of infrastructure that 
supports the manufacturing and export industries in those 
countries. So I think we will benefit from it and will keep our 
export levels higher.
    Senator Graham. My answer is yes.
    Ms. Dunn. Thank you very much, Mr. Chairman.
    Chairman Crane. Mr. Becerra.
    Mr. Becerra. Thank you, Mr. Chairman. And I really have no 
question other than to comment to say thank you to the two 
gentlemen for their work on this issue, and especially for 
their efforts to go into the regions affected by the recent 
hurricanes and to propose constructive legislation to try to 
resolve the matters. I agree with what both gentlemen have said 
on the issue of trying to get something to the table so we can 
get the President to sign something. Hopefully, it will be a 
good compromise that everyone can live with, and I am hoping 
that I will be one of those who gets to support it as well. 
Thank you, Mr. Chairman.
    Chairman Crane. Thank you, and I want to thank you 
gentlemen again, not only for your participation today, but 
your ongoing involvement in this issue, and look forward to 
hopefully to a successful conclusion this year.
    Senator Graham. Thank you so much.
    Mr. Kolbe. Thank you very much, Mr. Chairman.
    Chairman Crane. And now I would like to ask our second 
panel to take seats. The Honorable Richard Fisher, Deputy USTR, 
and the Honorable Alan Larson, Assistant Secretary for Economic 
and Business Affairs.
    And, gentlemen, after you have taken your seats, please 
proceed in the order I introduced you, and, as I indicated 
before, try to keep your oral presentations around 5 minutes. 
Any printed statements will be made a part of the official 
record.
    And with that, we will start with you, Mr. Fisher.

 STATEMENT OF HON. RICHARD FISHER, DEPUTY UNITED STATES TRADE 
                         REPRESENTATIVE

    Mr. Fisher. Thank you, Mr. Chairman. My colleague, 
Assistant Secretary Larson, and I are here to answer 
Congressman Kolbe's plea and to begin the process of moving 
down the track that Senator Graham had mentioned. I would like 
to start by offering my thanks to you and to the Subcommittee 
for your consistent support of our mission to open markets, 
expand trade, and enforce trade laws and trade agreements. We 
very much appreciate our close working relationship with this 
Committee and the Subcommittee, and we hope to continue it well 
into the future.
    Mr. Chairman, we in the Administration share the concerns 
you and others in Congress and the panelists that appeared 
before us have expressed regarding the need to support our 
neighbors in Central America and the Caribbean in the aftermath 
of last year's devastating hurricanes.
    This is, of course, a humanitarian imperative, as mentioned 
by everyone who has commented on this process so far. It is 
also a matter of our national interest. As the Congresswoman 
implied in her question just now, strong, expanding economies 
and the ability to succeed in the international economy are 
essential for the Caribbean nations to create health markets 
for their own goods and services, to fight crime and narcotics, 
and to create--to your point, Congresswoman--stable, democratic 
societies.
    And they are essential for us to create mutually beneficial 
trade relations with the region. As you mentioned, Mr. 
Chairman, in the introduction to this session, the Caribbean 
Basin Economic Recovery Act, better known as the Caribbean 
Basin Initiative, or CBI, has helped us toward this goal for 
some 15 years since its initiation during the Reagan 
Administration. Indeed, the CBI is the centerpiece of our trade 
relationships with Central America and with the Caribbean. 
Since 1994, CBI has complemented the peace process in Central 
America, assisted in the regions progress toward today's era of 
peaceful democracy, and stimulated two-way trade between the 
United States and CBI countries to our mutual benefit.
    And this is evident, of course, in our trade statistics. 
Last year, the U.S. merchandise exports to CBI countries were 
more than $19 billion, 48 percent of which, parenthetically, 
were textiles. To put this in context, as you referenced, Mr. 
Chairman, in your introduction, last year our goods exports to 
China were $14.4 billion. Our goods exports to France were $16 
billion. Our goods exports to Brazil were $16 billion. So, in 
short, we export more to the CBI countries than we do to the 
countries I just mentioned. Regarding our imports, as you 
referred to, Congresswoman, CBI beneficiaries exceed $17 
billion.
    Two-way trade with CBI, therefore, exceeds $36 billion. 
That is real money. The Caribbean Basin is a market of great 
importance to the United States, and we will all prosper from 
better two-way trade. That is the underlying premise.
    In designing the legislation that we have put forward, the 
Administration, Mr. Chairman, has considered a number of 
issues: the evolving economic and trade situation in the 
Caribbean region; the need to help the region prepare for the 
initiative of the Free Trade Areas of the Americas, the FTAA; 
the need for the region to meet its commitments to the World 
Trade Organization; and to succeed in the world economy.
    We also consider the constraints imposed upon us by 
budgetary considerations and the advice that we have received 
from our friends in Congress. As a whole, we believe that the 
package that we are putting forward is one of mutual benefit 
for the United States and the beneficiary nations. I want to 
stress that we look forward to working with you to further 
improve it, if necessary, and, as was just mentioned by the 
distinguished Senator and Congressman, to ensure its passage.
    In an overall sense, the legislation authorizes enhanced 
temporary trade benefits to the Caribbean Basin countries for 
apparel products assembled from U.S. fabric and textile 
handicrafts, and all non-textile products currently excluded 
from the CBI program. These non-textile products are petroleum, 
with petroleum derivatives, footwear, certain categories of 
flat goods and gloves, leather apparel, canned tuna, and 
categories of watches.
    As was mentioned earlier, the sticking point in these 
previous discussions have been textile and apparel provisions, 
so I would like to turn to that and summarize what is in the 
President's proposal.
    The President's proposal provides eligible countries 
immediate duty-free and quota-free treatment for products that 
are (a) assembled in the CBI region of fabric, which was made 
in the United States from U.S. yarn and cut in the United 
States; (b) that are cut and assembled in the CBI region of 
U.S.-formed fabric containing U.S. yarn; or (c) handloom or 
hand-made or folklore articles. For non-textile products, the 
President would be authorized to cut tariffs of the rate 
applicable to Mexican goods under the NAFTA.
    The benefits under the bill, Mr. Chairman, would apply for 
21 months, from October 1, 1999 through June 30, 2001. We have 
many different types of eligibility criteria. I see that the 
red light is on. I will summarize them as quickly as I may, if 
I may continue.
    There are basically two types of eligibility criteria in 
the President's proposal. One is mandatory, and the other is 
discretionary. With respect to mandatory requirements, 
countries may be designated beneficiaries only if they comply 
with existing CBI criteria and also demonstrate commitments to 
undertake their WTO commitments on or ahead of schedule, 
participate in the FTAA negotiations, and undertake other steps 
necessary for eventual accession to the Free Trade Area of the 
Americas, or, in its place, an equivalent free trade agreement.
    There are 11 discretionary data, which are summarized, Mr. 
Chairman, in my written statement, and I won't take up your 
time today by reviewing them.
    I want to say, though, that the legislation also has very 
strong provisions to prevent transshipment and other abuses 
that one might be tempted to entertain to exploit the 
provisions of this initiative.
    Under the CBTA, if the President finds that goods from 
third countries are being transshipped through CBI's countries 
and are receiving duty-free preference that they should not be 
receiving, the U.S. Trade Representative, our office, may 
reduce the amount of any quota, including eliminating a 
country's access to the U.S. market for this product.
    Furthermore, the Caribbean Basin Trade Enhancement Act 
contains a safeguard provision that enables the President to 
suspend duty-free treatment if temporary import relief is 
determined to be necessary due to serious injury to domestic 
industry.
    In summary, Mr. Chairman, this proposal offers significant 
trade benefits to our partners in the Caribbean and Central 
America. It reflects a maturing relationship between the United 
States and the countries of the Caribbean Basin. It helps to 
promote the goals we share with CBI members and their full 
participation in regional and world trade. Its passage will 
help the region remain on a healthy track, and the track it has 
been on for the last years of CBI. Growing economies, 
stabilizing democracies, strengthening peace and close trade 
and other relations with the United States. And it will provide 
a source of hope and confidence in the future to the people 
who, as we speak, are rebuilding their homes and their farms 
and lives in the conclusion and aftermath of these horrible 
hurricanes.
    Mr. Chairman, let me thank you, in conclusion, and the 
Members of this Committee and Subcommittee for your constant 
support of strong relations between the United States and our 
neighbors in the Caribbean Basin. Ambassador Barshefsky and I, 
all of us at USTR and in the administration look forward to 
working with you to ensure passage of meaningful CBI 
enhancement legislation this year.
    As Congressman Rangel--excuse me for taking liberties, 
Charlie--mentioned earlier, waiting is not an option. We are 
eager to find a practicable solution to get a CBI initiative 
passed through the Congress. Mr. Chairman, I thank you for the 
time, and we look forward to working with you.
    [The prepared statement follows:]

Statement of the Hon. Richard Fisher, Deputy United States Trade 
Representative

    Mr. Chairman, Mr. Ranking Member, Members of the Subcommittee: I 
welcome this opportunity to appear before the Subcommittee today to 
discuss the Administration's proposed Caribbean Basin Trade Enhancement 
Act (CBTEA) and our desire to work with you to pass CBI enhancement 
legislation.
    Let me begin by offering my thanks to the Subcommittee for your 
consistent support of our mission to open markets, expand trade, and 
enforce trade laws and trade agreements. We appreciate our close 
working relationship. We hope to continue it into the future.

                              Introduction

    Mr. Chairman, we in the Administration share the concerns you and 
others in Congress have expressed regarding the need to support our 
neighbors in Central America and the Caribbean in the aftermath of last 
year's devastating hurricanes.
    This is, of course, a humanitarian imperative: in the past months, 
hundreds of thousands of Central American families have lost their 
homes and livelihoods, and risks to health and nutrition in affected 
areas are high. It is also a matter of our own national interest. 
Strong, expanding economies and the ability to succeed in the 
international economy are essential to create healthy markets for our 
own goods and services, to fight crime and narcotics, and to create 
stable, democratic societies.
    Thus, as we assist our neighbors in the Caribbean Basin by 
increasing market access for their products, we advance our trade 
agenda by encouraging them to continue to reform their economies and to 
move closer to our common goal of more open and fair trade and 
investment policies throughout our hemisphere; and to our broader 
national interest in a close relationship with our neighbors based on 
common interests and shared values.
    The Caribbean Basin Economic Recovery Act (CBERA), better known as 
the Caribbean Basin Initiative (CBI), has helped us toward this goal 
for fifteen years since its initiation during the Reagan 
Administration. Indeed, the CBI is the centerpiece of our trade 
relations with Central America and the Caribbean. Passed by Congress in 
1983 and implemented during 1984, CBI has complemented the peace 
process in Central America, assisted in the region's progress toward 
today's era of peaceful democracy, and stimulated two-way trade between 
the United States and the CBI countries to our mutual benefit.
    This is evident in our trade statistics. Last year, United States 
merchandise exports to the CBI countries were more than $19 billion. To 
put this in context, last year our merchandise exports to France were 
$16.0 billion, to Brazil $15.9 billion, and to China $14.4 billion. Our 
imports from CBI beneficiaries exceeded $17 billion. Two way trade with 
CBI countries exceeds $36 billion. The Caribbean Basin is a market of 
great importance to the U.S., and prosperity in the region will help 
our two-way trade grow further.
    In the aftermath of last winter's hurricanes, the Administration 
strongly supports enhancing the CBI's benefits. This will help increase 
international confidence in the long-term economic prospects of the 
Caribbean region, supporting investment both at this especially 
difficult time and over the long term. Let me stress at the outset, Mr. 
Chairman, that the Administration's primary goal with regard to CBI 
enhancement is to work together with you to pass a balanced, realistic 
and meaningful bill this year.

                  The Caribbean Basin Initiative (CBI)

    Let me begin with some of the CBI's history.
    Created in 1983, the CBI allows the President to grant unilateral 
duty-free treatment on U.S. imports of eligible articles from CBI 
beneficiary countries. Most recently, Congress amended the CBI in Title 
II of the Customs and Trade Act of 1990. Commonly known as CBI II, this 
Caribbean Basin Economic Recovery Expansion Act of 1990 made the trade 
benefits of the CBERA permanent by repealing the 12-year termination 
date of September 30, 1995. In addition, it made several improvements 
in the trade and tax benefits. These improvements included: a 20 
percent tariff reduction on certain leather products, phased in over 
five years; duty-free treatment for Puerto Rican products imported from 
CBI countries; and duty-free imports from beneficiary countries for 
products made from 100 percent U.S. components, except for textile and 
apparel articles, and petroleum and certain products derived from 
petroleum.
    Additional improvements provided in CBI II included: an increase in 
the duty-free tourist allowance from $400 to $600; an exception to the 
general cumulation rule, required under the antidumping and 
countervailing duty laws, for imports from CBI beneficiary countries; 
and a scholarship assistance program for the region.
    Since then, as part of our effort to improve the program through 
administrative enhancements, Administrations have expanded the list of 
products eligible for CBERA duty-free treatment through two 
proclamations, intended to make the CBERA consistent with the 
Generalized System of Preferences (GSP). Effective September 28, 1991, 
94 tariff categories, affecting 47 million dollars in 1991 imports, 
were provided new or expanded duty-free treatment. A second expansion 
was effective on July 17, 1992. Twenty-eight tariff categories were 
provided new or expanded status as CBI-eligible goods.

                     Principles of CBI Enhancement

    That brings us to the present, when in the wake of last winter's 
natural disasters, the Administration proposes extending CBI benefits 
extended to products heretofore excluded by statute. In designing this 
legislation the Administration considered a number of major issues: the 
evolving economic and trade situation in the Caribbean Basin region; 
the region's role in the negotiations toward the Free Trade Area of the 
Americas; the region's commitments to the WTO; the constraints imposed 
upon us by budgetary considerations; and areas in which enhancement 
will benefit both the U.S. and the beneficiaries.
    In the regional sense, the greater openness of most Caribbean Basin 
economies over the past decade, improved macroeconomic stability, and 
the growth of foreign direct investment has set CBI countries on a path 
toward improved economic growth. Our legislative proposal supports 
these reforms. We also considered the perception among some CBI 
countries that passage of the NAFTA placed them at a relative 
disadvantage vis-a-vis Mexico, especially in the textile and apparel 
sector. Finally, we wanted to construct the enhancement in a way that 
would help the region make the transition to the Free Trade Area of the 
Americas.
    With respect to the trading system, today all but one of the CBI 
beneficiaries belong to the World Trade Organization. As WTO members 
they have undertaken a commitment to adhere to the rules of that 
organization. The CBI Trade Enhancement Act will promote compliance 
with those obligations, especially the new obligations emanating from 
the Uruguay Round. In many instances, the countries of the Caribbean 
and Central America will conclude their Uruguay Round transition 
periods during the period of the CBTEA.
    Of course, the principal sector excluded from CBI until now has 
been the textile and apparel sector. The CBTEA has been constructed 
with the intention to respond both to the concerns of the CBI countries 
that feel they have been disadvantaged by Mexico having NAFTA benefits 
for apparel shipments to the U.S., and to the concerns of U.S. industry 
that their own investments and partnership production operations in the 
Caribbean have continued viability and success.
    The key to CBI's success is that the trade it promotes provides 
benefits to both the U.S. and the Caribbean Basin countries. We should 
retain that feature of mutual benefit. The vast majority of our apparel 
imports from the Caribbean Basin countries contains substantial U.S. 
content. This means that our producers and our workers make fabric and 
the other inputs (linings, sewing thread, notions) that go into the 
CBI's apparel. Our companies employ people in manufacturing textiles 
and in cutting and distribution in the U.S., and facilities in the 
Caribbean and Central America employ people in sewing and assembling 
and some textile manufacturing. As a result of this complementarity, we 
have seen a declining share of U.S. market taken by imports from Asian 
sources in favor of production within the hemisphere. Last year in 
volume terms, imports of apparel from the CBI grew 8 percent, while 
imports from China declined by four percent. Moreover, the CBI 
countries, taken together, are our largest foreign supplier of apparel 
products. We fully expect the textile and apparel provisions of our 
proposed legislation to further expand such trade in a manner that will 
benefit the United States as well as the CBI beneficiary countries.
    Thus, given the potential benefits for these countries and the 
changing economic and trade environment in the region, we have designed 
a program that would give countries the incentive to continue to make 
progress on trade policy. We have also given a great deal of thought to 
ensuring increased market access for U.S. businesses as we grant 
increased preferences to CBI countries. This bill does not create a one 
way street of open-ended trade preferences with no benefit to U.S. 
interests. It promotes a responsible partnership for prosperity and for 
shaping the hemisphere's economy for the new century, as it fulfills 
the President's commitment, reaffirmed during his recent trip to 
Central America, to work with the Congress to pass legislation that 
would provide enhanced trade preferences to countries in the region.

    Provisions of the Caribbean Basin Trade Enhancement Act (CBTEA)

    Let me now discuss the specific provisions of the Administration's 
bill. In an overall sense, the legislation would authorize the 
President to provide enhanced temporary trade benefits to Caribbean 
Basin countries for: apparel products assembled from U.S. fabric; 
textile handicrafts: and all non-textile products currently excluded 
from the CBI program. Those non-textile products are: petroleum and 
petroleum derivatives, footwear, certain categories of flat goods and 
gloves, leather apparel, canned tuna, and a category of watches.

1. Textile and Apparel Provisions

    The President's proposal would provide to eligible countries 
immediate duty-free and quota free-treatment for textile and apparel 
products if such products are:
    (A) assembled in the CBI region of fabric which is made in the U.S. 
from U.S. yarn, and cut in the U.S. (i.e., 807-A program);
    (B) cut and assembled (using U.S. sewing thread) in the CBI region 
of U.S. formed fabric containing U.S. yarn (known as the ``809'' 
program); or
    (C) handloom, handmade, or folklore articles (as identified by 
President and properly certified by the exporting country).
    For non-textile products, the President would be authorized to cut 
tariffs to the rate applicable to Mexican goods under the NAFTA. The 
benefits under the bill (e.g. 100 percent tariff reduction) would apply 
for 21 months, from October 1, 1999 through June 30, 2001.

2. Eligibility Requirements

    Mandatory Eligibility Requirements. A country would be designated a 
beneficiary for the new trade benefits only after the President has 
determined that it has complied with a set of new eligibility criteria 
in the bill. (Every CBI beneficiary already must be complying with the 
criteria in the existing CBI law to continue to receive trade 
benefits.) The mandatory eligibility requirements are that a CBI 
country has demonstrated commitments to undertake its WTO obligations 
on or ahead of schedule; to participate in FTAA negotiations; and to 
undertake other steps necessary for eventual accession to the FTAA or 
an equivalent free trade agreement.
    Discretionary Eligibility Requirements. The bill also provides 
eleven discretionary eligibility requirements to be examined in 
determining whether the benefits provided in the bill should be 
extended to a particular CBI country.
    After the initial designation of CBTEA beneficiary countries based 
on the mandatory eligibility requirements, the President would examine 
these criteria to determine whether such countries should continue to 
receive 100 percent of the CBTEA tariff reduction benefits. The CBERA 
reports prepared by the Administration for the President to send to 
Congress would include recommendations concerning the extent to which 
each beneficiary country should continue to enjoy CBTEA benefits. In 
the event a country failed to demonstrate sufficient progress under 
these criteria, the country could have its level of benefits reduced 
during the period currently covered by the CBTEA or, should the CBTEA 
be extended beyond June 30, 2001, at a subsequent time. The eleven 
additional eligibility requirements are as follows:
     International Trade Rules: The extent to which a country 
follows accepted rules of international trade provided in the WTO 
Agreement, including compliance with WTO panel and Appellate Body 
determinations.
     Intellectual Property Rights (IPR): With respect to 
intellectual property rights, the bill includes eligibility criteria 
regarding a CBI nation's compliance with the WTO Agreement on Trade-
Related Aspects of Intellectual Property Rights, the provisions of 
Chapter 17 (Intellectual Property) of the NAFTA, and certain other IPR 
standards.
     Investment: With regard to investment, the bill includes 
an eligibility criterion based on a CBI nation's compliance with the 
provisions of NAFTA Chapter 11 (Investment). These conditions would 
encourage national treatment and other protection for U.S. investments.
     Market Access: Beneficiary countries would be expected to 
provide equitable and reasonable market access in product areas for 
which the CBI countries are receiving new benefits.
     Worker Rights: Beneficiary countries would be expected to 
observe internationally recognized worker rights, including the right 
of association, the right to organize and bargain collectively, a 
prohibition on the use of any form of coerced or compulsory labor, a 
minimum age for the employment of children, and acceptable conditions 
of work with respect to minimum wages, hours of work, and occupational 
safety and health.
     Environmental Protection: The CBTEA would also take into 
account the extent to which the country adopts and enforces laws 
providing for a high level of environmental protection.
     Narcotics Cooperation: The President would consider 
whether the beneficiary country has met the narcotics cooperation 
certification criteria set forth in section 490 of the Foreign 
Assistance Act of 1961 for eligibility for United States assistance.
     Corrupt Business Practices: This legislation would 
encourage CBI nations to ratify the recently concluded Inter-American 
Convention Against Corruption. The President also could take into 
account whether, having ratified this Agreement, countries are taking 
necessary measures to implement the Agreement.
     Government Procurement: Our proposed eligibility criteria 
include a CBI country's support for the multilateral and regional 
objectives of the United States with respect to government procurement, 
including the negotiation of government procurement provisions of the 
FTAA and the work program in the WTO as agreed at the Singapore 
Ministerial Conference; and the extent to which the country applies 
transparent and competitive procedures in government procurement 
equivalent to those in the WTO Agreement on Government Procurement.
     Customs Valuation: The bill includes an eligibility 
criterion based on the provisions of the WTO Agreement on 
Implementation of Article VII of the GATT 94, which addresses rules for 
customs valuation.
     Fair Treatment: The President could take into account the 
extent to which those CBI nations that have entered an FTA with any 
other countries (i.e., beyond the members of CARICOM or the Central 
American Common Market) are prepared to grant the United States 
comparable access for commercially important products. This provision 
is intended to give the United States protection against discrimination 
in favor of partners outside the Caribbean region even as we grant a 
beneficiary country enhanced market access.
    These eligibility requirements are not imposed for the purpose of 
excluding countries from the program. The intent is to encourage 
countries to pursue sound trade and investment policies that prepare 
them to assume the kinds of obligations that we expect to emerge from 
the FTAA negotiations. In some cases, of course, these requirements 
correspond to WTO obligations that these countries already have pledged 
to abide by. Thus, the eligibility requirements are essential to make 
the program a transition to a permanent, reciprocal relationship at the 
appropriate time.

3. Transshipment and Safeguard Provisions

    It is essential that the benefits of CBI enhancement be confined to 
those countries for whom it is enacted. Accordingly, the legislation 
has strong provisions to prevent transshipment and other abuses. CBTEA 
customs enforcement is modeled on the NAFTA provisions, and NAFTA-type 
documentary requirements will apply. Under the CBTEA, if the President 
finds that goods from third countries are being transshipped through 
CBI countries and are receiving duty preferences that they should not, 
the United States Trade Representative may reduce the amount of any 
quota with the countries involved in transshipment.
    The CBTEA also contains a safeguard provision which, as in NAFTA, 
enables the President to apply duties and/or impose quotas if imports 
of textiles and apparel are causing or threatening serious damage to 
domestic production.

4. Reporting Requirements

    The CBTEA would coordinate the due dates of the reports to be 
prepared by the President, the ITC, and the Secretary of Labor under 
the CBERA and the Andean Trade Preferences Act. Under the CBTEA, the 
President would deliver the next CBERA report to the Congress on 
December 1, 2000, in sufficient time for the Congress to consider the 
renewal of the program prior to June 30, 2001. The report would include 
an evaluation of countries' compliance with the discretionary criteria. 
As noted, it is our expectation that countries identified as 
demonstrating inadequate progress under these criteria could have their 
benefits reduced below the 100 percent level. The President would, of 
course, be able to suspend a country's benefits at any time, if it 
failed to maintain satisfactory performance under the criteria.

Coordination with GSP Country Eligibility Reviews

    The legislation would codify the existing practice of withdrawing 
or limiting CBI benefits when GSP benefits are withdrawn or limited as 
a result of a finding in a GSP Country Eligibility Review that a 
beneficiary country has failed to remedy a deficiency with respect to 
one or more eligibility requirements.

                         Maturing Relationship

    In summary, this is a balanced proposal. It provides significant 
trade benefits to our partners in the Caribbean and Central America, 
reflects the maturing relationship between the United States and the 
countries in the Caribbean Basin, and helps promote the goals we share 
with CBI members of their full participation in regional and world 
trade.
    We can be very proud of the work we have done in partnership with 
the Caribbean Basin governments and people over the past fifteen years. 
Since the beginning of the Caribbean Basin Economic Recovery Act in 
1984, regional trade has grown; all but one CBI beneficiary belongs to 
the World Trade Organization and all those that belong have agreed to 
implement all of the obligations needed for membership; and all of the 
countries in the region are involved in the FTAA process. During the 
same period, Caribbean standards of living have grown; democracy has 
stabilized in countries in which it was threatened; and peace has 
strengthened. This is a trend of immense importance, most of all to the 
Caribbean nations but also to the United States. This proposal will 
help us remain on that path.
    In conclusion, Mr. Chairman, let me salute your constancy over the 
years in pursuit of stronger relations between the United States and 
the countries of this region. Ambassador Barshefsky and I and our 
colleagues in the Clinton Administration look forward to working with 
you and this Committee to craft meaningful CBI enhancement legislation 
that will pass the Congress and be signed into law this year. Thank you 
again for this opportunity to appear before this Sub-Committee.

                                

    Chairman Crane. Thank you, Mr. Ambassador.
    Mr. Larson.

STATEMENT OF HON. ALAN LARSON, ASSISTANT SECRETARY FOR ECONOMIC 
         AND BUSINESS AFFAIRS, U.S. DEPARTMENT OF STATE

    Mr. Larson. Mr. Chairman and Members of the Committee, 
thank you very much for this opportunity to testify. I would 
like to complement Ambassador Fisher's testimony by stressing 
four points: first, that the United States has a large stake in 
seeing peace, prosperity, and democracy take root in Central 
America and the Caribbean; second, that the Administration's 
bill is a key part of a multi-faceted strategy to foster 
durable, private sector led economic growth in the region; 
third, that now, in the aftermath of Hurricane Mitch, quick 
passage of this legislation is all the more important in order 
to give hope to the region and guidance to investors; and, 
fourth, enactment of this bill will continue a tradition of 
enlightened bipartisan cooperation between the Congress and the 
executive branch on these issues.
    Mr. Chairman, we need to promote peace, build democratic 
institutions, achieve prosperity, and raise the quality of life 
in this region. And these are goals that are shared by the 
people of Central America and the Caribbean. Growth in Central 
America and the Caribbean nations does not benefit only those 
countries; we benefit as well.
    Trade with these countries has been bright spot. Between 
1996 and 1998, United States exports to Central America 
increased by 44 percent. The U.S. exported nearly as much to 
CBI countries last year as it did to China and India combined.
    Our relationship is marked by strong cultural and people to 
people ties. But the flow of people between the United States 
and the Caribbean Basin must be orderly. There are indications 
that in the aftermath of Hurricane Mitch, the flow of illegal 
immigrants to the United States from Central America is 
increasing. Economic reconstruction and growth can provide 
economic opportunities to help persuade potential illegal 
migrants to stay home.
    The fight against narcotics and other transnational crimes 
is a top U.S. priority. We are deeply concerned that 
traffickers will attempt to take advantage of the disruption 
caused by the hurricane to bring through this region even 
larger amounts of illegal drugs that will end up on our 
streets. This bill will strengthen the battle against illegal 
narcotics by encouraging legitimate job creation.
    In recent years, we have taken a number of steps to 
encourage economic development in this region. We have 
cooperated in opening up the regional civil aviation market. 
Working with private U.S. companies and potential lenders, we 
are exploring a package to encourage telecom infrastructure 
reconstruction. We have concluded bilateral intellectual 
property rights agreements with Nicaragua and Honduras. We have 
negotiated bilateral investment treaties with many countries 
and are seeking ratification of new BITs with Honduras, 
Nicaragua, and El Salvador. We have encouraged the 
international financial institutions to be active in the 
region. And we have participated in multilateral debt 
rescheduling for many countries and pledged substantial debt 
forgiveness to Nicaragua, Guyana, Honduras, and Haiti.
    But, Mr. Chairman, CBI enhancement legislation is a key 
element of this package, and it has so far been the missing 
element. Now, in the aftermath of Hurricane Mitch, the economic 
situation has become more urgent, and that is why quick action 
is needed.
    The Administration's bill may not please everyone in every 
detail. But we cannot let perfect be the enemy of good. The 
Administration's bill balances various competing interests, and 
we believe provides a basis for early action.
    Mr. Chairman, one of the most important chapters of this 
region's history has been the transformation of its economic 
policies from inward looking and state-directed policy toward 
export-oriented and market-based policies. The Ways and Means 
Committee has played a key role in making this possible. When 
the original CBI was being considered, a Presidential mission, 
composed of key Members of this Committee, made a crucial fact-
finding trip to the region. As head of the embassy economic and 
commercial section in Jamaica, I had the privilege of observing 
first-hand how the Committee developed tangible evidence that 
extending trade benefits to CBI countries not only would create 
jobs in the Caribbean, but also would create jobs here at home 
as well. And this is as true now as it was then.
    We have a proud history, Mr. Chairman, at helping others in 
times of disaster, and that is why the Administration is 
committed to working with Congress to achieve early agreement 
on an effective bill that provides the economic opportunity 
that this region needs and deserves. Thank you.
    [The prepared statement follows:]

Statement of Hon. Alan Larson, Assistant Secretary for Economics and 
Business Affairs, U.S. Department of State

    Thank you for this opportunity to testify on the proposed Caribbean 
Basin Trade Enhancement Act (CBTEA). The Department of State believes 
that early enactment of this legislation is of critical importance.
    Ambassador Fisher will present a detailed description of the 
Administration's bill. I would like to complement his testimony by 
stressing four points: (1) the United States has a large stake in 
seeing peace, prosperity and democracy take root in Central America and 
the Caribbean; (2) for several years we have been seeking legislation 
like the CBTEA, because it is a key part of a multifaceted strategy to 
foster durable private sector-led economic growth; (3) now, in the 
aftermath of Hurricane Mitch, quick passage of this legislation is all 
the more important in order to give hope to the region and guidance to 
investors; and (4) enactment of this bill would continue a tradition of 
enlightened bipartisan cooperation between Congress and the Executive 
Branch in promoting economic development in this region.
    The United States has a large stake in the Caribbean and Central 
America. Promoting peace, building democratic institutions, achieving 
prosperity, and raising the quality of life for all--these are the 
principal U.S. aims for the region and these goals are shared by the 
people of Central America and the Caribbean. As our close neighbors, 
the countries of Central America and the Caribbean have unique 
importance for us and they deserve our best efforts as we work together 
to achieve shared goals.
    The United States and the countries of the Caribbean Basin are 
bound together geographically, politically, economically and socially. 
Growth in Central America and the Caribbean doesn't benefit only those 
countries; we benefit as well. The Administration's bill will stimulate 
the Caribbean Basin economies by providing new incentives for 
investment, exports and job creation. This increased economic activity, 
in turn, will benefit our own economy by increasing opportunities for 
our exports of both goods and services.
    Despite the severe economic turbulence in the world economy over 
the last two years, trade with the Central American and Caribbean 
countries has continued to be a bright spot for the U.S. In 1998, when 
U.S. exports to Asia shrank, exports to the Caribbean grew modestly and 
exports to Central America expanded by 13%. In fact, between 1996 and 
1998, U.S. exports to Central America increased by 44%. To put this in 
context, the U.S. exported nearly as much to CBI countries in 1998 as 
it exported to China and India combined. In addition, U.S. companies 
are the primary investors in the region.
    Our economic interdependence and shared democratic ideals are 
underscored and reinforced by our strong cultural and people-to-people 
ties. Over two million citizens of the countries of Central America and 
the Caribbean live in the U.S., and an even larger community of U.S. 
citizens is of Central American and Caribbean origin. Over the years, 
communities of Central American and Caribbean immigrants in the United 
States have grown roots and are now a major component of the social, 
business and cultural fabric in the United States. This growing sector 
of American society also is increasingly finding its voice within the 
U.S. political system.
    We want to assure that the flow of people between the U.S. and the 
Caribbean Basin is an orderly one. There are indications that, in the 
aftermath of Hurricane Mitch, the flow of illegal migrants to the U.S. 
from Central America is increasing. It is understandable that 
breadwinners would seek economic opportunities to help their families 
rebuild shattered lives. But illegal immigration stretches the 
resources of the U.S. Government while threatening the lives of the 
people who attempt it. Only economic reconstruction and growth can 
provide the economic impetus and opportunities to persuade Central 
Americans to stay at home.
    The fight against narcotics and other transnational crimes is 
another U.S. priority. Before the hurricane, we had already noted an 
increase in narco-trafficking; in fact, it was estimated that over half 
of the cocaine entering the United States was coming in through the 
Mexico-Central America transit zone. In the aftermath of the 
hurricanes, we are concerned that traffickers will attempt to take 
advantage of the disruption to bring in even larger amounts through the 
region. The needs of recovery and reconstruction are putting enormous 
new demands on the resources of governments in the region.
    With this in mind, the Department of State plans to increase 
significantly Embassy counter-narcotics budgets in the countries 
affected by Hurricane Mitch to address the increased vulnerabilities. 
But our counter-narcotics efforts will have much greater prospects of 
success in an environment of economic and social stability. The 
Administration's bill will strengthen the battle against narcotics in 
the region by encouraging job creation, which is the foundation of 
economic and social stability.
    As the Congress examines this proposal, I urge that it keep in mind 
the enormous depth of the disasters that struck Central America and the 
Caribbean last October. Over 9,000 people died; over 9,000 remain 
missing; nearly 13,000 people were injured; at least 3 million people 
have been displaced. The U.S. Corps of Engineers has estimated the cost 
of repairing infrastructure alone at $8.5 billion, which does not 
include lost crops, lost businesses and the interruption of production. 
Nearly one person out of four in the countries hit by Hurricane Mitch 
was directly affected. There is no doubt that, one way or another, 
every individual in Honduras, Nicaragua, Guatemala and El Salvador has 
felt the impact.
    The physical destruction of the hurricane also meant widespread 
destruction of jobs. The ability of the economies of this region to 
restore jobs and create them for new entrants into the labor markets 
will to a very large extent determine whether the new democracies of 
this region will survive.
    This legislation is part of a multifaceted strategy to support 
durable, private sector-led growth. In recent years, the U.S. and the 
CBI countries have initiated a number of efforts that are laying the 
foundations for durable, private sector-led growth. In particular, we 
have taken steps to improve transportation and telecommunications 
links, to improve the climate for investment, to foster sound macro-
economic policies and to relieve unsustainable debt burdens. CBI 
enhancement legislation is a key element of this strategy to foster 
sustained economic growth.
    On transportation, we have cooperated successfully in recent years 
with our partners in Central America in opening up the regional civil 
aviation market. We signed Open Skies agreements in May 1997 with Costa 
Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama.
    Aviation liberalization is bringing tangible benefits in the form 
of greater competition, increased business and tourist traffic, and 
incentives for increased trade and investment. These benefits 
complement our efforts to promote economic reform and development with 
our partners in the region.
    Since completion of these new agreements, flight choices to the 
region have increased, new carriers have entered the market and 
airfares have decreased. These benefits are shared by airlines, 
airports, communities, travelers and businesses in the U.S. and in 
Central America alike.
    The Central Americans are helping themselves develop the 
infrastructure essential to long-term prosperity by opening the telecom 
sector to foreign capital. However, telecom infrastructure in Honduras 
and Nicaragua was badly damaged by Hurricane Mitch. In response, the 
State Department, working with private U.S. carriers and potential 
lenders, has developed a package of policy reform and external 
financing for telecom infrastructure reconstruction. By using a small 
portion of revenues generated by U.S. calls to Honduras and Nicaragua 
to back infrastructure loans, this package would provided needed 
private sector funds for reconstruction of the telecom infrastructure. 
Concurrent changes in bilateral settlement charges would lower fees 
paid by U.S. carriers--and ultimately, by U.S. consumers--for telephone 
calls to the two countries. We have invited Honduras and Nicaragua to 
hold experts talks to explore this package further.
    The United States has concluded two bilateral intellectual property 
rights agreements in Central America--Nicaragua and Honduras. While 
problems remain, the ratification of the World Intellectual Property 
Organization Copyright Treaty and the WIPO Treaty on Performances and 
Phonograms by Panama and El Salvador, indicate the region's progress 
toward recognizing the importance of the protection of intellectual 
property as we move into the digital age. As Central American countries 
strive to diversify their economies in the wake of the recent 
hurricane, modern intellectual property protection, compliance with 
their obligations under the WTO Treaty on the Protection of 
Intellectual Property Rights (TRIPS) and judicial reform will create an 
improved environment for private investment.
    We continue to seek to negotiate Bilateral Investment Treaties with 
CBI countries. These treaties lock in a high level of treatment for 
U.S. investors in these countries, including access to international 
arbitration when problems do arise. We have BITs in force with Grenada, 
Jamaica, Panama, and Trinidad and Tobago. We are also looking forward 
to working with the Senate to obtain its advice and consent to 
ratification of our BITs with Honduras, Nicaragua, and El Salvador. The 
BIT with El Salvador was signed this year.
    The international financial institutions have also made a 
significant contribution to recovery and growth in the region. The 
Inter-American Development Bank (IDB) hosted a meeting of all donors 
December 10-11; more than 50 participating donor nations and 
multilateral agencies signaled support of roughly $6.3 billion. A 
follow-up meeting will be held May 25-28 in Stockholm.
    In addition to organizing and contributing to the multilateral 
Hurricane Mitch relief effort, the IDB itself provided $1.58 billion in 
loans to CBI countries in 1998. The World Bank provided $465 million in 
loans to CBI countries for the fiscal year ending June 30, 1998.
    For many developing countries, agreement with the IMF on a 
structural reform program (ESAF) is essential, both for the loans they 
provide and for the reforms that promote growth. Currently, Guyana, 
Haiti and Nicaragua are CBI countries with active ESAFs, and Honduras 
is in the final stages of negotiations. El Salvador has a Stand-by 
agreement, and Panama has an enhanced fund facility.
    Even countries that adopt appropriate economic policies sometimes 
are still unable to fully service their international debt. Part of our 
strategy to assist in resolving that problem is participation in 
multilateral debt rescheduling, through the Paris Club. Thus, since 
1990, we have participated in 17 Paris Club negotiations with 9 CBI 
countries, resulting in treatment of over 5 billion dollars of debt 
(including debt owed to other bilateral official creditors).
    More recently, we have participated in new efforts to provide 
lasting solutions to the debt problems of the most heavily indebted 
poor countries (HIPC). This program provides substantial debt 
forgiveness to countries which demonstrate a track record of economic 
reform. Nicaragua and Guyana are well along in the HIPC process. 
Honduras and Haiti have also received ``Naples terms'' debt reduction 
from the Paris Club; Honduras is under review for possible 
participation in the more generous HIPC program.
    The Administration has requested $41 million to implement an 
exceptional three-pronged strategy to address the external debt 
problems faced by Nicaragua and Honduras, the countries most severely 
hit by Hurricane Mitch: first, by a deferral of the bilateral debt 
service payments over the next 2-3 years; second by deeper bilateral 
debt forgiveness from the Paris Club; and third, by addressing the 
problem of IFI debt obligations. With respect to the IFI debt, the 
Administration is seeking appropriations to contribute to the Central 
American Debt Trust Fund to pay IFI debt service.
    Finally, this week, Commerce Under Secretary for International 
Trade David Aaron is in Central America leading a business development 
mission. The 16 U.S. companies on the mission represent such key 
rebuilding sectors as construction, housing, and water purification.
    Now, in the aftermath of Hurricane Mitch, quick passage of the 
CBTEA is especially important to give hope to the region and guidance 
to investors. CBI enhancement legislation has been a key element of our 
economic development strategy for several years. It is the missing 
piece of the foregoing set of measures to foster private sector growth. 
Now, in the aftermath of Hurricane Mitch, the economic situation has 
become more urgent. That is why quick action is needed to enact the 
CBTEA.
    Ambassador Fisher is providing a more detailed description of the 
contents of the Administration's bill. But in general, the bill will 
authorize the President to provide enhanced temporary trade benefits to 
CBI countries for: apparel products assembled from U.S. fabric; textile 
handicrafts; and all non-textile products currently excluded from the 
CBI program.
    Along with increased benefits, the bill also establishes mandatory 
and discretionary eligibility requirements. These provisions are meant 
to encourage the CBI countries to adopt sound trade and investment 
policies, to maintain high standards of environmental protection and 
workers rights and to cooperate with the United States in anti-
narcotics efforts.
    In sum, the bill is designed to provide both increased preferences 
to the CBI countries and greater market opportunities for U.S. 
businesses.
    The CBI enhancement bill which is before this Committee is a key 
element of the Administration's overall reconstruction strategy. It is 
aimed precisely investment of job creation and private sector-led 
growth. The improved market access that this bill offers dovetails 
closely with our efforts to improve transportation and 
telecommunications links, to create a sound environment for investment 
and to mobilize support from international financial institutions.
    The Administration's bill may not please everyone in every detail. 
But as Ambassador Fisher has pointed out, Congress and the 
Administration have been trying for more than six years to pass CBI 
enhancement legislation. This is an example of the perfect being the 
enemy of the good. The Administration's bill is one that balances 
various competing interests and, in our view, should command a 
consensus for early action. It is critical that we achieve some 
consensus to pass legislation as soon as possible.
    The Central Americans and Caribbeans require an opportunity to help 
themselves. It is the nature of the apparel industry that companies can 
react quickly and positively to enhancements to CBI. One major apparel 
company told the State Department that it would employ additional 
Central Americans within a week of CBI enhancement. Early action would 
give hope to the region and would give investors the clear signals they 
need to make investment decisions.
    Enactment of this legislation will continue a tradition of 
bipartisan leadership in support of the region's economic development. 
One of the most important chapters of the region's history has been the 
transformation of its economic policies from inward-looking and state-
directed, toward export-oriented and market-based. Together with the 
movement toward democracy, this is the fundamental reason for the 
region's solid growth, which averaged about 3% during the 1990's. As a 
result of the success of these policies, there is now a broad consensus 
in the region for freer trade and market competition.
    The original Caribbean Basin Initiative was an important factor in 
supporting the economic reforms of the 1980's and 1990's. Its expansion 
to provide duty-free treatment for virtually all products exported by 
the Caribbean Basin countries will reinforce the efforts of market-
oriented reformers of the region, both in the private sector and in 
governments, to continue and deepen sound economic policies.
    The Ways and Means Committee played a key role in making possible 
this historic transformation. In the early 1980s when the original CBI 
was being considered, a Presidential Mission composed of key members of 
this committee made a fact-finding trip to the region. At the time I 
was head of the Embassy's economic and commercial section in Jamaica 
and had the privilege of escorting the delegation on a tour of an 
apparel assembly facility. After the tour we all had to wait as 
Congressman Gibbons roamed around the factory asking questions and 
reviewing nearly every station and machine. When he finally came out, 
he told us that nearly all of the inputs in the factory--sewing 
machines, fabric, dyes and even light bulbs--came from the U.S. His 
inspection of this factory provided tangible evidence that extending 
trade benefits to CBI countries would not only create jobs in the 
Caribbean, but would create jobs here at home as well.

                               Conclusion

    The United States has a proud history of helping others in times of 
disaster. Given our special relationship with the countries of Central 
America, we could do no less than provide immediate and extensive 
assistance. Hurricane Mitch took countless lives and undermined the 
economies of the region.
    It has also threatened to divert efforts away from further 
consolidation of democracy. Resources that would be used, for example, 
to reform judicial systems, to build transparent financial sectors, or 
to ensure equal opportunities for all, now must meet basic needs. We 
simply must not permit Hurricane Mitch to uproot progress toward 
greater freedom and prosperity and in the process to create a fertile 
environment for instability crime and narcotics trafficking. By helping 
our neighbors and trading partners, we also help ourselves.
    The Administration is committed to working with Congress to achieve 
early agreement on and effective bill that provides the opportunity 
that the region needs.

                                

    Chairman Crane. Thank you, Mr. Larson. Mr. Larson, has the 
existing CBI program achieved its goal of stabilizing democracy 
in countries where they were threatened not only with economic 
instability, but civil wars as well, going back to the origins 
of CBI in 1983?
    Mr. Larson. Mr. Chairman, I think there has been very, very 
strong progress in stabilizing democracies and stabilizing 
economies. We have seen great progress in Central America where 
the peace process has resulted in demobilization and an end to 
the conflicts and the abuses of human rights that we have seen 
in the past.
    We have now, in the region, a much, much brighter picture 
with respect to economic growth, strong institutions, and 
democracy than we were looking at in the 1980's.
    Chairman Crane. And, Mr. Ambassador, you mentioned that our 
exports to the Caribbean countries total approximately $19 
billion.
    Mr. Fisher. Yes, sir.
    Chairman Crane. And do you know what that translates into 
in terms of job creation here in the United States?
    Mr. Fisher. Well, I don't have a specific number, Mr. 
Chairman, on top of my head, but, nonetheless, being able to 
export that volume obviously results in jobs in this country. 
And we have been growing a significant portion of our economy 
at the margin through exports. Again, it is important to bear 
in mind that the CBI countries represent a significant market. 
Often when we think of export markets, we think of France, and 
we think of Brazil, and we think of China--of course, we want 
China to grow even further. But one rarely does think that 
these CBI countries represents a significant chunk of change 
and such an important market for our output. We value it. It is 
job creating, and it is good.
    Chairman Crane. Well, based upon information we have 
received $1 billion in exports translates roughly into 20,000 
domestic jobs, and the pay for those domestic jobs exceeds the 
national average. And so that would be into 350,000 or 375,000 
jobs directly related to our exports to the Caribbean 
countries. And I think it is a message that has not been 
properly disseminated.
    Let me get another question off to you quickly, Mr. Fisher, 
and that is, we have had a remarkable record of successes at 
the WTO, winning 18 cases and settling favorably in 10. The one 
dark spot on the USTR's record is in the textile area. And two 
out of the four cases the United States has lost in the WTO 
involve textiles. Did you personally review the 
Administration's CBI bill for its consistency with our WTO 
obligations?
    Mr. Fisher. We believe, Congressman, that the proposal we 
have put forward is consistent with our WTO obligations.
    Chairman Crane. You don't see any potential problems 
erupting?
    Mr. Fisher. I would be happy to reanalyze that for you if 
you wish me to, and get back to you on that. But I believe the 
way it is proposed and structured presently that it is in 
keeping with our commitment.
    Chairman Crane. Very good. All righty. Mr. Levin.
    Mr. Levin. Thank you. Let me just raise a couple of 
questions, and it may well be that you will want to discuss 
them with us further some other time. It is not immediately 
pressing.
    As you know, a summary of the Administration's bill was 
sent to us fairly recently, and I have just been--begun to look 
it over. But I did want to ask you, the bill has a set of 
mandatory eligibility requirements and then discretionary 
eligibility requirements, and I think, Mr. Fisher, this may be 
best directed to you. And, for example, one of the, one of the 
discretionary eligibility requirements is whether the 
beneficiary country has met the narcotics cooperation 
certification criteria, right?
    Mr. Fisher. Yes, sir.
    Mr. Levin. That is one of them. Another relates to 
intellectual property rights--whether they are complying with 
their obligations under the WTO; then another relates to worker 
rights and whether they are pursuing internationally recognized 
worker rights; and then there are a number of other important 
ones.
    As I read the summary at least, and we are just working on 
the bill language itself, these are discretionary in the sense 
that the President or the Administration does not have to 
invoke them. Are there stated criteria as to when these and how 
these discretionary requirements would be implemented? Or is it 
just going to be under this bill something that is totally 
discretionary within the Administration.
    Mr. Fisher. Well, first, Congressman, if I may, I would 
like to point out, because you listed in particular five 
criteria for deciding whether benefits should be limited or 
withdrawn as discretionary criteria, I would like to point out 
that the first five you mentioned are also in Congressman 
Crane's bill, in H.R. 984. We have an additional 6, but there 
are 11 total in our proposed discretionary criteria list. And, 
again, in terms of precise formula, there is no precise 
formula. This would be at the discretion of the President.
    I would say that, to our knowledge presently, in terms of 
working with the current beneficiaries of this enhancement 
legislation that almost all of these discretionary variables 
are being addressed. But we would leave it up to the judgment 
of the President, and it would be fully discretionary and, 
hopefully, wisely applied.
    Mr. Levin. All right. I think we need to----
    Mr. Fisher. Also, Congressman, one thing I would offer to 
you, and, of course, the Chairman of the Committee, is I had a 
little spreadsheet prepared that distinguishes between the 
three different versions--our proposal, the Congressman's and 
his co-
authors' proposal, and Senator Graham's bill for the Senate. I 
would be happy to share it with you afterwards. It goes through 
all the different aspects of the bill and compares the three, 
so we can look at them on one piece of paper.
    Mr. Levin. All right. And let me suggest that, when we have 
our further conversations, that we do address the issue of 
implementation of discretionary requirements. I mean, just----
    Mr. Fisher. We would, of course, under our formulation 
prepare a report to the Congress for December 2000 which would 
review these different variables. At the same time, the 
discretion may be invoked during the existence of the 
enhancement program. But I would be happy to follow up with 
that in detail, if you would like.
    Mr. Levin. Right. I mean, even potential or likely 
conflict. I mean a discretionary requirement. And I think this 
is going to be of interest to people, and I don't think that 
anybody should assume that it's relevant only to our 
relationships with the CBIs. We all know these are issues that 
matter in varying degrees to various Members of the Congress, 
and I think are increasingly of concern to Members of Congress 
and to the Administration. And I do think we need to talk 
through how it would operate. And let me just leave it at that, 
partly because the red light is on. But even if it were yellow, 
I would leave it at that because we need to discuss it in 
greater length.
    Mr. Fisher. Congressman, we would look forward to 
discussing that with you and others.
    Mr. Levin. Thank you. With all of us, we need to talk about 
it.
    Mr. Fisher. Thank you. Thank you very much.
    Chairman Crane. Mr. Rangel.
    Mr. Rangel. Thank you, Mr. Chairman. Mr. Larson, you 
mentioned that trip in the early 1980's to the Caribbean, which 
the Members of the Committee were on, including Sam Gibbons, 
who was the senior member of this committee. And you pointed 
out in your testimony that in Jamaica, Sam had examined the 
machines and the fabric and dyes and the light bulbs and had 
concluded that all of these had been made in America and were 
exported to Jamaica. I would like to add two things. No. 1, 
that as soon as you said that, Sam Gibbons entered the room. 
And, No. 2, that Sam did that in every country we visited. 
[Laughter.]
    And the results were the same. Almost everything that they 
consumed had been imported from the United States.
    I assume that by having the State Department report that 
you would indicate that this enhancement of the Caribbean Basin 
bill would be in our national interest?
    Mr. Larson. Very definitely, Mr. Congressman. If I could 
just add one point? Why I put that reference to the trip by the 
Presidential delegation in because it demonstrated so 
graphically to me a point that has been made by many others 
today, and that is that in this region a large share of the 
inputs to the production process are supplied by the United 
States. And so to the extent we're encouraging economic 
activity they're including in their apparel industry, we are 
creating a market for U.S. products.
    Mr. Rangel. Well, I suppose that both of your offices have 
heard from organized labor whose position would be that we have 
suffered tremendously, our economy has been hit hard under the 
existing CBI legislation. And to enhance it, to give it parity 
with Mexico, would cause us further economic harm. In addition 
to that, and I would like to get both of your reflections, the 
working conditions in these countries are far below the 
standard which Americans find acceptable. Have your office had 
the opportunity to review these observations and to report on 
them, Mr. Larson, Secretary Larson?
    Mr. Larson. First of all, let me take up your last point 
first, Congressman. I think that we just had a brief exchange 
about the discretionary criteria under the Administration's 
proposal. I think it is important that there is a reference in 
those discretionary criteria to workers' rights and the respect 
for internationally recognized core labor standards because 
that gives the United States a tool in the implementation of 
this legislation to encourage movement in the right direction 
on workers' rights.
    I visited a number of the factories in the region now, and 
I have not found personally situations that I would regard as a 
violation of workers' rights. Obviously, some people in this 
part of the world have very low wages because that is part of 
being a very poor, underdeveloped country. But I think we would 
have the tools under this bill to be able to monitor and 
address those concerns.
    On your first point, as others have pointed out today, we 
can expect that a significant part of what will happen as a 
result of this proposed legislation would be a transfer of 
economic activity in these industries from other parts of the 
world outside of the United States to the Caribbean and Central 
American countries. And it would largely be from countries 
elsewhere that don't use much U.S. content in their production 
to countries that do use a great deal of U.S. content in their 
production and that would be a plus.
    Mr. Fisher. Let me add to that?
    Mr. Rangel. Sure.
    Mr. Fisher. Congressman Rangel, if I may add to that? My 
diplomatic colleague was quite diplomatic in not mentioning 
which these countries are. We have seen a decline in Chinese 
exports of textiles to the United States. We've seen an 
increase on a compound constant basis from Mexico and from the 
CBI countries. The product that is produced in the Asian sphere 
typically lacks completely U.S. input whereas our producers and 
our workers make the fabric and linings and the threads and the 
notions that go into CBI apparel under the U.S. content rules. 
And, of course, our companies employ people in the cutting and 
distribution of those products.
    I would like to just, if I may, take one aspect of this 
that the two previous gentlemen were referring to, the Senator 
and the Congressman, with regard to this 2005 issue. I think 
it's very important, in light of this competitive aspect with 
Asia, to understand that tariff benefits under the bill for CBI 
countries are a significant advantage over its duration. That 
is the bill that would give duty-free treatment to most CBI 
apparel exports whereas, by contrast, the average tariff for 
imports of apparel from the world is 13 percent, which Asian 
countries would still be paying while we provided these 
benefits to the CBI countries. I just wanted to add that in to 
correct a mis-impression that might have been given previously.
    But the summary answer to your question, Chairman Rangel, 
is that we feel there is certainly a higher U.S. employment 
benefit for products that are cut, excuse me, products that are 
manufactured in the Caribbean area than the products that are 
manufactured in Asia which have no U.S. content whatsoever.
    Mr. Rangel. Well, I would appreciate if both of you could 
send me whatever material you have dealing with the dislocation 
or the impact on American textile workers as well as whatever 
information you have on the working conditions that exist in 
the Caribbean countries, and whatever you can get from the 
Trade Commission.
    Thank you, Mr. Chairman.
    Chairman Crane. Mr. Jefferson.
    Mr. Jefferson. Thank you, Mr. Chairman. I have a question 
which is just for clarification purposes. I noticed that the 
textile and apparel provisions in the bill submitted by the 
Administration are more restrictive, considerably more 
restrictive, than the ones in H.R. 984. The restrictive 
difference is to the extent that they don't seem compatible. 
Does that mean the Administration is not supportive of H.R. 984 
and only supports the bill it submitted or what?
    Mr. Fisher. Congressman, we have a different approach to 
this than H.R. 984. The difference is in the regional content 
question and U.S. content question of manufactured products in 
the textile area. This is, as was pointed out by the two 
previous witnesses you had, always been the divisive issue that 
we have had to deal with in trying to push forward CBI 
legislation. The reason for that, Congressman, is that 48 
percent of the roughly $19 billion in exports that come from 
the CBI countries comes in the form of textile products. And, 
as Assistant Secretary Larson mentioned earlier, the majority 
of those have significant U.S. content. One estimate is that 80 
percent already have U.S. content.
    The difference of view here is largely a matter of what is 
practicable in terms of getting a bill through the Congress. 
And I want to reiterate to you, and I want to iterate to 
Chairman Crane, that we are eager to work with you to get 
passage of this bill because we feel that passage delayed is 
passage denied and that it's time to move on CBI, and we hope 
to square our corners with you on this issue. This is our 
considered judgment that approaching this critical area of 
textiles in this manner is the best way to get passage of CBI 
legislation, and we support the approach that we've initiated.
    Mr. Jefferson. I understand you support your approach. I 
guess I was trying to figure--in previous years the 
Administration voiced its support for the approach of H.R. 984, 
and my question really was, I know you support what you 
submitted, and I'm not arguing whether that's the best approach 
or not to get it out of the Congress or whether it's the best 
approach on substance. I'm not arguing either one of those. I'm 
just trying to see where the Administration stands now on H.R. 
984. Does it stand in opposition to H.R. 984?
    Mr. Fisher. Again, Congressman, we've put forward our own 
initiative here. It has not materialized, as Chairman Crane 
said, yet in being put on the floor as a bill, but we have our 
different approach here. And there are differences from H.R. 
984 and one would deduce from that that obviously we don't 
support H.R. 984 as it is currently drafted. The significant 
differences are the content provisions that deal with textiles. 
There also is a difference on the duration of the program and 
that's a budgetary consideration. And we would be eager to work 
with this Committee and with you, Mr. Chairman, and everybody 
else on the Subcommittee to try to figure out a way to extend 
that if we could, if we could find the budgetary wherewithal to 
get it done.
    Mr. Jefferson. I yield back my time, Mr. Chairman. Do you 
have a comment on this issue?
    Mr. Larson. I would simply add, Mr. Jefferson, that we feel 
very strongly that this is a time when we can't let the perfect 
be the enemy of good. Fast action is necessary and we believe 
the Administration's bill balances all of the competing 
interests and provides an approach that could be susceptible of 
getting quick approval and then quickly bringing these economic 
opportunities to the benefit of the CBI nations.
    Mr. Jefferson. Thank you. Mr. Chairman, I yield.
    Chairman Crane. Mr. Becerra.
    Mr. Becerra. Thank you, Mr. Chairman. Thank you, first of 
all, to the two of you for your testimony. Let me pick up on a 
point that Ranking Member, Mr. Rangel, made and ask that you 
really see if you can get us some information on the working 
conditions in a number of the countries that would be helped by 
CBI. I think that information would be helpful to allay the 
concerns of a number of Members who won't have the opportunity 
to sit through these hearings, to hear the testimony, hear 
about the positive effects trade-wise that the United States 
stands to gain from going through a CBI process and expanding 
trade with these countries.
    Maybe one of the two of you, or both of you, can give me a 
response to this. I'm hearing word from some American interests 
that while they want to continue doing trade in a number of 
these countries, CBI countries, their concern is that 
oftentimes they run into a bureaucracy in either getting 
fulfillment of a contract commitment, getting paid for work 
that they've done, and it becomes a nightmare trying to obtain 
remuneration for services rendered or products provided. Have 
any of you heard of any of these complaints and, if so, can you 
give me a sense of where we are with that?
    Mr. Larson. I can give you a fairly general response but I 
hope a helpful one. A lot of these countries are countries that 
have just come out of very serious difficulties, some of them 
economic alone, some of them political and economic together. 
That's one of the reasons why it has been so important for us 
to work with them on developing a strategy to build around 
private sector growth so it wasn't just a question of aid. In 
many cases, aid is necessary but it's not the total answer. We 
have worked to provide a better environment for U.S. business. 
We've negotiated bilateral investment treaties----
    Mr. Becerra. Mr. Larson.
    Mr. Larson. Yes.
    Mr. Becerra. Let me see if I can get you to respond just to 
the question because I'm going to run out of time and I want to 
ask the two of you a quick question. Are you familiar or have 
you heard any particular concerns expressed by American 
business interests that are not finding as hospitable an 
environment to actually see their work compensated?
    Mr. Larson. I have not heard of specific problems of 
getting paid for work that has been done. There are broad 
issues of the business environment that we're trying to work 
on.
    Mr. Becerra. And I think you were hitting----
    Mr. Larson. Yes, that's right.
    Mr. Becerra. And I think we have to recognize that some of 
the countries that have been hit hard by the hurricanes and so 
forth do require some assistance and some time to get 
themselves back and running again. So that's fine.
    Second question, we focused on the more global aspect of 
this and quite honestly in terms of labor and environment and 
so forth, we focused on the various conditions more in terms of 
the Caribbean and Central American countries. Focusing here 
domestically, what do we see as the effect of expanded trade? I 
know we're going to increase exports and therefore jobs in 
those export industries, but now where we will see increased 
imports, what's the prediction in terms of job loss and, more 
specifically, I'm more interested in what the Administration is 
looking to do? We're going to be reauthorizing TAA this year, 
the Trade Adjustment Assistance, I would like to know what 
specifically, even though the impact will be small compared to 
a larger free trade agreement, what we're looking to do to try 
to offset the hurt of dislocation to American workers here?
    Mr. Fisher. Well, first, with regard to the specific 
legislation that is being proposed, again, the majority of the 
products covered when you really go through the numbers are 
going to be textile related. The textile industry has been 
suffering from significant employment losses. Congressman 
Rangel referenced that earlier. I would submit that whether or 
not CBI legislation is passed, this trend will likely continue. 
We have some very low-cost competitors around the world. It's 
likely to occur, however, at a slower pace, Congressman, if we 
have a high U.S. content CBI partnership than it would 
otherwise because, again, there's little to no U.S. content 
from the Asian counterparts that come into this market. It's 
very, very difficult to pinpoint a specific number that results 
specifically from this aspect of our textile trade. We just 
make the assumption, and it's a common sense assumption, that 
if we have a portion of U.S. content coming in the form of the 
legislation we've proposed, that it will have less damage and 
be more beneficial to our textile workers in the United States 
than it would be coming from Asia.
    And, of course, if you receive product back in the final 
assembly, as it were, and also the distribution of those 
products, there are some numbers that have been calculated. For 
every 100 jobs created in the Caribbean, there are some 15 that 
get involved in the distribution system and so on. We can send 
to you our best estimates of this analysis.
    Mr. Becerra. That would be helpful.
    Mr. Fisher. But I want to warn you, the numbers aren't 
terribly precise.
    Mr. Becerra. Understood. But that would be helpful to give 
us some sense of what you're projecting to be the extent of 
dislocation of American workers. I do appreciate that.
    Chairman, thank you very much.
    Chairman Crane. Thank you, and I want to thank our 
witnesses. And before you depart though, I do want to ask that 
some questions be made a part of the record that we can submit 
to either one of you. And we thank you for your participation 
today.
    [Questions submitted by Chairman Crane and Mr. Ramstad, and 
Mr. Fisher's responses are as follow:]

    Question 1. Recently I was contacted by a company having trouble 
doing business in the Dominican Republic due to the Dominican 
Government's apparent refusal to pay for work performed pursuant to an 
existing contract. My understanding is that in 1994, Mundogas Americas 
Dominican, S.A. (``Mundogas''), signed a 15-year contract with the 
Board of Directors of Operadora de Puerta Viejo, S.A., an entity of the 
Government of the Dominican Republic (GODR), to supply 50% of the 
Dominican Republic's requirements for liquified petroleum gas. Since 
1997, there have been numerous instances of delayed and incomplete 
payments and other contract manipulations. These, and other violations, 
which make it difficult for U.S. companies to do business in the 
Dominican Republic, are described in the attached document. Can you 
please comment on your impressions of these apparent unfair business 
practices that the Government of the Dominican Republic seems to be 
participating in? In your view, are they a threat to United States 
companies seeking to invest in this country?
    Answer. Officials from Mundogas and their Washington counsel have 
met with officials from my staff in the Office of the U.S. Trade 
Representative (USTR) to discuss the situation. We understand Mundogas 
has also met with officials from the U.S. State Department and other 
appropriate U.S. agencies. We are also aware that officials from the 
U.S. Embassy in Santo Domingo have been working closely with Mundogas 
in the Dominican Republic to resolve the company's complaints. We 
support our embassy's efforts.
    Subsequent to our meeting with Mundogas, we spoke with the 
Dominican Republic's Ambassador to the United States, Bernardo Vega, to 
inform him of our concern and to urge him to seek a fair and 
expeditious resolution of this dispute. We will continue to coordinate 
with Mundogas' representatives in pursuit of a solution to this 
problem.

    Question 2. Ambassador Fisher, a very serious situation has 
recently developed in Guatemala. I know your office is aware of the 
situation, but for everyone else here, I want to summarize what has 
happened.
    As you know, on May 11th, a Guatemalan trial court unfairly and 
improperly convicted Cargill de Guatemala, a subsidiary of Cargill, 
Inc., and its financial officer on four counts of fraud and tax fraud. 
Cargill manager, Daniel Tabora, was sentenced immediately to 4 years, 
11 months in prison.
    The charges in this case stem from the fraudulent activities of a 
Guatemalan supplier, who fled Guatemala with the $80,000 in valued-
added taxes Cargill paid him (note: Guatemalan law does not permit 
exporters to pay the VAT directly to the government). Rather than 
pursue the perpetrator of the crime, however, the Guatemalan government 
has focused on Cargill. Standard operating procedures have not been 
followed in the trial, which was moved up on the calendar twice. 
Prosecutors produced no witnesses and introduced no evidence proving 
Cargill's knowledge of or even intent to avoid tax payments. Even 
though many companies have been duped by this Guatemalan supplier, 
Cargill is the only company that has been brought to trial 
(coincidentally all the other companies who have not faced similar 
punishment are Guatemalan). And, the employees who have testified 
truthfully on behalf of Cargill, are now being threatened with 
prosecution for perjury.
    While I strongly question whether Guatemala should receive any of 
the reconstruction and disaster mitigation funds as provided in the 
bill, the reason I raise this issue today is because one of the basic 
purposes of CBI was to encourage the development of democratic 
governments and health economies. I generally support CBI, but I 
strongly believe the eligibility requirements for this preferential 
treatment should be closely and carefully followed. Benefits under CBI 
are conditioned on countries continuing to meet seven mandatory and ten 
discretionary conditions and the President may withdraw or suspend a 
country's designation or the application of duty-free treatment on any 
article at any time, if he determines the criteria are not being met.
    In my opinion, these actions of the Guatemalan government do not 
reflect a democratic government. In addition, they raise serious 
concerns about their treatment of U.S. companies and foreign nationals 
in general, as well as their ability to abide by internationally 
recognized standards of trade. Can you please comment on how closely 
you review questionable behavior on the part of a CBI beneficiary 
nation?
    Under Section 108 of the bill, USTR will report to Congress on 
economic development and market-oriented reforms in each participating 
country. USTR will assess the extent to which the country provides 
equitable access to the markets of that country, macroeconomic reforms 
in the country, how the country treats foreign investment whether the 
country has moved trade liberalization measures and the extent to which 
the country works to accommodate market access objectives of the US. 
Would questionable activities by a country be outlined in this report 
to Congress?
    Answer. Officials from Cargill and their Washington counsel have 
met with officials from my staff in the Office of the U.S. Trade 
Representative (USTR) to discuss the situation. We understand Cargill 
has also met with officials from the U.S. State Department and other 
appropriate U.S. agencies. We are also aware that officials from the 
U.S. Embassy in Guatemala City, Guatemala, have made numerous 
interventions on behalf of Cargill in the past year.
    Subsequent to our meeting with Cargill, we spoke with 
representatives of the Guatemalan Government in Washington and 
communicated our awareness of the situation and our concern that it be 
resolved fairly and expeditiously.
    As a matter of policy and law, the Administration actively monitors 
and reviews actions taken by CBI and GSP beneficiary nations. Reports 
on these programs are prepared regularly by the U.S. International 
Trade Commission and by USTR. In the past, the U.S. has suspended 
benefits for some beneficiary nations pending actions taken to correct 
behavior that is not consistent with the conditionality of the program. 
We will continue to monitor this case and enforce scrupulously the 
provisions of the CBI program.

    Question 3. I recently met with a representative from the Canadian 
Consulate General in my Minnesota office. One of the issues we 
discussed is a bill before the Canadian government to make it a 
criminal act for foreign-owned magazines to include ads aimed at 
Canadian consumers. It is my understanding the government of Canada is 
justifying it under the guise of protecting Canadian culture. What is 
USTR planning to do about this issue?
    Answer. Should Canada have implemented C-55 as proposed, USTR had 
announced that we were prepared to withdraw trade benefits of an 
equivalent commercial effect. However, on May 26, United States Trade 
Representative Charlene Barshefsky announced that the United States and 
Canada successfully resolved outstanding differences relating to 
Canada's magazine trade practices and its controversial legislation--
Bill C-55. The agreement addresses concerns that led the United States 
to file and win a WTO case, and includes commitments from Canada in the 
areas of investment, tax and market access for U.S. periodicals 
carrying advertisements directed primarily for the Canadian market. In 
return, the United States committed not to take action under the WTO, 
NAFTA or section 301.
    Under the agreement, U.S. magazines exported to Canada will be able 
to carry 12 percent of total ad space with advertising aimed primarily 
at the Canadian market--something C-55 as originally proposed would 
have prohibited entirely. Within three years, this percentage will grow 
to 18%. Canada has also committed to provide non-discriminatory tax 
treatment under section 19 of their Income Tax Act. Previously, section 
19 prohibited advertisers from receiving the standard business 
deduction if they advertised in foreign-owned publications. Canada will 
eliminate the nationality requirement within one year. In addition, 
Canadian advertisers will be able to place ads in any magazine 
regardless of the nationality of the publisher or place of production. 
Canadian advertisers will also be eligible for half of the tax 
deduction if they place ads in foreign magazines with zero to 79% 
original editorial content or for the full deduction if the magazine 
contains 80% or more original editorial content. Finally, Canada agreed 
to permit 51% foreign equity in an enterprise, up from the current 25%, 
within 90 days and will permit foreign investors to own 100% of an 
enterprise after one year.

                                

    Chairman Crane. And with that, I would now like to invite 
the next panel. Ambassador Bernardo Vega from the Dominican 
Republic; Ambassador Francisco Aguirre-Sacasa from Nicaragua; 
Ambassador Rene Leon from El Salvador; and Ambassador Jaime 
Daremblum from Costa Rica.
    And if you gentlemen will take your respective seats? And 
when you are seated, we will proceed in the order in which I 
presented you. And, as in the case of our other witnesses, if 
you will, please, try to keep your oral presentations to 
approximately 5 minutes. You don't have to be exactly on the 
target, but then any printed statements will be made a part of 
the permanent record.
    And with that, we will start with you, Ambassador Vega.

 STATEMENT OF HIS EXCELLENCY BERNARDO VEGA, AMBASSADOR TO THE 
           UNITED STATES FROM THE DOMINICAN REPUBLIC

    Mr. Vega. Honorable Chairman Crane and Distinguished 
Members of the Subcommittee, ladies and gentlemen, I am pleased 
to be able to testify before the U.S. Congress on a subject 
matter so important to my country, more now after Hurricane 
George. But CBI enhancement legislation is also a win-win 
proposal. It helps our region, but it also helps the U.S. 
economy and creates U.S. jobs.
    Last week Washington's press reported, again, a record U.S. 
trade deficit. Yet, the United States has had a trade surplus 
with the CBI region for the last 12 years, as you can see from 
the graph I'm presenting. This U.S. surplus is the eighth 
biggest in the world, surpassed only by that with seven 
countries: The Netherlands; Australia, Belgium, Brazil, United 
Kingdom, Saudi Arabia, and Argentina.
    The U.S. trade surplus with the CBI region only started to 
occur in 1986, precisely 2 years after the Caribbean Basin 
Initiative legislation was passed in Washington, as you can see 
from the graph.
    The more new jobs that are created in CBI countries, the 
more new jobs that are also created in the United States, 
simply because approximately 60 percent of every dollar that 
our countries spend on non-oil imports are spent on imports 
from the U.S.A. CBI countries are the sixth biggest purchasers 
of U.S. goods worldwide, surpassed only by the two NAFTA 
countries, Japan, United Kingdom, and Germany. Ambassador 
Barshefsky very correctly pointed out recently that 360,000 
jobs in the United States depend on trade with our region.
    Allow me to get into some specifics. The CBI region is the 
tenth biggest importer worldwide of U.S. cars, surpassed only 
by the two NAFTA countries, Japan, Germany, Saudi Arabia, 
United Kingdom, Australia, Austria, and Belgium.
    Our region is the fifth biggest importer of U.S. cereals, 
surpassed only by Japan, Mexico, Egypt, and Korea.
    Because of the importance of our apparel exports to the 
United States, we are the biggest importer of U.S. sewing 
machines after Mexico. But recent exports of U.S. sewing 
machines to our region have decreased by 3 percent, while those 
to Mexico have increased by 44 percent because of the trade 
deviation created as a result of more advantageous import and 
quote textile regimes granted to Mexico under the NAFTA.
    In telecommunications equipment, we are the seventh biggest 
purchaser worldwide, surpassed only by the two NAFTA countries, 
Japan, United Kingdom, Hong Kong, and The Netherlands.
    In U.S. exports of fats and vegetable oils, our region is 
the third biggest consumer worldwide.
    We purchase more U.S. air conditioners than any other 
country in the world, with the exception of Canada, Mexico, and 
easily explainable Saudi Arabia.
    The next graph I'm showing shows how Mexico's apparel 
exports have zoomed after the NAFTA came into effect, while 
those of the CBI region have very much slowed down and in some 
cases have even decreased because of the trade deviation caused 
by the NAFTA. For us to keep purchasing U.S. goods, we need to 
increase our apparel exports to you.
    Haiti is probably the country that can mostly benefit from 
CBI enhancement. Before its political problems affected its 
investment climate, its exports of apparel to the United States 
were only $80 million less than those of its neighbor, the 
Dominican Republican. Yet, today, as you can see from the next 
graph, Dominican exports of apparel exceeded those of Haiti by 
$2 billion. Thus, CBI enhancement could mean thousands of new 
jobs in Haiti, helping to stabilize its political situation, 
and reducing today's illegal migratory pressures. Eighty-three 
percent of all of Haiti's exports of goods are today made up of 
apparel. So any increase means a lot to that nation.
    All WTO member nations, including the United States, are 
under the obligation to eliminate quotas on textiles 6 years 
from now. Together with the very big recent Asian devaluations, 
this commitment poses a double threat to U.S. producers of 
cotton, textile fibers, cloth, and apparel. The way for the 
U.S. industry to prepare itself for this challenge, resulting 
from globalization, is to form a strategic alliance with CBI 
countries, through CBI enhancement legislation, by sending 
U.S.-made cloth to our region to be cut and converted into 
apparel which would be shipped back to the United States. 
Eighty-nine percent of CBI exports of apparel are today made 
with U.S. components, predominately U.S. fabric.
    Under this mechanism, U.S. production of cloth could 
compete with Asian apparel imports. Practically all apparel 
that comes from Asia is made, of course, from Asian cloth. 
China and Hong Kong, after Mexico, already are the two biggest 
exporters of apparel to the United States. Thus, U.S. cloth 
producers in effect depend on CBI enhancement legislation in 
order to be able to face globalization a very few years from 
now.
    Last year, U.S. imports of apparel grew by 13 percent. But 
from Mexico alone, they increased by 28 percent--from South 
Korea, 44 percent; from Thailand, 18 percent; while from CBI 
countries, only 8 percent.
    Textile assembly is the third biggest source of foreign 
income in the Dominican Republic after tourism and money 
remittances, and 93 percent of that assembly is made with U.S. 
components, predominately U.S. fabric. One hundred and forty 
thousand Dominicans assemble U.S. cloth. Our country is no 
longer the plantation economy of a few years ago and most of 
those who convert cloth into apparel are women. Their new and 
important contribution to family income has been the most 
stabilizing social phenomena in the last 15 years in our 
country. If we can increase this figure, there would be less 
pressure to migrate, illegally or legally, less temptation to 
act as a transit point for illegal drugs from South America 
into the United States. Ninety percent of the value of all 
Dominican exports of apparel are made in factories which comply 
with the voluntary code of conduct with respect to labor 
practices that U.S. companies, for whom they are made, require 
of them. These so-called ``terms of engagement'' are subject to 
internal and also third party monitoring.
    More jobs mean more political stability and a better 
climate for U.S. investment and U.S. tourism. The same applies 
to the rest of the region. U.S. national security objectives 
with respect to its southern neighbors would thus be 
strengthened.
    For all these reasons, CBI enhancement, I repeat, is a win-
win situation for the Caribbean and Central America and also 
for the United States.
    I thank Chairman Philip Crane and Congressman Charles 
Rangel, Jim Kolbe, William Jefferson, and Robert Matsui for 
having introduced H.R. 984 and urge quick approval of the same.
    Thank you.
    [The prepared statement follows:]

Statement of His Excellency Bernardo Vega, Ambassador to the United 
States from the Dominican Republic

    Honorable Chairman Crane and distinguished Members of the 
Subcommittee, Ladies and Gentlemen: I am pleased to be able to testify 
before the U.S. Congress on a subject matter so important to my 
country, but CBI enhancement legislation is also a win-win proposal. It 
helps our region, but it also helps the U.S. economy and creates U.S. 
jobs.
    Last week Washington's press reported, again, a record U.S trade 
deficit. Yet, the US has had a trade surplus with the CBI region for 
the last twelve years (Graph No. 1). This U. S. surplus is the eighth 
biggest in the world, surpassed only by that with seven countries: The 
Netherlands, Australia, Belgium, Brazil, United Kingdom, Saudi Arabia 
and Argentina (table No. 1).
    The U.S. trade surplus with the CBI region only started to occur in 
1986, precisely two years after the Caribbean Basin Initiative (CBI) 
legislation was passed in Washington. (Graph No. 1).
    The more new jobs that are created in CBI countries, the more new 
jobs that are also created in the U.S., simply because approximately 
70% of every dollar that our countries spend on non oil imports, are 
spent on imports from the U.S.A. CBI countries are the sixth biggest 
purchasers of U.S. goods worldwide, surpassed only by the two NAFTA 
countries, Japan, the United Kingdom and Germany (table No. 2). 
Secretary Barshefsky very correctly pointed out that 360,000 jobs in 
the U.S. depend on trade with our region.
    Allow me to get into some specifics. The CBI region is the 10th 
biggest importer, worldwide, of U.S. cars, surpassed only by the two 
NAFTA countries, Japan, Germany, Saudi Arabia, United Kingdom, 
Australia, Austria and Belgium (table No. 3).
    Our region is the fifth biggest importer of U.S. cereals, surpassed 
only by Japan, Mexico, Egypt and Korea (table No. 4). Because of the 
importance of our apparel exports to the U.S., we are the biggest 
importer of U.S. sewing machines, after Mexico, but recent exports of 
U.S. sewing machines to our region decreased by 3%, while those to 
Mexico increased by 44% (table No. 5), because of the trade deviation 
created as a result of more advantageous import and quota textile 
regimes granted to Mexico under the NAFTA.
    In telecommunication equipment we are the seventh biggest purchaser 
worldwide, surpassed only by the two NAFTA countries, Japan, United 
Kingdom, Hong Kong and The Netherlands (table No. 6).
    In U.S. exports of fats and vegetable oils, our region is the third 
biggest consumer (table No. 7).
    We purchase more U.S. air conditioners than any country in the 
world, with the exception of Canada, Mexico and easily explainable 
Saudi Arabia (table No. 8).
    Graph No. 2 shows how Mexico's apparel exports have zoomed after 
the NAFTA came into effect, while those of the CBI region have slowed 
down, and, in some cases, decreased, because of the trade deviation 
caused by the NAFTA. For us to keep purchasing U.S. goods, we need to 
increase our apparel exports to you.

                     A Way Out For Haiti's Economy

    Haiti is probably the country that can more benefit from CBI 
enhancement. Before its political problems affected its investment 
climate, its exports of apparel to the U.S. were only US$80 million 
less than those of its neighbor, the Dominican Republic. Yet, today, 
Dominican exports of apparel exceed those of Haiti by US$2 billion 
(Graph No. 3). Thus, CBI enhancement could mean thousands of new jobs 
in Haiti, helping to stabilize its political situation and reducing 
today's illegal migratory pressures. Eighty three percent of all of 
Haiti's exports of goods are today made up of apparel, so any increase 
means a lot to that nation.

                          A Strategic Alliance

    All WTO nations, including the U.S., are under the obligation to 
eliminate quotas on textiles six years from now. Together with the very 
big recent Asian devaluations, this commitment poses a double threat to 
U.S. producers of cotton, textile fibers, cloth and apparel. The way 
for the U.S. industry to prepare itself for this challenge, resulting 
from globalization, is to form a strategic alliance with CBI countries, 
through CBI enhancement legislation, by sending U.S. made cloth to our 
region to be cut and converted into apparel which would be shipped back 
to the U.S. Eighty nine percent of CBI exports of apparel are today 
made with U.S. components, predominantly U.S. fabric.
    Under this mechanism, U.S. production of cloth could compete with 
Asian apparel imports. Nearly all apparel that comes from Asia is made 
from Asian cloth. China and Hong Kong, after Mexico, already are the 
two biggest exporters of apparel to the U.S.A.
    Thus, U.S. cloth producers in effect depend on CBI enhancement 
legislation in order to be able to face globalization a very few years 
from now.

              More Jobs Mean Less Migration and Less Drugs

    Textile assembly is the third biggest source of foreign income in 
the Dominican Republic (after tourism and money remittances), and 93% 
of that assembly is made with U.S. component, predominantly U.S. 
fabric. One hundred forty thousand Dominicans assemble U.S. cloth. Our 
country is no longer the plantation economy of a few years back. Most 
of those who convert cloth into apparel are women. Their new and 
important contribution to family income has been the most stabilizing 
social phenomena in the last fifteen years in our country. If we can 
increase this figure, there would be less pressure to migrate, 
illegally or legally, and less temptation to act as a transit point for 
illegal drugs from South America into the U.S.A. Ninety percent of the 
value of all Dominican exports of apparel are made in factories which 
comply with the voluntary code of conduct with respect to labor 
practices that U.S. companies for whom they are made require of them. 
These so called ``terms of engagement'' are subject to internal and 
third party monitoring.
    More jobs mean more political stability and a better climate for 
U.S. investments and U.S. tourism. The same applies to the rest of the 
region. U.S. national security objectives with respect to its southern 
neighbors would thus be strengthened.
    For all these reasons CBI enhancement is a win-win situation for 
the Caribbean and Central America and also for the U.S.
    I thank Chairman Philip M. Crane and Congressmen Charles B. Rangel, 
Jim Kolbe, William J. Jefferson and Robert T. Matsui for having 
introduced H.R. 984 and urge quick approval of the same.

  Table 1.--U.S. Balance of Trade--Biggest Surpluses (January-November)
                       [Millions of U.S. Dollars]
------------------------------------------------------------------------
             Rank                  Country          1997         1998
------------------------------------------------------------------------
1............................  Netherlands....       11,460       10,386
2............................  Australia......        6,859        6,119
3............................  Belgium........        5,095        5,131
4............................  Brazil.........        5,531        4,471
5............................  United Kingdom.        3,555        4,410
6............................  Saudi Arabia...        2,086        3,726
7............................  Argentina......        3,211        3,373
8............................  -CBI-..........        1,553        2,597
------------------------------------------------------------------------
Source: Global Trade Information Services, Inc.

                Table 2.--U.S. Exports (January-November)
                       [Millions of U.S. Dollars]
------------------------------------------------------------------------
             Rank                  Country          1997         1998
------------------------------------------------------------------------
1............................  Canada.........      138,043      141,671
2............................  Mexico.........       65,046       72,467
3............................  Japan..........       60,408       53,246
4............................  United Kingdom.       33,133       36,168
5............................  Germany........       22,468       24,174
6............................  -CBI-..........       16,926       18,381
7............................  Netherlands....       18,055       17,330
8............................  Taiwan.........       18,152       16,485
9............................  France.........       14,509       15,994
10...........................  Korean Republic       23,387       14,146
------------------------------------------------------------------------
Source: Global Trade Information Services, Inc.

          Table 3.--U.S. Exports of Vehicles (January-November)
                       [Millions of U.S. Dollars]
------------------------------------------------------------------------
             Rank                  Country          1997         1998
------------------------------------------------------------------------
1............................  Canada.........     28,963.1     28,730.1
2............................  Mexico.........      7,061.4      7,384.4
3............................  Japan..........      3,054.1      2,440.6
4............................  Germany........      2,048.0      2,176.7
5............................  Saudi Arabia...      1,011.0      1,057.7
6............................  United Kingdom.        794.9      1,049.0
7............................  Australia......        987.8      1,031.9
8............................  Austria........        698.6      1,014.1
9............................  Belgium........      1,127.6        938.6
10...........................  -CBI-..........        665.5        909.8
------------------------------------------------------------------------
Source: Global Trade Information Services, Inc.

          Table 4.--U.S. Exports of Cereals (January-November)
                       [Millions of U.S. Dollars]
------------------------------------------------------------------------
             Rank                  Country          1997         1998
------------------------------------------------------------------------
1............................  Japan..........      2,672.3      2,029.8
2............................  Mexico.........        809.0      1,179.7
3............................  Egypt..........        701.4        636.8
4............................  Korean Republic        643.2        618.4
5............................  -CBI-..........        682.3        616.1
6............................  Taiwan.........        770.2        485.5
7............................  Colombia.......        189.8        237.1
8............................  Philippines....        310.8        232.3
9............................  Canada.........        222.5        227.4
10...........................  Venezuala......        180.0        163.6
------------------------------------------------------------------------
Source: Global Trade Information Services, Inc.

                          Table 5.--U.S. Exports of Sewing Equipment (January-November)
                                           [Millions of U.S. Dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                                       Percent
                   Rank                                Country                 1997         1998      Change 98/
                                                                                                          97
----------------------------------------------------------------------------------------------------------------
1.........................................  Mexico.......................         96.0        138.4        44.21
2.........................................  -CBI-........................         86.5         83.9        -2.93
3.........................................  Canada.......................         28.2         28.1        -0.27
4.........................................  Honduras.....................         24.5         24.1        -1.62
5.........................................  Dominican Republic...........         30.9         22.3       -27.65
4.........................................  Germany......................         12.5         14.8        18.66
7.........................................  Guatemala....................          5.9         12.7       117.76
5.........................................  Brazil.......................         22.0         12.2       -44.42
9.........................................  El Salvador..................          7.0         11.6        66.17
6.........................................  Japan........................         10.9         10.4        -4.71
7.........................................  Colombia.....................          5.9          7.4        24.95
12........................................  Costa Rica...................         10.6          7.3       -30.86
8.........................................  Hong Kong....................          8.9          7.1       -20.25
----------------------------------------------------------------------------------------------------------------
Source: Global Trade Information Services, Inc.

                    Table 6.--U.S. Exports of Telecommunication Equipment (January-November)
                                           [Millions of U.S. Dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                                       Percent
                   Rank                                Country                 1997         1998      Change 98/
                                                                                                          97
----------------------------------------------------------------------------------------------------------------
1.........................................  Canada.......................      1,249.3      1,336.5         6.98
2.........................................  Mexico.......................        569.3        874.4        53.59
3.........................................  Japan........................        793.0        748.2        -5.65
4.........................................  United Kingdom...............        429.5        548.7        27.75
5.........................................  Hong Kong....................        315.4        331.4         5.09
6.........................................  Netherlands..................        244.0        305.3        25.12
7.........................................  -CBI-........................        158.3        240.7        52.06
8.........................................  Germany......................        200.4        201.2         0.41
9.........................................  Taiwan.......................        145.8        198.4        36.12
10........................................  China........................        169.5        196.3        15.77
----------------------------------------------------------------------------------------------------------------
Source: Global Trade Information Services, Inc.

  Table 7.--U.S. Exports of Fats and Vegetable Oils (January-November)
                       [Millions of U.S. Dollars]
------------------------------------------------------------------------
             Rank                  Country          1997         1998
------------------------------------------------------------------------
1............................  Mexico.........        328.7        415.2
2............................  China..........        167.5        282.5
3............................  -CBI-..........        182.8        217.0
4............................  Canada.........        195.9        180.2
5............................  Hong Kong......        116.7        171.2
6............................  Turkey.........        117.1         99.4
7............................  Japan..........         88.9         89.8
8............................  Spain..........         37.3         74.8
9............................  Korean Republic         63.8         72.2
10...........................  Saudi Arabia...         51.2         60.9
------------------------------------------------------------------------
Source: Global Trade Information Services, Inc.

 Table 8.--U.S. Exports of Air Conditioning Equipment (January-November)
                       [Millions of U.S. Dollars]
------------------------------------------------------------------------
             Rank                  Country          1997         1998
------------------------------------------------------------------------
1............................  Canada.........        880.6        941.3
2............................  Mexico.........        291.5        309.0
3............................  Saudi Arabia...        101.6         79.7
4............................  -CBI-..........         57.0         72.1
5............................  Venezuala......         41.8         58.0
6............................  Japan..........         35.4         56.3
7............................  United Arab             46.8         42.5
                                Emirates.
8............................  Brazil.........         37.6         41.4
9............................  Germany........         25.2         39.5
10...........................  France.........         41.8         35.3
------------------------------------------------------------------------
Source: Global Trade Information Services, Inc.

[GRAPHIC] [TIFF OMITTED] T6685.002

[GRAPHIC] [TIFF OMITTED] T6685.003

[GRAPHIC] [TIFF OMITTED] T6685.004

[GRAPHIC] [TIFF OMITTED] T6685.005

 Imports by the United States.--Chapters 61 and 62 of the HTS (Apparel)
                       [Millions of U.S. Dollars]
------------------------------------------------------------------------
                 Dominican Republic                     Haiti
  Year   ---------------------------------------------------------------
             61         62         Total       61        62       Total
------------------------------------------------------------------------
  1983       32.50      101.10      133.60     23.30     53.30     76.60
  1984       38.50      129.90      168.40     29.80     58.90     88.70
  1985       43.70      167.30      211.00     31.80     83.90    115.70
  1986       54.20      221.30      275.50     33.00     83.10    116.10
  1987       74.70      297.40      372.10     51.90     93.50    145.40
  1988      109.30      405.80      515.10     58.00    101.90    159.90
  1989      139.90      498.20      638.10     64.20    108.40    172.60
  1990      178.40      507.30      685.70     73.10     89.90    163.00
  1991      218.10      681.60      899.70     74.60     76.70    151.30
  1992      308.90      854.00    1,162.90     38.10     26.70     64.80
  1993      348.10    1,019.00    1,367.10     48.50     46.20     94.70
  1994      390.20    1,147.60    1,537.80     17.70     13.50     31.20
  1995      465.60    1,232.10    1,697.70     47.60     29.50     77.10
  1996      538.30    1,181.80    1,720.10     68.40     36.10    104.50
  1997      687.30    1,501.80    2,189.10    102.10     41.20    143.30
------------------------------------------------------------------------
Source: United States Department of Commerce

                                

    Chairman Crane. Thank you.
    And our next witness is Mr. Aguirre-Sacasa. Mi Espanol es 
muy malo [speaking briefly in Spanish].

   STATEMENT OF HIS EXCELLENCY FRANCISCO X. AGUIRRE-SACASA, 
   AMBASSADOR TO UNITED STATES FROM THE REPUBLIC OF NICARAGUA

    Mr. Aguirre-Sacasa. Muchas gracias, Senor Presidente and 
members of the Trade Subcommittee. Let me open by thanking you 
for giving us this opportunity to come and testify before you 
today and for the great interest that you take in the recovery 
of the countries that have been affected by Hurricanes Georges 
and Mitch in Central America and the Caribbean.
    At today's hearing you will hear from many people, but I 
may be the only one who was an eyewitness to the hurricane 
itself for I arrived in Managua on the 29th of October on the 
last commercial air flight before the airport was shut down for 
several days, and I will never forget what I witnessed. I saw 
creeks that swelled to 100 times their normal flow, farms and 
range lands that were flooded, the desperate faces of homeless 
campesinos who had lost everything, and roads swallowed up by 
rock slides, and most ominously of all, I recall the emergency 
cabinet meeting when we got the first unconfirmed reports of a 
major mud-slide which had wiped out the farming community of 
Posoltega in western Nicaragua.
    The rest is history. Hurricane Mitch proved to be the most 
destructive natural calamity ever in our hemisphere. It left 
over 10,000 dead, three million homeless, and over $8 billion 
in destruction in its wake. In the two hardest hit countries, 
Honduras and Nicaragua, rainfall exceeded 60 inches in 4 days. 
That's nearly three times what San Francisco gets in a normal 
year, Mr. Chairman. And coming as it did at the end of a 
copious rainy season, Mitch caused enormous material damage. 
According to the U.S. Army Corps of Engineers, destruction in 
Honduras and Nicaragua came to the equivalent of 75 and 65 
percent respectively of each country's GDP. And that's as if 
the United States had suffered over $5.5 trillion in losses as 
a result of a natural disaster.
    The countries of Central America, especially Honduras and 
Nicaragua, were battered but not broken by Mitch. The resilient 
peoples of the region are slowly and quite literally digging 
out from under the mud, and our societies and governments have 
successfully carried out the critical emergency phase of the 
recovery effort with the help of the international community 
and especially of the people and the Government of the United 
States. For this generous support, America has earned the 
everlasting gratitude of our peoples.
    Mr. Chairman, we are now entering the reconstruction phase. 
As President Aleman of Nicaragua has often said,

    Our governments and peoples do not merely want to reconstruct the 
region as it was prior to Mitch. Instead, we are determined to 
transform our nations into more robust, better societies where 
democracy and the rule of law will be strengthened and where economic 
growth will be accelerated and the fruits of that growth will be more 
equitably distributed.

    We understand that we bear primary responsibility for 
getting our countries back on their feet. But we also realize 
that the enormity of our losses mean that we cannot go it 
alone. We urgently need the help of the international community 
and especially of the United States, our closest friend and 
partner. Give us the tools and we will get on with the task of 
transforming our societies.
    What do we require? The top priority is quick approval of 
the supplemental aid bill for Central America to help us jump-
start the reconstruction effort. Let me stress, Mr. Chairman, 
that all of our countries, but especially Honduras and 
Nicaragua, need passage of the aid package now. Our rainy 
season begins in 2 months and we need to get the aid in place 
prior to then to plant our next crops.
    Our countries also need fairer access to the U.S. market 
for our exports. This would allow the Central American 
economies to prosper, to create more jobs, thus cutting down on 
illegal immigration, and to buy more U.S. exports. And American 
consumers would benefit from high-quality goods at affordable 
prices creating, as Ambassador Vega has mentioned, a win-win 
situation for all concerned.
    I urge the Congress to approve therefore a CBI enhancement 
bill such as H.R. 984 quickly. And I encourage the 
Administration to sign it into law before the end of 1999. To 
wait until 2000, an electoral year, will, I fear, doom this 
initiative to failure.
    Mr. Chairman, allow me to end by saying a few words about 
what is at stake.
    In the 1980's, Central America was in turmoil. The region, 
which is nearer to Washington, D.C. than California or Nevada 
are, was being ripped apart by civil war, ideological 
confrontation, and dictatorship. Economic chaos was the order 
of the day as were human rights violations. Hundreds of 
thousands of our citizens voted with their feet against these 
conditions by emigrating illegally to safe havens in the United 
States.
    Today, this has changed. For the first time since the 
Central American countries gained their independence almost 200 
years ago, all five of our republics enjoy popularly elected 
democracies and live in peace. The process of national 
reconciliation is being deepened and prior to Mitch, all of our 
countries were enjoying economic growth based on free-market 
policies. Illegal emigration to the United States was down as 
conditions in the region improved.
    Today, Central America, Mr. Chairman, is a success story 
that we can all take pride in. Central American blood, courage, 
patriotism, and vision helped us to forge this remarkable 
turnaround. So did the investment of American treasure and 
American perseverance. But Central America is still a fragile 
work in progress which must be carefully nurtured especially in 
the wake of a killer storm like Mitch. By passing the 
supplemental aid bill and a good CBI enhancement bill quickly, 
Congress and the Administration, working in concert, have an 
extraordinary opportunity to safeguard a major foreign policy 
achievement. They can also help ensure that this success story 
grounded in so many basic values which we share with the United 
States will be preserved and strengthened.
    Thank you very much.
    [The prepared statement and an attachment follow:]

Statement of His Excellency Francisco X. Aguirre-Sacasa, Ambassador to 
the United States from Nicaragua

    Mr. Chairman, members of the Trade Subcommittee: By the time 
today's hearing is concluded, you will have heard from many people, but 
of all those who will testify, I may be the only one who was an 
eyewitness to the hurricane itself.
    I arrived in Managua on the 29th of October on the last commercial 
flight before the airport was shut down for several days and will never 
forget what I witnessed during the next four days. I saw creeks swell 
to a hundred times their normal flow, farm and rangelands flooded, the 
desperate faces of homeless campesinos, and roads closed by rockslides. 
And, most ominously of all, I was at the emergency Cabinet Meeting when 
we got the first unconfirmed report of a major mudslide which had wiped 
out the farming community of Posoltega.
    I saw, Mr. Chairman, the first videos brought back by air force 
pilots who flew helicopters over devastated areas. These showed only 
mud and debris where once villages had stood. And I'll never forget 
when President Aleman declared three days of mourning when the 
magnitude of the death toll began to become apparent.
    The rest is history. Hurricane Mitch proved to be the most 
destructive natural calamity in our Hemisphere, ever. It left over 
10,000 dead, three million homeless and over $8 billion in destruction 
in its wake. In the two hardest hit nations--Honduras and Nicaragua--
rainfall exceeded 60 inches in four days, three times what San 
Francisco receives in a normal year! And coming as it did at the tail 
end of a copious rainy season, Mitch caused enormous material damages. 
According to estimates by the U.S. Corps of Engineers, destruction in 
Honduras and Nicaragua came to the equivalent of 75% and 65%, 
respectively, of both countries' GDP. To put this into some 
perspective, that is as if the United States had suffered over $5.5 
trillion in losses as the result of a natural disaster.
    Mr. Chairman, the countries of Central America--especially Honduras 
and Nicaragua--were battered but not broken--by Mitch. The resilient 
peoples of the Region are slowly and quite literally digging out from 
under the mud. And our societies and governments have successfully 
carried out the critical emergency phase of the recovery effort with 
the help of the international community and, especially, the people and 
the government of the United States. For this, your people and 
government have earned the everlasting gratitude of Central America.
    Mr. Chairman, we are now entering the critical reconstruction phase 
of the disaster. As President Aleman of Nicaragua has often said, our 
governments and peoples do not want to reconstruct the Region as it was 
prior to Mitch. Instead, we are determined to transform our countries 
into stronger, better societies where democracy and national 
reconstruction will be strengthened, where the rule of law will prevail 
and where economic growth will be accelerated and the fruits of this 
growth will be more equitably distributed.
    We understand that we bear primary responsibility for getting our 
countries back on their feet. But we also know that the enormity of our 
losses also mean that we can not go it alone. We urgently need the help 
of the international community, especially that of the United States 
our closest friend and neighbor. If you give us the tools, we will get 
on with the task of transforming our societies.
    What do we require? The top priority is quick approval of the $960 
million supplemental aid bill for Central America to help us jump start 
the reconstruction effort. Let me stress, Mr. Chairman, that all of our 
countries--but especially Honduras and Nicaragua--need passage of the 
aid package now. Our rainy season begins, once again, in three months 
and we need to get as much of the aid in place prior to then to plant 
our next crops.
    Our countries also need fairer access to the U.S. market for our 
exports. America already is Central America's most important trading 
partner. Your exports to CBI countries come to over $18 billion 
annually and hundreds of thousands of American jobs depend on this 
trade. Freer commerce would allow the Central American economies to 
prosper, to create more jobs thus cutting down on emigration, and to 
buy more U.S. goods. And American consumers would benefit from high 
quality goods at affordable prices creating a ``win-win'' situation for 
all concerned. I urge the Congress to approve, therefore, a CBI 
enhancement bill quickly and I encourage the Administration to sign it 
into law before the end of 1999. To wait until 2000, an electoral year, 
will--I fear--doom this initiative to failure.
    Mr. Chairman, allow me to end by saying a few words about what is 
at stake.
    In the 1980s, Central America was in turmoil. The Region, which is 
nearer to Washington, D.C. than California or Nevada, was being ripped 
apart by civil war, ideological confrontation and dictatorship. 
Economic chaos was the order of the day as were human rights 
violations. Hundreds of thousands of our citizens literally voted with 
their feet against these conditions by emigrating illegally to safe 
haven in the United States.
    Today, this has changed. For the first time since the Central 
American countries gained their independence 175 years ago, all five of 
our republics enjoy popularly elected democracies and peace. The 
process of national reconciliation is being deepened and all of our 
countries were enjoying economic growth based on free market policies 
before Mitch. Illegal emigration to the U.S. was down as conditions in 
the Region improved.
    Today's Central America is a success story that we can all take 
pride in. Central American blood, courage and vision helped to forge 
this remarkable transformation. So did American treasure and 
perseverance. But our success story is still a fragile ``work in 
progress'' which must be carefully nurtured, especially in the wake of 
a killer storm like Mitch. By passing the supplemental aid bill and a 
good CBI enhancement bill quickly, Congress and the Administration--
working in concert--have an extraordinary opportunity to safeguard a 
major foreign policy achievement. They can also help ensure that this 
Central American success story--grounded in so many basic values which 
we share with the United States--will be preserved and strengthened.
    Many thanks.
      

                                

[GRAPHIC] [TIFF OMITTED] T6685.009

                                

    Chairman Crane. Thank you, Mr. Ambassador.
    Our next witness, Ambassador Leon.

  STATEMENT OF HIS EXCELLENCY RENE A. LEON, AMBASSADOR TO THE 
         UNITED STATES FROM THE REPUBLIC OF EL SALVADOR

    Mr. Leon. Mr. Chairman, Members of the Subcommittee, thank 
you for providing me this opportunity to appear before the 
Trade Subcommittee regarding the proposed Caribbean and Central 
American Relief and Economic Stabilization Act.
    I would like to begin by thanking you, Mr. Chairman, as 
well as Congressman Kolbe, Rangel, and Matsui, for introducing 
this legislation which is urgently needed for the expeditious 
and sustainable economic recovery of the Central American 
region from Hurricane Mitch. I would also take this opportunity 
to recognize the leadership that you have provided on CBI over 
the years.
    While direct financial assistance is greatly needed, we 
believe that the key to a successful economic recovery from 
Hurricane Mitch lies in expanding trade with our most important 
trading partner, the United States.
    El Salvador fully supports the immediate passage of the 
Caribbean and Central American Relief and Economic 
Stabilization Act. Enactment of this legislation will create 
economic, social, and national security benefits for both 
Central America and the United States.
    Enhanced trade will expand economic opportunities that are 
urgently needed to preserve our region's stability, creating 
employment, and encouraging international and domestic 
investment. It will also help us to preserve our most precious 
achievements: peace after long periods of domestic conflicts, 
functional and strong democracies based on governments elected 
by the people, full respect for human rights, and market-
oriented reforms. Furthermore, economic expansion will permit 
our countries to provide attractive jobs to our people, thus 
discouraging them from emigrating outside of the region to seek 
better living conditions.
    Enhanced trade will strengthen the positive trend that we 
have seen in trade between our region and the United States in 
the past decade. We did some research, Mr. Chairman, during the 
week on the Internet and we got the latest 1998 figures, 
preliminary figures for the trade between our region and the 
United States. U.S. exports to CBI countries, among which 
exports to Central America are predominate, have more than 
doubled since 1989 from $9 billion to $22.7 billion in 1998 
creating more than 400,000 jobs in the United States according 
to a ratio of one billion to 20,000 jobs that you have just 
mentioned earlier. By comparison, U.S. exports to China in the 
same year, 1998, were only $14.3 billion. And to India and 
Russia combined, only $7.1 billion. The United States maintains 
a growing deficit with those countries, whereas it enjoys a 
trade surplus of $2.7 billion with the CBI region.
    Enhanced trade will also help maintain and improve the 
competitiveness of the U.S. industries vis-a-vis Asian 
competitors. The financial crisis in Asia has created 
difficulties for the textile and apparel industries in the 
United States. The trade incentives provided in H.R. 984 will 
allow U.S. firms operating in the CBI region to remain 
competitive in textile and apparel market segments where 
otherwise they would be displaced by increasingly inexpensive 
Asian products.
    Finally, enhanced trade will increase purchase of U.S. raw 
materials and capital goods from the CBI region. In the period 
from 1994 to 1998, U.S. exports to the CBI countries have 
increased 78 percent. In 1998 alone, approximately 57 percent 
of total imports from the Central American countries came from 
the United States. The region's high propensity to import goods 
and services from the United States, which is approximately 75 
cents per each additional dollar exported by the CBI countries, 
which by comparison, let me tell you that in Asia, for the 
Asian region, it's only 2 cents; and our dependency on U.S. 
imports will translate into more exports and jobs in this 
country.
    Mr. Chairman, I would like to close by pointing out that 
H.R. 984 addresses the key trade interests of the Central 
American countries. This bill provides tariff and quota 
treatment equivalent to NAFTA to products currently excluded 
from CBI. Thus, will eliminate the consequences of trade and 
investment deviation that our countries have been experiencing 
in the past 6 years.
    By granting apparel products made with regional yarns and 
fabrics, tariff and quota treatments, similar to that granted 
to Mexican products under NAFTA, the bill addresses the concern 
of El Salvador as well as other countries in Central America 
that have a textile industry. Let me just point out that this 
textile industry does not represent a threat to U.S. interests 
due to its relatively small size. It does employ more than 
18,000 people and supports about $850 million worth of exports 
which are critical to preserve.
    And, finally, this is a textile industry that complies with 
the rule of origin of NAFTA and also it is a textile industry 
that imports all its raw cotton from the United States.
    Finally, Mr. Chairman, this legislation is fully consistent 
with Central America's trade policy objective to negotiate a 
free trade agreement with the United States similar to NAFTA 
even before the deadline for the creation of the Free Trade 
Area of the Americas in the year 2005.
    The United States has invested hundreds of millions of 
dollars to make the region what it is today: peaceful, 
democratic, economically vibrant, and a good friend of America. 
The magnitude of the Mitch disaster demands a strategic policy 
for the region to preserve this reality. The expansion of trade 
and investment opportunities through the enactment of a 
flexible and comprehensive CBI legislation is a sine qua non 
component to help Central America rebuild and recover in the 
wake of Hurricane Mitch.
    Thank you, Mr. Chairman.
    [The prepared statement follows:]

Statement of His Excellency Rene A. Leon, Ambassador to the United 
States from the Republic of El Salvador

    Mr. Chairman, Members of the Subcommittee, thank you for providing 
me this opportunity to appear before the Trade Subcommittee of the 
House Ways and Means Committee regarding the proposed ``Caribbean and 
Central American Relief and Economic Stabilization Act.'' I would like 
to begin by thanking you, Mr. Chairman, as well as Congressmen Kolbe, 
Rangel and Matsui for introducing this legislation, which is urgently 
needed for the expeditious and sustainable economic recovery of the 
Central American region from Hurricane Mitch. I would also take this 
opportunity to recognize the leadership that you have provided on CBI 
over the years.
    While direct financial assistance is greatly needed, we are 
convinced that the path to regional growth and sustainable development 
lies in the region's ability to help itself. In this regard, we believe 
that the key to a successful economic recovery from Hurricane Mitch 
lies in expanding trade with our most important trading partner, the 
United States.
    Therefore, El Salvador fully supports the immediate passage of the 
``Caribbean and Central American Relief and Economic Stabilization 
Act.'' We regard this legislation as vital to the reconstruction of the 
region in the wake of Hurricane Mitch and as a critical step toward the 
creation of a free trade area between the United States and Central 
America. Enactment of this legislation will create economic, social and 
national security benefits for both Central America and the United 
States.
    Enhanced trade by granting our exports the most favorable tariff 
and quota treatment will expand economic opportunities that are 
urgently needed to preserve our region's stability, creating employment 
and encouraging international and domestic investment. It will also 
help us to preserve our most precious achievements: peace after long 
periods of domestic conflicts, functional and strong democracies based 
on governments elected by the people, full respect for human rights and 
market oriented reforms. Furthermore, economic expansion will permit 
our countries to provide attractive jobs to our people, thus 
discouraging them from emigrating outside of the region to seek 
enhanced living conditions.
    Enhanced trade between the United States and the region will 
strengthen the positive trend that we have seen in trade between our 
region and the United States in the past decade. U.S. exports to CBI 
countries--among which exports to Central America are predominant--have 
more than double since 1989, from $9.0 billion to $22.7 billion in 
1998, creating more than 360,000 jobs in the United States. By 
comparison, U.S. exports to China the same year were only $14.3 billion 
and to India and Russia combined only $7.1 billion. The United States 
maintains a growing deficit with those countries, whereas it enjoys a 
trade surplus with the CBI region. This surplus, was $3.3 billion in 
1998, up 73% from the previous year, which compares favorably with the 
trade deficit of $700 million the U.S. had with the CBI region in 1983. 
The implementation of this legislation, will ensure that this positive 
trend in trade with the CBI region continues.
    Enhance trade will help maintain and improve the competitiveness of 
the U.S. industry vis-a-vis Asian competitors. The financial crisis in 
Asia has created difficulties for the textile and apparel industries in 
the United States. The trade incentives provided in H.R. 984 will allow 
U.S. firms operating in the CBI region to remain competitive in textile 
and apparel market segments, where otherwise they would be displaced by 
increasingly inexpensive Asian products.
    Finally, enhanced trade will increase purchases of U.S. raw 
materials and capital goods from the CBI region. In the period from 
1994 to 1998, U.S. exports to the CBI countries have increased 78%. 
This figure, constitutes one of the more dynamic growth rates 
experienced by U.S. exports worldwide. In 1998 alone, approximately 57% 
of total imports from the Central American countries came from the 
United States. The region's high propensity to import goods and 
services from the United States (approximately 79 cents per dollar) and 
our dependency on U.S. imports, will translate in more exports and jobs 
in this country.
    Mr. Chairman and members of this subcommittee, there is 
overwhelming evidence that show that the approval and implementation of 
H.R. 984 will bring expanded growth and prosperity for the United 
States and its citizens. And at the same time, by expanding trade and 
investment in the CBI region, will permit us to restore economic growth 
rapidly. Enactment of this bill, without any doubt, places the United 
States and the CBI countries in a win-win situation.
    Mr. Chairman, I would like to close my intervention by pointing out 
that H.R. 984 addresses the key trade interest of the Central American 
countries:
     This bill provides tariff and quota treatment equivalent 
to NAFTA to products currently excluded from CBI. Thus, will eliminate 
the consequences of trade and investment deviation that our countries 
have been experiencing in the past 6 years.
     By granting apparel products made with regional yarns and 
fabrics, tariff and quota treatment, similar to that granted to Mexican 
products under NAFTA, the bill addresses the concern of El Salvador, as 
well as other countries in Central America, that have a textile base, 
that does not represent a threat to the U.S. textile industry. Support 
for the Central American textile industry is important, because it is 
one of the most dynamic economic activity in the manufacturing sector 
of our economies, and one of the most reliable sources of employment, 
that could help economies to a faster recovery in the wake of Mitch. It 
would also mean supporting a high value added economic activity, which 
is critical to our apparel industry and U.S. firms to remain 
competitive vis-a-vis their Asian competitors.
     Finally, this legislation is fully consistent with Central 
America's trade objective to negotiate a free trade agreement with the 
United States similar to NAFTA, even before the deadline for the 
creation of the Free trade Area of The Americas in the year 2005.
    Mr. Chairman and members of this Subcommittee: El Salvador is 
committed to foster its economic reforms in order to keep our ability 
to meet the criteria to undertake the obligations of NAFTA or any other 
similar agreement, and our obligations under the WTO. Let me assure you 
that, El Salvador and the rest of the Central American countries 
already fulfill those requirements.
    The United States has invested hundreds of millions of dollars to 
make the region what it is today: peaceful, democratic, economically 
vibrant and a good friend of America. The magnitude of the Mitch 
disaster demands a strategic policy for the region to preserve this 
reality. The expansion of trade and investment opportunities through 
the enactment of a flexible and comprehensive CBI enhancement is a sine 
qua non component of legislation that aims at helping Central America 
rebuild and recover in the wake of Hurricane Mitch.
    Thank you, Mr. Chairman.

                                

    Chairman Crane. Thank you.
    And our final witness is Ambassador Daremblum from Costa 
Rica and we would like to ask you to please give our best 
regards to Sonia Pecado who accompanied us on a trip to Costa 
Rica, our Trade Subcommittee, back in 1995.

STATEMENT OF HIS EXCELLENCY JAIME DAREMBLUM, AMBASSADOR TO THE 
                 UNITED STATES FROM COSTA RICA

    Mr. Daremblum. Delighted, Mr. Chairman.
    Mr. Chairman, Congressman Rangel, I appreciate the 
opportunity to testify in favor of H.R. 984 to provide enhanced 
access to the U.S. market for exports from the Caribbean Basin 
in order to restore the benefits of a proven trading 
relationship between the United States and the nations of 
Central America and the Caribbean. H.R. 984 is necessary 
because it creates the most jobs in the region, because it 
creates the most incentives for businesses to thrive in the 
region.
    I thank you, Mr. Chairman and Congressman Rangel, as well 
as the other cosponsors of this legislation, for advancing it 
as a part of your response to the devastation of Hurricanes 
Mitch and Georges which impacted the entire region leaving 
thousands dead and millions without shelter, health care, 
education, and social services. Most important, millions lost 
their means of livelihood, their employment swept away in flood 
waters.
    Mr. Chairman, my country, Costa Rica, was spared the utter 
devastation suffered by our neighbors in the region but we were 
affected as well, and we continue to bear an ever increasing 
burden as a result of Hurricane Mitch. Costa Rica suffered more 
than $100 million in infrastructure damage from Mitch but the 
greatest impact is the influx of thousands of refugees into our 
Nation from our neighbors, of people who are desperately 
looking for a way to restore and sustain life shattered by the 
unspeakable horror of the storm that has shattered their homes, 
their communities, and, most importantly, their capacity to 
earn a livelihood for themselves and their families. Costa Rica 
has become the host to an estimated 600,000 refugees, many of 
whom had entered our Nation fleeing social and political 
turmoil and economic conditions during the course of the last 
decade in our neighboring nations.
    The Government of Costa Rica recently granted amnesty to 
400,000 undocumented refugees, allowing them to become legal 
residents and eventually full citizens. Given that the 
population of Costa Rica is 3.5 million, in the United States 
such an amnesty would be the equivalent of offering green cards 
to an additional 30 million people. We, in Costa Rica, have and 
will welcome these refugees because the people of Costa Rica 
have a reverence for humanity and the protection of human 
rights.
    The laws and traditions of our Nation provide that each and 
every refugee entering Costa Rica be given what is necessary to 
sustain life: food, clothing, shelter, education, and the hope 
for gainful employment. We thus have no choice and no desire to 
do anything other than to provide for the many refugees from 
neighboring nations who have come and are continuing to come to 
Costa Rica in search of hope.
    Parallel to this, recent data indicate a more than 30 
percent increase in refugees from the south into Mexico en 
route to the United States since Hurricane Mitch. We're 
witnessing the beginning of what threatens to be a flood of 
humanity fleeing poverty and hopelessness. That is why the 
Central American nations need to be given enhanced access to 
the U.S. market equal to that enjoyed by the U.S. NAFTA 
partners, notably Mexico, so that they can obtain the 
investment needed to rebuild their economies.
    At present, we are seeing new investment go to Mexico and 
even worse are experiencing the loss of existing investments 
and jobs from our region to Mexico. The Crane-Rangel bill is 
for these purposes the most advantageous of the proposals for 
CBI enhancement that have been advanced in response to the 
hurricanes to date. We need to allow access to the U.S. market 
for apparel, manufactured from material produced in the region, 
because we want to maximize the job creation effect of enhanced 
access. Otherwise, we will be undermining jobs in the region 
given as we strive to create new opportunities for employment.
    Mr. Chairman, I would like to personally thank you and your 
colleagues for your efforts to promote free trade among our 
nations. In addressing the critics of this common sense 
proposal, let the economic performance of our relationship 
speak to their heads and let the humanitarian needs of their 
neighbors speak to their hearts.
    Thank you again for the invitation to testify before this 
Subcommittee, and I look forward to working with this 
Subcommittee and your colleagues on the full Committee toward 
passage of this meaningful trade legislation.
    Thank you very much.
    [The prepared statement follows:]

Statement of His Excellency Jaime Daremblum, Ambassador to the United 
States from Costa Rica

    Chairman of the Trade Subcommittee of the Committee of Ways & Means 
Cong. Crane, Ranking Democrats of the full committee Cong. Charles 
Rangel and of the Trade Subcommittee Cong. Levin, and the other 
distinguished members of the Committee on Ways & Means, I am Jaime 
Daremblum, the Ambassador of Costa Rica to the United States, and I 
thank you for the opportunity to provide testimony in support of the 
Crane/Rangel legislation to enable the nations of the Caribbean to have 
enhanced access for our exports to the United States market. I join my 
fellow Ambassadors from the region in asking for passage of this 
legislation as an essential element of the relief of the United States 
is supplying in response to the unprecedented devastation caused in the 
region by Hurricanes Mitch and Georges.
    My nation, Costa Rica, was spared the utter devastation suffered by 
our neighbors in the region, but we were affected as well and we 
continue to bear an ever increasing burden as a result of Hurricane 
Mitch. Costa Rica suffered more than $100 million in infrastructural 
damage from Mitch, but the greatest impact is the influx of thousands 
of refugees into our nation from our neighbors, of people who are 
desperately looking for a way to restore and sustain lives shattered by 
the unspeakable horror of a storm that has shattered their homes, their 
communities and, most importantly, their capacity to earn a livelihood 
for themselves and their families. Costa Rica has become host to an 
estimated 500,000 to 600,000 refugees, many of whom had entered our 
nation fleeing social and political turmoil and economic conditions 
during the course of the last decade in our neighboring nations.
    The Government of Costa Rica recently granted amnesty to 400,000 
undocumented refugees, allowing them to become legal residents and 
eventually full citizens. Given that the population of Costa Rica is 
only 3.5 million, in the United States such an amnesty would be the 
equivalent of offering green cards to an additional 30 million people. 
We in Costa Rica have and will welcome these refugees because the 
people of Costa Rica have a reverence for humanity and the protection 
of human rights. The laws and traditions of our nation provide that 
each and every refugee entering Costa Rica be given what is necessary 
to sustain life: food, clothing, shelter and the hope of gainful 
employment. We thus have no choice, and no desire, to do anything other 
than to provide for the many refugees from neighboring nations who have 
come and are continuing to come to Costa Rica in search of hope.
    In this way, we share the guiding principles of the United States, 
as your constitution and tradition calls upon you to ``give me your 
hungry, your poor, those yearning to be free'' and impels the 
humanitarian impulse which you have exhibited since the early aftermath 
of the disastrous hurricanes which afflicted our region. Recent data 
indicate a more than 30% increase in refugees from the South into 
Mexico enroute to the United States since Hurricane Mitch. We are 
witnessing the beginning of what threatens to be a flood of humanity 
fleeing poverty and hopelessness. That is why it is absolutely critical 
that the United States Congress enacts President Clinton's hurricane 
relief request and, along with it, enacts the Crane/Rangel bill to 
provide the enhanced access to the United States market required to 
attract the investment needed to rebuild the affected economies and 
create the jobs to provide hope and a reason to remain home.
    I submit for the record excerpts from an editorial written by my 
President which appeared in the Washington Post on November 24, 1998, 
which expressed our gratitude for the assistance provided by the United 
States and then raised the issue which we are addressing in today's 
hearing.

          ``In the aftermath of Hurricane Mitch we, the people and 
        leaders of the nations of Central America, are still counting 
        the cost and trying to comprehend the extent of the devastation 
        we have suffered . . . Even as we struggle to alleviate the 
        human suffering with the assistance of the international donor 
        community, we are filled with growing apprehension for the 
        future of the survivors who have been deprived of their ability 
        to earn their livelihood. . . . [W]e are aware that the 
        suffering we have experienced in the wake of Hurricane Mitch is 
        only the beginning of a continuing tragedy that will produce 
        multiplied suffering unless we are able to find a way to 
        restore our economies. The path to our recovery from Hurricane 
        Mitch must be through the restoration and recovery of our 
        economies.
          We will need the help of our friends in the United States to 
        restore our capacity for economic growth as much as we require 
        the emergency assistance you are providing us now in our hour 
        of need. We will have to attract private capital to our 
        economies from the United States and other developed nations to 
        enable us to create new means of production and opportunities 
        for employment.
          The competition for private investment capital, however, is 
        global and intense, especially now in the wake of the losses 
        suffered by United States investors in some of the emerging 
        markets which has made investors leery and reluctant to invest 
        abroad. In addition to the challenge of attracting foreign 
        investment in a time of disillusionment with emerging markets, 
        we in Central America suffer from the disadvantage of being 
        disabled by not being a part of the North American Free Trade 
        Agreement (NAFTA), which has superseded our existing trade 
        relationship with the United States under the Caribbean Basin 
        Initiative.
          The CBI has been responsible for a decade of unparalleled 
        growth in trade between the United States and the nations of 
        the Caribbean Basin, acting as a catalyst for exports, 
        investments and employment creation in the United States as 
        well as in nations of the region such as my own Costa Rica. The 
        Caribbean Basin has become one of the best markets in the world 
        for United States products, with each of the nations in the 
        region importing an average of 75% of our goods and services 
        from the United States. The Caribbean Basin is the area of the 
        world in which United States exports have grown most rapidly in 
        recent years. Since the CBI was enacted in 1984, the United 
        States has developed a growing trade surplus with CBI nations. 
        From 1983 to 1995, United States exports to the region surged 
        by nearly 300% from $5.7 billion to $15.3 billion. Since each 
        United States $1 billion of United States exports to the 
        Caribbean Basin generates 20,000 new direct jobs in the United 
        States, this means that the increase in purchases by Caribbean 
        Basin nations such as Costa Rica of United States goods and 
        service from the initiation of the CBI in 1983 to 1995 helped 
        to create more than 300,000 trade-related jobs in the United 
        States Thus the trading relationship developed under the CBI 
        has been to our mutual benefit for more than a decade. The CBI 
        proved that trade, not aid, is the key to economic development 
        and political stability in the region. Today the strong 
        democracies and, prior to Hurricane Mitch, growing economies of 
        the nations of Central America, are proof of the benefits of 
        the enhanced trade relationship under the CBI.

           *         *         *         *         *

          I am asking our friends in the Administration and the [United 
        States] Congress to enable us, through providing parity of 
        access to the United States market, to attract investment to 
        our economies with the same urgency as the mobilization of 
        emergency resources to relieve the victims of Hurricane Mitch. 
        It is difficult at this time of sorrow to associate this 
        tragedy with anything good or promising for the future but, if 
        we keep our faith and obtain the full commitment of our 
        friends, we may be able to build and secure an economic future 
        that is much better than what we have experienced in the 
        past.''

    As my President stated in his opinion editorial, we in Costa Rica 
support legislation to provide enhanced access to the United States 
market for exports from the nations of Central America and the entire 
Caribbean Basin. We know that such access is the only way for us to 
achieve the new investment that will be needed to create new capacity 
for production in the region and the new jobs that will be needed to 
replace the thousands of jobs lost, literally swept away, by Hurricanes 
Mitch and Georges. It is estimated that it will take close to 5 years 
to restore the capacity to produce the agricultural exports that have 
been the primary exports from the nations of Central America. Thousands 
of people have lost their ability to earn a living and we must restore 
that productive capacity. We can meet this challenge if the United 
States Congress will enact the Crane/Rangel bill to enhance the 
benefits of the Caribbean Basin Initiative. I ask the members of this 
Committee to report this legislation favorably to the U.S. House.

 Caribbean Parity Needs to be a Part of a Meaningful Hurricane Relief 
                          Legislative Package

    The path to recovery from Hurricanes Mitch and Georges must be 
through the restoration and recovery of the devastated economies. The 
nations of the region will have to attract private capital to their 
economies from the United States and other developed nations to enable 
them to create new means of production and opportunities for 
employment. The Central American nations need to be given enhanced 
access to the United States market equal to that enjoyed by the United 
States' NAFTA partners--notably Mexico--so that they can obtain the 
investment needed to rebuild their economies. At present, we are seeing 
the bulk of new investment go to Mexico and are experiencing the loss 
of existing investment and jobs from our region to Mexico.
    The Crane/Rangel bill is the most deserving of support of the 
proposals for CBI enhancement that have been advanced in response to 
the hurricanes to date. We need to have enactment of the Crane/Rangel 
bill because it will preserve the thousands of jobs in the nascent 
textile industry in the region as well as stimulating the needed 
investment to create new jobs. We need to allow access to the United 
States market for apparel manufactured from materials produced in the 
region because we want to maximize the job creation effect of enhanced 
access. Otherwise, we will be undermining jobs in the region even as we 
strive to create new opportunities for employment.
    The CBI has benefitted the United States economy, while stimulating 
economic growth in the Caribbean Basin, and this benefit is measurable 
as shown in the following Tables I and II evidencing the growth in 
United States exports to the region and the number of jobs created in 
the United States economy from exports to the Caribbean. It is also 
measurable on a state-by-state basis that the benefits derived from 
Caribbean trade have been shared by the state economies in the nation 
with every state enjoying a healthy trade surplus in the region (see 
Annex 1).

                                       US/CBI Trade Statistics (1985-1995)
                                           [Millions of U.S. Dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                             Annual
                                                                                             Export
                             Year                                   U.S.       Exports       Trade      Balance
                                                                  Imports                 Growth  [In
                                                                                            percent]
----------------------------------------------------------------------------------------------------------------
1985..........................................................         6687         5942            -        745
1986..........................................................         6065         6362         7.1%        297
1987..........................................................         6039         6906          8.6        867
1988..........................................................         6061         7690         11.4       1629
1989..........................................................         6637         8290          7.8       1653
1990..........................................................         7525         9569         15.4       2044
1991..........................................................         8372        10013          4.6       1641
1992..........................................................         9627        11263         12.5       1636
1993..........................................................        10378        12428         10.3       2050
1994..........................................................        11495        13441          8.1       1946
1995..........................................................        12673        15306         13.8       2633
----------------------------------------------------------------------------------------------------------------
Source: International Trade Commission on the CBERA Thirteenth Report 1997 Investigation No. 332-227 USITC
  Publication 3132 September 1998.

Number of US Workers Dependent on Trade with the Caribbean Basin Nations
------------------------------------------------------------------------
                                                              No. of New
                                                 Total No.    U.S. Jobs
                     Year                         of U.S.    Created Per
                                                  Workers        Year
------------------------------------------------------------------------
1985..........................................      118,840            -
1986..........................................      127,240        8,400
1987..........................................      138,120       10,880
1988..........................................      153,800       15,680
1989..........................................      165,800       12,000
1990..........................................      191,380       25,580
1991..........................................      200,260        8,880
1992..........................................      225,262       25,002
1993..........................................      248,552       23,290
1994..........................................      268,814       20,292
1995..........................................      306,120       37,306
------------------------------------------------------------------------
Source: The International Trade Commission Report on the CBERA
  Thirteenth Report 1997 Investigation No. 332-227 USITC Publication
  3132 September 1998.

    The CBI has been responsible for 15 years of unparalleled growth in 
trade between the United States and the nations of the Caribbean Basin, 
acting as a catalyst for exports, investment and employment creation in 
the economies of the United States and the nations of the Caribbean 
Basin.
    As the growth process in CBI economies has been strengthened by 
increased United States investment and market access, their import 
capacities have increased, resulting in increased purchases of United 
States goods and services. Each dollar spent by the nations of the 
Caribbean Basin for imported goods and services generates 60 cents 
worth of United States exports, while that same dollar spent on imports 
by Asian nations would only generate 10 cents per dollar of United 
States exports. In addition, the jobs created in the Caribbean Basin 
have often been in industries such as apparel manufacture where United 
States employers can no longer offer globally competitive products if 
all phases of production are carried out in the United States.
    In this regard, the CBI has served as a first and vital step in the 
path leading to expanded trade, investment and growth with the United 
States. The CBI has supported economic reform to create genuine market 
economies in the region and has laid the groundwork for mutual 
prosperity through sustained growth and stronger commercial links.

           The Significance of United States-Caribbean Trade

    (1) Since the CBI was enacted in 1984, the United States has 
developed a growing trade surplus with CBI countries: from 1985 to 
1995, United States exports to the region almost tripled from $5.9 
billion to $15.3 billion.
    (2) Each $1 billion of United States exports to Latin America 
generated 20,000 new direct jobs in the United States. This means that 
the increase in CBI purchases of United States goods and services from 
1985 to 1995 has created approximately 200,000 new direct jobs in the 
United States. USTR Charlene Barshefsky currently estimates that almost 
400,000 new U.S. jobs have been created as a result of the trade 
surplus the U.S. enjoys with the nations of the Caribbean Basin.
    (3) Of every dollar of income received by the average Central 
American and Caribbean person, close to 60 cents go to buy American 
products, as compared to Asia which spends only 10 cents on the import 
of American goods.
    (4) CBI industries also have a strong propensity to buy American 
raw materials, machinery and equipment. On average, 45% of the imports 
of CBI countries come from the United States.
    (5) While CBI countries send over 50% of their exports to the 
United States, a total of $7.6 billion, this represents only 1.5% of 
total United States imports in 1990.
    (6) In contrast, United States imports from the newly 
industrialized economies of Japan and East Asia combined to export 
$150.2 billion to the United States, which represents 30% of total 
United States imports. These countries represent 58% of the United 
States trade deficit, while the United States has a surplus with the 
CBI.
    In addition to the tangible measurable benefits from trade with the 
Caribbean, the United States has benefitted from increased economic 
growth in the region, producing greater social stability and a 
reduction in poverty. The negative consequences of poverty, 
instability, and social unrest in the region are clear: increased 
pressure upon the United States borders from illegal immigration and an 
increase in the flow of dangerous narcotics from the region into the 
United States The United States thus has a real stake in the kind of 
economic growth and poverty reduction which has been the positive 
contribution of the CBI beyond its measurable economic benefits.
    We in Costa Rica, as I indicated earlier, have a similar stake 
because many thousands of these refugees will turn South rather than 
North and enter Costa Rica. We have proven in Costa Rica the ability to 
attract foreign investment to create employment, including recently the 
investment of high tech firms in our nation. We are, however, suffering 
from the some competitive disadvantage as the rest of the region and we 
need enhanced access to the United States market in order to meet the 
challenge of creating employment opportunities for the refugees 
arriving from neighboring states. In today's world, trade, jobs, 
immigration and the preservation of the environment have become 
integrally intertwined. By granting enhanced trading opportunities for 
the Caribbean Basin in the United States, we will be providing the 
means for an economic recovery that meets the humanitarian imperative 
of creating jobs and hope for the impoverished people of the region.

               The Time to Enact Caribbean Parity is Now

    President Clinton and many in the United States Congress have 
recognized that the strength of our economies and democratic governance 
is the best defense for the United States against trafficking in 
illegal narcotics and a flood of illegal immigration. Recognizing that 
the CBI had been undermined by the NAFTA, President Clinton promised 
the restoration of equality of access to the United States Market for 
Caribbean Basin nations to that afforded Mexico under the NAFTA at the 
Miami Summit in 1995 and at a Central American regional summit in 1997. 
The leadership and members of the Committee on Ways & Means and the 
United States Congressional leadership have supported legislation to 
provide the nations of the Caribbean Basin with enhanced access to the 
United States market in the past, but the legislation has been caught 
up in the fight over the granting of 'fast track' authority to the 
President to expand the NAFTA. Now we have the opportunity to advance 
the enactment of legislation to provide Caribbean Basin Initiative 
enhancement as an important, even necessary, part of a program of 
recovery of the economies of the region as a top priority.
    Mr. Chairman and Members of the Committee, enhanced trade and 
investment with the region will enable the creation of jobs that will 
restore hope and provide the opportunity for the people of Central 
America to remain at home.
    [Attachments are being retained in the Committee files.]

                                

    Chairman Crane. Thank you, Mr. Ambassador.
    And, Ambassador Leon, you've recently had very successful 
elections which highlight the dramatic transition to democracy 
in your country. Why do you believe a trade component is 
essential to the U.S. hurricane relief package?
    Mr. Leon. Yes, sir, thank you very much for that 
recognition. And basically we believe that it is essential 
simply because it will create the job opportunities that we 
need to deliver what the benefits of the market are supposed to 
be. Otherwise, it has been said here in this Committee during 
this session that democracy is not only the act of voting, of 
people going to the polls and elect presidents or authorities 
to rule a country. And we believe that this will provide us 
with tools to deliver what the people in our countries need and 
this is a good economic opportunity to find a good job and with 
better salaries. And it will bring also the additional 
benefits, not only in terms of stabilization for our country 
but for the United States because it would curtail the 
incentive to seek for a better future outside our region.
    Chairman Crane. Second question, what would the effect be 
on your factories in El Salvador of a bill that mandated the 
use of U.S. fabric?
    Mr. Leon. I think that it will create disruption for about 
4,000 jobs in El Salvador and it will create disruption 
conditions for about $350 million worth of exports that use 
regional yarns--I mean local yarns and regional fabrics in El 
Salvador. The total figure for Central America, sir, will be 
over 18,000 jobs and about a figure close to $900 million that 
could be just disrupted if any CBI legislation just allows 807, 
809 trade to benefit.
    Chairman Crane. And for Ambassador Daremblum, Costa Rica 
has had a leadership role in the summit with the Presidents of 
the United States and Central America earlier this month. What 
was the reaction of leaders in the region to the Clinton 
administration's recent proposal on CBI?
    Mr. Daremblum. Mr. Chairman, my government issued a 
statement right after the summit in which it summarizes what 
the position is concerning the Administration's proposal. We 
feel that even though it's a step in the right direction 
because it addresses the chapter of trade within the context of 
the strategy for the reconstruction of Central America, there 
are some aspects in that bill which are very worrisome and that 
are of concern to us. First of all, the restrictions included 
there concerning the fabric and the yarn, do not help to 
correct the distortions that have led to investment being 
diverted to Mexico in this area.
    Second, there is a limitation as to time because it only 
provides incentives for 21 months which is not very effective 
for investors.
    And, third, it creates and introduces greater 
conditionalities that exist today in the present or in the 
current CBI legislation. For all these reasons, we don't feel 
that it's an effective instrument to really encourage the long-
term reconstruction of our area.
    Chairman Crane. Thank you. Mr. Rangel.
    Mr. Rangel. Thank you, Mr. Chairman. I think that all of 
you will agree that the United States has felt it necessary to 
reach out and try to do as much as we can do to repair some of 
the harm that has been done by the natural disasters in that 
area. And certainly when we first enacted the Caribbean Basin 
Initiative, it was because we not only wanted to support 
democracy, but we felt that it was trade that was necessary, 
rather than just economic assistance and all of the governments 
have agreed to that. And it has caused a great deal of 
stability and, indeed, has enhanced and improved the exports of 
the United States as a result of it. But whenever there's 
change, we do have a great deal of problems where those changes 
take place.
    And so I need you to prepare to send to me, since we don't 
have time to get it this morning, the number of American firms 
that are operating in your countries because I would assume 
that these firms are also operating in the United States of 
America? And as a result of their investment in your countries, 
we are assuming that they have increased their trade and 
increased their employees and increased their taxes? But to be 
honest with you, I don't really believe they're speaking on 
behalf of the host countries the way you would expect that they 
would.
    Ambassador Vega, who would you just normally believe is the 
largest American business presence in the Dominican Republic 
without having to be accurate, just in thinking about U.S. 
firms that are there?
    Mr. Vega. If it's in terms of investment, Mr. Congressman, 
it would be sugar--in the sugar industry and in banking because 
most of the textile assembly in my country is done by 
Dominican-owned companies who receive orders from U.S. 
companies to produce for them and ship back.
    Mr. Rangel. So one would assume that these U.S. companies, 
enhancing their business as a result of the CBI parity, would 
be in a sense lobbying on your behalf? Do any of you discuss 
with the U.S. presence in your countries how important this 
legislation is to you and, therefore, to them? I know 
Ambassador Leon and I have discussed this earlier. Is my point 
clear? Yes, Ambassador?
    Mr. Daremblum. Congressman Rangel, the American Chamber or 
the Costa Rican-American Chamber of Commerce has been lobbying 
for a long time very actively here in the United States for CBI 
enhancement. Twice a year or once a year, they come up here, a 
big delegation, that includes very prominent American companies 
doing business in my country. And they come up here and they 
have been really promoting and supporting this type of 
legislation.
    Mr. Rangel. OK, well, let me give you lobbying 101. And 
that is that Chambers of Commerce don't influence anybody 
because we don't know who they are or where they're located. 
It's the members of the Chamber of Commerce who have companies 
and firms and plants in the United States because in the United 
States it would be located in what--Congressional districts? 
And so, therefore, it would mean that if these companies are 
successful in your countries in expanding their ability to hire 
more people, it would be in Members' districts. And Chambers 
don't have Members except in the District of Columbia. And so 
it would seem to me to make a lot of sense for these companies 
not to come down here in large groups and impress nobody, but 
to have their members that have plants and companies throughout 
the United States to explain to their Member of Congress how 
important it is that this legislation be passed.
    Let me say this, there has been some criticism that the 
working conditions have not improved in many of your countries, 
that the workers' rights, notwithstanding the general system of 
preferences, are not enforced. I would appreciate whatever 
information each of you could send to me as to what the 
conditions of working, any evidence of improvement, whether or 
not the trade unions are active, whether there has been an 
increase in wages, and whether or not the workers have been the 
recipients of the increase in trade rather than just 
management. And, of course, where we have allegations of sweat 
shops, conditions that are abhorrent to those of us in the 
Congress, where you've read those allegations or heard about 
them, it would be helpful if without waiting for the questions, 
you could come forward and share with us how proud you are of 
the improvements or what you're doing to make the improvements?
    Would anyone just like--I would expect that all of you 
would be sending me materials in connection with that. But if 
there is anyone that feels strongly that they would like to 
make a short comment now, it would be helpful? Yes, Ambassador.
    Mr. Aguirre-Sacasa. Congressman Rangel, I will make a 
comment on the sweat shop issue because there was a series here 
called Hard Copy about a year ago alleging that in Nicaragua 
sweat shop conditions existed. The allegation was that we did 
not pay minimum wage, that we had young kids working in our 
apparel factories, that we prohibited labor unions, and that 
there was sexual harassment, a whole series of very 
inflammatory comments which worries me a great deal. I worked 
for many years at the World Bank, was in charge of industrial 
development in parts of Africa and parts of Latin America. And 
when I saw that particular show, I rushed down to Nicaragua to 
look into the reality.
    I will be glad to send you the information, but the facts 
are the following. In our own country of Nicaragua, we do have 
free association of labor unions and they exist in our free 
trade zones. No one in the free trade zone is under 18 years of 
age and that is confirmed. And the average age, because of very 
low employment levels, is about 25 or 26. The average worker in 
the free trade zones in Nicaragua earns more than a doctor, 
than a policeman, or than a teacher. The wages are low by 
comparison by U.S. standards but that is a sad legacy of the 
conditions in our country and the very low per capita income 
that we have. And I could go on and on, but the point is that 
in Nicaragua, we have a code of conduct, I know our neighboring 
countries do as well, in the free trade zones and that that 
particular series, that Hard Copy mauling and mugging of 
reality in Nicaragua couldn't be further from the truth.
    Mr. Rangel. Well, my time has expired but where you have 
written evidence of the allegations, you might want to share 
your responses because it could very well be that this 
Subcommittee may want to make a visit not to see what you're 
doing and to perform oversight, but we're here to help to 
improve the quality of life for people and countries and not 
just businesses. And I know that all of you, and those of you I 
know personally, share that view.
    So I regret the shortness of our time here, but all of you 
know you should feel free in coming to see me to provide this 
information so that we can have further discussions because I 
know that the attacks on working practices on your countries 
bother you individually as well as your national sovereignty, 
and I want to make certain I give you ample time to respond.
    Thank you, Mr. Chairman.
    Chairman Crane. Thank you. Mr. Becerra.
    Mr. Becerra. Thank you, Mr. Chairman. Let me welcome my 
friends from the various countries that are represented today 
here in Congress. I have had a chance to work with all of you 
in one capacity or another and visit your home countries as 
well except Costa Rica. I have not had a chance to go to Costa 
Rica, and I do hope to have an opportunity at some point soon.
    I want to thank you for the work that you've done during 
this entire several month process of trying to raise the level 
of understanding here in this country of what actually occurred 
throughout Central America and in the Caribbean with regard to 
the devastating storms. It's the voices of the representatives 
from the various governments, and especially those of the 
Ambassadors, that educated us very eloquently. I know I saw on 
many occasions many of you on our news programs explaining the 
devastation and what needed to be done. So I want to thank you 
for that.
    I think we've made some progress, and I appreciate all that 
has been done so far from your home countries to move the 
process forward here in Congress. As I said before when Mr. 
Rangel made a remark, I will say again: he raised something 
very important. There are going to be those here in Congress 
who will not have an opportunity to really review these 
legislative packages, and they're going to very quickly make a 
decision yes or no on something very important to your 
countries, whether it's the aid package or CBI. And I would 
very much urge you to get us information that will help us 
respond to some of the concerns that might be raised, whether 
it is in regard to the working conditions in the country or 
environmental concerns.
    And, Ambassador Aguirre, the point you make about the 
relative earnings is an important one. If you can make the 
point in fact that folks that work in some of these zones that 
you mentioned are earning as much, if not more, than a 
professional, that is something that we could not dispute. I 
think that's an extremely crucial point to be able to make that 
while the wages may seem low relative to U.S. standards, when 
you compare them to the wages of others, especially 
professionals, that it's really a decent wage. That really 
helps your cause.
    And the other point I tried to raise when our 
administration was testifying, I've been--I don't know if my 
colleagues have--but I have been approached by some American 
business interests that have said it has been difficult at 
times to work in some of the 
countries in the Caribbean and in Central America because the 
bureaucracy or the difficulties in completing a contract or 
getting remuneration and those are the kind of things that if 
you can address them without much difficulty would really help 
us alleviate those concerns that might be expressed to some of 
my other colleagues.
    Aside from all I've said, I hope that at the end of the day 
whatever we come up with, and I hope it does include some form 
of CBI, that it's something that truly does give you an 
opportunity to do the work that you wish to do yourselves. I 
know that you're looking for assistance from this Government 
but that it's not going to help you recover completely. I know 
that everything I saw, the goodwill of the people there in 
Central America was we want to do this for ourselves. We just 
want to have that partnership with the United States to help 
get us there.
    I would ask this question, and I may not have any other 
question than this. The Graham bill is probably an in-between 
between what the Administration is proposing and what Chairman 
Crane has proposed. Your thoughts on the Graham bill? Any of 
you, have your countries taken any official positions on the 
Graham bill, whether it's support, oppose, or any particular 
comment?
    Mr. Leon. Thank you very much, Mr. Becerra. It has been a 
most delightful experience working with you and discussing with 
you many of the issues you have just raised. Let me tell you 
that I would like to refer very quickly to the first issue 
regarding working conditions. We will be glad to send you this 
information, and I'm sure all the rest of my colleagues here 
will do so too. I think that the major advance of the region in 
terms of working conditions has been in terms the 
enforceability of the labor laws in our country. And also in 
terms of the, I would say, sanctions that we will apply to 
those not obeying those laws. Our countries, almost all our 
countries, I would say all our countries have very good labor 
laws and basically what we have been trying to perfect is the 
enforceability of these laws. In the case, for instance, of El 
Salvador's, the government can unilaterally revoke the benefits 
of a company operating in a free zone that doesn't comply with 
the labor legislation of El Salvador, unilaterally. If, of 
course, there is an investigation and due process that 
corroborate that labor conditions are not being respected. But 
also in terms of wages. El Salvador, for instance, right now at 
this moment, wages in El Salvador in the textile and apparel 
industry are 37 percent higher than those in Mexico, for 
instance.
    Mr. Becerra. You mentioned that when I was there in El 
Salvador.
    Mr. Leon. Yes, and the other point that I would like to 
tell you is that also the private sector operated in the 
Maquila sector have been doing a great effort to have its own 
ethics code of conduct monitored by independent bodies so that 
they reassure themselves. And this is very effective because it 
uses peer pressure that everybody is complying with the labor 
regulations.
    In regard to the second point, we believe that the Graham 
bill addresses the point that we need a trade component to be 
able to complete our own efforts for the successful recovery of 
the Central American countries. Of course, I don't think that 
the Graham bill is the middle ground between in the CBI 
legislation projects (bills). But I am sure that Congress could 
be able to discuss together and try to make middle ground 
between these two bills. That's our hope and it's solely in the 
hands of the U.S. Congress.
    Mr. Becerra. Thank you. Thank you, Mr. Chairman.
    Chairman Crane. Thank you all for your presentations and, 
gentlemen, we look forward to working with you as we move 
hopefully toward the successful conclusion of the CBI parity 
bill that we are talking about out of the House, out of this 
Committee today.
    And with that, then, I would like to ask our final panel to 
come before the vote starts. And that's Ronald Rayner, 
president, 
National Cotton Council; Jim Conner, executive vice president, 
American Yarn Spinners; Carlos Moore, executive vice president, 
American Textile Manufacturers; Stephen Lamar, director of 
government relations, American Apparel Manufacturers; and Erik 
Autor, vice president, International Trade Council; and Mark 
Levinson, chief economist, Union of Needletrades, Industrial 
and Textile Employees, AFL-CIO.
    If you gentlemen will please take seats, we will commence 
in the order I presented you. All right, Charlie Rangel has 
asked, if you don't mind, that Mark Levinson go first because 
Charlie cannot stay for the entire panel but he has some 
specific questions for Mr. Levinson. And I notice over here a 
distinguished representative of the AFL-CIO, Evie Dubrow. Now 
if Mr. Levinson wants to yield and have Evie replace him on the 
panel? [Laughter.]
    But Evie has worked faithfully even in retirement. She 
retired a number of years ago, but she never does retire. I've 
known Evie for all the years I've been here on the Hill and she 
was here many years before me, but I salute Evie Dubrow.
    And with that, Mr. Levinson, if you would proceed?

   STATEMENT OF JAY MAZUR, PRESIDENT, UNION OF NEEDLETRADES, 
   INDUSTRIAL AND TEXTILE EMPLOYEES, NEW YORK, NEW YORK, AS 
          PRESENTED BY MARK LEVINSON, CHIEF ECONOMIST

    Mr. Levinson. Thank you. I would yield to Evie at any time. 
I'm actually here today representing Jay Mazur, who wasn't able 
to make it down, and he asked me to apologize for that.
    I'm the chief economist at UNITE. I appreciate this 
opportunity to testify on H.R. 984, on behalf of the 250,000 
members of UNITE.
    We do not believe that the provisions of H.R. 984 meet the 
needs of the people in the Caribbean Basin. They're poorly 
designed to accomplish the task of promoting economic 
development in the region. The bill will also lead to job loss 
and reduced living standards in the United States.
    The argument for H.R. 984 is that because of the 
elimination of tariffs and quotas for Mexico as a result of the 
NAFTA, the CBI countries are less competitive and U.S. 
investment will flow out of the Caribbean and into Mexico.
    The fact is that since NAFTA, the total share of U.S. 
apparel imports coming from the Caribbean Basin has increased 
from 18 percent in 1993 to 24 percent in 1998. In 1998, CBI 
nations shipped an astonishing $7.6 billion worth of apparel 
imports to the United States. By contrast, Mexico shipped $5 
billion worth of apparel imports to the United States.
    We believe the CBI/NAFTA development model is badly flawed. 
In my submitted testimony, I document that there is an inverse 
relationship between where investment is going in CBI countries 
and the direction of wages. Growth in apparel imports from CBI 
countries is increasing most rapidly in countries that are 
experiencing the greatest wage declines. And, likewise, where 
wages are increasing, growth in apparel imports is very slow. 
Is this not a race to the bottom?
    The United Nations' Economic Commission for Latin America 
and the Caribbean describes the failure of the CBI/NAFTA 
development strategy as follows:

          The contribution made by Mexican and Central American maquila 
        factories to economic growth is more modest than that which one 
        could suppose upon seeing the volume of their activity. Should 
        the maquila factories multiply in their current form, the 
        countries would be specializing in supplying cheap labor, and 
        the sector's growth would depend on continual cheapening of 
        this factor. This is not compatible with a long-range strategy 
        of growth with social equity.

    The economies of the CBI countries can only be bolstered if 
their people, including their workers, truly share in economic 
development. This requires that workers have a voice in their 
own destiny. In short, this requires worker rights.
    There are approximately half a million workers in CBI 
countries producing apparel for U.S. retailers and 
manufacturers and sold in the United States. Less than 1 
percent have been able to exercise their right to collective 
bargaining. Employers, in collusion with governmental 
authorities, systematically crush organizing efforts.
    Not one of the 65,000 workers in the maquilas of El 
Salvador has a collective bargaining agreement. The same is 
true for Guatemala, after the Philips-Van Heusen company shut 
down the only unionized factory in that country in December. 
The few functioning unions in Honduras are under fierce attack 
and a similar pattern is developing in the Dominican Republic.
    The U.S. labor movement has tried to utilize the worker 
rights provision in the existing CBI law by filing petitions 
under the GSP. But there are major problems which limit the 
effectiveness of GSP and CBI in enforcing labor rights.
    A major problem is the snail pace of investigations and the 
fact that the Government has too much discretion over whether 
or not to take action. Take the example of Guatemala. Labor 
rights advocates in the United States first petitioned the U.S. 
Government to investigate gross violations of internationally 
recognized workers' rights in Guatemala in 1986. Petitions were 
filed in 1987, 1989, 1990, 1991, and 1992. The U.S. Government 
refused to act on the petitions until 1992. The U.S. Government 
reviewed the State of workers' rights in Guatemala through 
1993. In 1994, the GSP statute lapsed and the review process 
ended. The AFL-CIO submitted allegations of violations of 
workers' rights again in 1995. Again, the U.S. Government chose 
not to suspend benefits but to review Guatemalan law and 
practice. The United States terminated this review in 1997, 
having concluded that the government of Guatemala was indeed 
taking steps to afford Guatemalan workers their internationally 
recognized rights. The AFL-CIO filed a new petition in 1998. It 
is still pending.
    There are over one million people making apparel and 
textile products in the United States. They will be the primary 
losers as jobs and companies relocate in response to the 
perverse incentives of this NAFTA parity proposal. Hundreds of 
thousands of workers could lose their jobs.
    H.R. 984 does not address the main economic problem of 
workers in the Caribbean and Central America: the lack of 
decent paying jobs. The economies of expanding mass markets are 
straightforward: either people have the ability to purchase or 
they don't. Either we pursue policies in the CBI that increase 
the ability of people to buy products or we are saying that we 
don't really care, that we are engaged in a charade that 
benefits an elite in CBI countries and U.S. importers at the 
expense of workers in CBI countries and in the United States.
    Members of our union, and the hundreds of thousands of 
apparel and textile workers who have lost their jobs find it 
hard to understand why the Committee believes that extending 
NAFTA to the Caribbean, a policy that has been a windfall for 
corporations but a disaster for workers, will improve the 
conditions of work and enhance the living standards of working 
people in the Caribbean Basin and in the United States. They 
have a hard time understanding why workers have been all but 
forgotten in this debate.
    Thank you.
    [The prepared statement follows:]

Statement of Jay Mazur, President, Union of Needletrades, Industrial 
and Textile Employees, New York, New York, as presented by Mark 
Levinson, Chief Economist

    I appreciate this opportunity to testify on H.R. 984, the Caribbean 
and Central American Relief and Economic Stabilization Act, on behalf 
of the 250,000 members of the Union of Needletrades, Industrial and 
Textile Employees (UNITE). Our members live and work in all parts of 
our country. They are a cross section of the U.S. workforce: native 
born, minorities and new Americans who have come to our shores from 
just about every country in the world.
    UNITE is not new to the Caribbean Basin scene. Many of our members 
came to the United States from the Caribbean and Central American 
countries. Many maintain close contact with the region, have family 
living there and visit the lands of their birth. We work with garment 
worker unions and union federations throughout the area. So we, too, 
feel a special obligation to assist the peoples of these countries to 
improve their economic circumstances. Furthermore, we are aware of the 
importance of the region to our nation's well being.
    We do not believe, however, that the provisions of H.R. 984 meet 
the needs of the people of the Caribbean Basin. They are poorly 
designed to accomplish the task of promoting economic development in 
the region. The bill will also lead to job loss and reduced living 
standards in the U.S.

                    The Premise Of The Bill Is Wrong

    The argument for H.R. 984 is that because of the elimination of 
tariffs and quotas for Mexico as a result of the North American Free 
Trade Agreement, the CBI countries are less competitive and U.S. 
investment will flow out of the CBI and into Mexico.\1\
---------------------------------------------------------------------------
    \1\ The drafters of H.R. 984, having failed in several attempts to 
pass CBI-NAFTA parity, are now attaching it to badly needed relief for 
Central American countries hard hit by Hurricane Mitch. Ironically, the 
development model encouraged by CBI/NAFTA parity is likely to 
exacerbate, rather than heal, the damage wrought by the natural 
disaster. See, Robert Scott, Rebuilding the Caribbean: A Better 
Foundation for Sustainable Growth, Economic Policy Institute, 1999.
---------------------------------------------------------------------------
    The fact is that since NAFTA the total share of U.S. apparel 
imports coming from the Caribbean Basin has increased from 18% in 1993 
to 24% in 1998. In 1998 CBI nations shipped an astonishing $7.6 billion 
worth of apparel imports to the U.S. By contrast Mexico shipped $5 
billion worth of apparel products to the U.S.
    Four out of the six significant apparel exporting Caribbean Basin 
nations continued to see apparel exports grow at double digit annual 
growth rates in the five years since NAFTA took effect. The increase in 
Mexican apparel production came at the expense of Asian countries and 
the United States. If NAFTA undermined any Caribbean Basin countries' 
apparel export promotion strategies, it undermined those of Jamaica and 
Costa Rica--the region's two most democratic--and higher wage--apparel 
exporting countries.

                 CBI/NAFTA Development Model Is Flawed

    The CBI, we were told, would benefit the people of the region. But 
it has not worked. The principal beneficiaries of CBI have been U.S. 
based apparel companies, importers and retailers, a small elite in the 
Caribbean Basin and some Asian companies who have set up apparel 
factories in the CBI to export to the U.S. market.
    As a result of CBI there has been a dramatic expansion of trade 
between the United States and CBI countries. Despite the expansion of 
trade, poverty is widespread, most roads in the five leading apparel-
exporting countries remain unpaved, government investment in 
education--with the exception of Costa Rica--remains anemic and large 
percentages of the population of the region do not have access to safe 
drinking water.
    Jobs in export-oriented manufacturing have been created due to CBI, 
but job losses have occurred in the agricultural, mining and domestic 
oriented manufacturing sectors of Caribbean and Central American 
countries under CBI. Job losses in these traditional sectors have far 
outweighed job gains. CBI related jobs pay poverty level wages, thus 
exacerbating income inequality, social instability and migration from 
the Caribbean Basin region.
    Table 1 captures many of the problems of the CBI/NAFTA development 
model. First, there is an inverse relationship between where investment 
is going in CBI countries and the direction of wages. Growth in apparel 
imports from CBI countries is increasing most rapidly in countries that 
are experiencing the greatest wage declines. And likewise, where wages 
are increasing, growth in apparel imports is very slow.\2\ Is this not 
a race to the bottom?
---------------------------------------------------------------------------
    \2\ Countries where wages have fallen the most are also the 
countries that have the worst record of abusing worker rights. For an 
interesting argument along these lines see: Dani Rodrik, Democracies 
Pay Higher Wages, NBER Working Paper 6364, revised October 1998, 
forthcoming in the Quarterly Journal of Economics.)
---------------------------------------------------------------------------
    Second, because wages are so low, there is little incentive for 
manufacturers to increase productivity. In the Caribbean and Central 
America, manufacturers appear to compete by simply sweating labor. So 
where apparel industry production has increased, productivity (as 
measured by value added per employee) has decreased.

                                                     Table 1
----------------------------------------------------------------------------------------------------------------
                                                  Growth of U.S. imports    Avg. annual growth of:
                                                ----------------------------------------------------  Growth of
                                                                 Annual                 Value added   avg. wages
                                                                average     Employment      per      (US$)  1985-
                Apparel Industry                   1989-98    growth 1994-   1985-96      employee     96  (In
                                                     (In        98  (In        (In        1985-96      percent)
                                                   percent)     percent)     percent)       (In
                                                                                          percent)
----------------------------------------------------------------------------------------------------------------
Honduras.......................................        2523%          40%          32%         -11%         -59%
El Salvador....................................         2512           39           21         -15*          -27
Guatemala......................................          466           13       bulletbullet         8***
Dominican Rep..................................          256           11       bulletbullet        56***
Costa Rica.....................................          206            5           10          -10           65
Jamaica........................................           74            3            5        -41**        71***
----------------------------------------------------------------------------------------------------------------
bulletNot available
* Estimate
** 1986-90
*** Bobbin Consulting Group (1987) and Werner International (1998) hourly wage and fringe data, 1987-96
Sources: (imports) U.S. Department of Commerce, Major Shippers Reports, various years; (employment and
  productivity) United Nations Industrial Development Organization (UNIDO) country statistics, available on the
  world wide web at http:\\www.unido.org; (wages) UNIDO, Bobbin Consulting Group (1987), and Werner
  International Management Consultants (1998).

    The United Nations' Economic Commission for Latin America and the 
Caribbean (ECLAC) study of Mexican and Central American maquilas 
describes the failure of the CBI/NAFTA development strategy:

          The contribution made by [Mexican and Central American 
        maquila factories] to economic growth is more modest than that 
        which one could suppose upon seeing the volume of their 
        activity. Should the maquila factories multiply in their 
        current form, the countries would be specializing in supplying 
        cheap labor, and [the sector's] growth would depend on the 
        continual cheapening of this factor. This is not compatible 
        with a long-range strategy of growth with social equity. 
        (emphasis added) \3\

    \3\ Comision Economica para America latina y el Caribe. Maquila y 
transformacion productiiva en Mexico y centroamerica. LC/MEX/R.630. 28 
de octubre de 1997. Translated by UNITE from the original Spanish.
---------------------------------------------------------------------------

                        Labor Rights Are Ignored

    The economies of the CBI countries can only be bolstered if their 
people, including their workers, truly share in economic development. 
This requires that workers have a voice in their own and in their 
nations'destinies. Trade unionists in Latin America are very clear on 
this point. Luis Anderson, the Secretary General of the Inter-American 
Regional Organization of Workers/ICFTU, put it this way:

          ``CBI Parity, like all trade and aid agreements, must place 
        workers' rights on an equal plane with property rights. We 
        cannot accept policies that grant employers and governments 
        privileged access to international markets without also 
        requiring them to respect the right of workers to freedom of 
        association and other internationally recognized workers' 
        rights. This is not protectionism. This is the critical link 
        between core labor standards and international commerce that 
        must be forged if workers are to realize a fair share of the 
        fruit of their labor.\4\
---------------------------------------------------------------------------
    \4\ Press statement, ORIT, January 1999.

    The abysmal exploitation of workers in almost every CBI country has 
been fully documented, in testimony before Committees of the Congress, 
by government investigators and in petitions filed with office of the 
United States Trade Representative. Yet H.R. 984 fails to strengthen 
worker rights.
    Many CBI countries have elaborate and extensive labor codes, some 
even more advanced than those in our own country. They guarantee 
workers the right to organize and to bargain collectively with their 
employers on working conditions and wages. They establish standards to 
protect the health and physical well being of workers in their 
countries. The problem is that just about every CBI country fails to 
enforce its own laws. Workers are effectively denied the right to form 
unions.

Working Conditions in the Caribbean Basin and the Inadequacy of the CBI 
                        Worker Rights Provision

    There are approximately half a million workers in CBI countries 
producing apparel for U.S. retailers and manufacturers and sold in the 
United States. Less than 1% have been able to exercise their right to 
collective bargaining. Employers in collusion with governmental 
authorities systematically crush organizing efforts. Workers are left 
defenseless against the arbitrary and abusive practices of their 
employers.
    Not one of the 65,000 workers in the maquilas of El Salvador has a 
collective bargaining agreement. The same is true for Guatemala, after 
the Phillips-Van Heusen company shut down the only unionized factory in 
that country in December.\5\ The few functioning unions in Honduras are 
under fierce attack and a similar pattern is developing in the 
Dominican Republic. The big U.S. retailers and manufacturers that call 
the shots continue to cooperate with these anti-union practices, which 
have proven virtually immune to existing CBI law.
---------------------------------------------------------------------------
    \5\ In 1997 after a 7-year campaign, workers at a Phillips-Van 
Heusen owned factory did succeed in winning union recognition and a 
collective bargaining agreement. Shortly before Christmas last year 
Philips Van Heusen closed the factory.
---------------------------------------------------------------------------
    The U.S. labor movement has tried to utilize the worker rights 
provision in the existing CBI law by filing petitions under the 
Generalized System of Preferences. GSP conditions trade benefits on 
whether or not a country in the region ``has taken or is taking steps 
to afford to workers in that country . . . internationally recognized 
workers' rights.'' (H.R. 984 has the same language.) Our attempts have 
resulted in some modest improvements. But there are major problems 
which limit the effectiveness of GSP and CBI in enforcing labor rights.
    A major problem is the snail pace of investigations and the fact 
that the government has too much discretion over whether or not to take 
action. Take the example of Guatemala. Labor rights advocates in the 
United States first petitioned the U.S. Government to investigate gross 
violations of internationally recognized workers' rights in Guatemala 
in 1986. Petitions also were filed in 1987, 1989, 1990, 1991 and 1992. 
The U.S. Government refused to act on the petitions until 1992. The 
U.S. Government ``reviewed'' the state of workers' rights in Guatemala 
through 1993. In 1994 the GSP statute lapsed and the review process 
ended. The AFL-CIO submitted new allegations of violations of workers' 
rights in 1995--again, the U.S. Government chose not to suspend 
benefits, but to ``review'' Guatemalan law and practice. The U.S. 
terminated this review in 1997, having concluded that the government of 
Guatemala was, indeed, ``taking steps'' to afford Guatemalan workers 
their internationally recognized rights. The AFL-CIO filed a new 
petition in 1998. It is still pending.
    The law is simply inadequate to deal with the level and intensity 
of exploitation that takes place on a routine basis. The information 
reaching the public about these abuses is but the tip of an enormous 
iceberg, but you can get a sense of what these hundreds of thousands of 
workers face every day by looking at a few recent reports.
    Four Wal-Mart contractors in Honduras--Evergreen, Ecotex, Seolim 
Baracoa, Uniwear Embroiders--employ over 1200 workers, many of them 
teenage girls, working shifts of 12 hours or more, paid 43 cents an 
hour base wage, or about half the cost of survival. They are not 
allowed to talk and must ask permission to go to the bathroom; there 
are factories with fire exits blocked, the air hot and thick with dust; 
complaints or attempts to organize a union result in immediate 
dismissal.\6\
---------------------------------------------------------------------------
    \6\ A Jesuit Priest in Honduras described conditions in the factory 
this way:
    ``Going into these factories is like entering prison, where you 
leave your life outside. The factory owners do not let--and don't 
want--the young workers to think for themselves. They want them to be 
stupid. The workers need permission to use the bathroom, and they are 
told when they can and cannot go.
    Young women enter these factories at 14, 15, 16 and 17 years old. 
They become a mechanism of production, working 9 hours a day plus two, 
three or four hours overtime, performing the exact same piece operation 
over and over, day after day. . . . These young workers rarely last 
more than six years n the maquila, when they leave exhausted. They 
leave without having learned any useful skills or developed 
intellectually. These young workers entered the maquila with a sixth 
grade education, with no understanding of the maquila, the companies 
whose clothing they sew or the forces shaping where they fit into the 
global economy. They soon feel impotent, seeing that the Ministry of 
labor does nothing, or almost nothing, to help defend their rights.
    Once the women start working in the maquila they often fall into 
debt. The wages are very low and no one can survive on them.'' Wal-Mart 
Sweatshops in Honduras, National Labor Committee, November 17, 1998.
---------------------------------------------------------------------------
    You will find very similar conditions in El Salvador at the Nike 
and Adidas contractor called Formosa Textiles in the San Bartolo Free 
Trade Zone. Here the pay and meager purchasing power are almost 
identical to that of the Wal-Mart workers in Honduras, with the same 
abusive treatment by supervisors. At Formosa Textiles there is the 
added humiliation of new employees being forced to submit to two 
pregnancy tests and being immediately--and illegally--fired if they 
test positive. When Formosa workers reported these conditions and the 
firing of workers suspected of union organizing to local union and 
human rights workers, it appears that Nike has retaliated against the 
workers by pulling its work out of Formosa.
    There is a standard pattern of repression against workers who try 
to exercise their rights. In the guise of ``economic'' considerations, 
companies just walk away from troublesome workers who insist on 
asserting themselves. This is a trend with which we are well familiar 
in this country, the phenomenon of ``runaway shops.'' Now we see it in 
the Caribbean region, as companies are abandoning the relatively higher 
standards of Jamaica and Costa Rica, for example, for countries where 
they can pay starvation wages and not worry about workers protesting.
    This development has become particularly disturbing in the 
Dominican Republic, the leading CBI exporter of apparel to the United 
States. Dominican worker activism and supportive efforts made by U.S. 
trade unions (partly in the form of a GSP worker rights petition) had 
combined successfully to produce modest changes. These gains have begun 
to unravel.
    Maquiladora worker campaigns in the Dominican Republic ended in 
union recognition and collective bargaining agreements at 9 factories 
in the mid 1990s. Average wages rose significantly between 1993 and 
1996, though they still fell well short of pushing workers and their 
dependents above the poverty line.\7\ Maquiladora factory owners have 
responded to these modest gains with the familiar strategy of the 
runaway shop.
---------------------------------------------------------------------------
    \7\ Pre-tax base pay for an operator in a cap manufacturing factory 
in 1998 was $0.69 per hour. This wage is only \1/3\ of what the 
Dominican government estimates to be a necessary income for a typical 
family to meet its basic needs A worker can earn an estimated $43.22 
for the week by putting in a 56-hour week and earning a $3.42 bonus for 
perfect on-time attendance, meeting production quota, and not getting 
on the bad side of the supervisor. After rent, lunch from free trade 
zone vendors, transportation, child care, milk & cereal (for infant), a 
worker is left with $2.26 per day for the rest of her family's food, 
water, electricity, clothes, school costs, personal care products and 
medicine. Was your school's cap made in this sweatshop? A UNITE report 
on campus caps made by BJ&B in the Dominican Republic. New York: UNITE, 
1998.
---------------------------------------------------------------------------
    Sudden closures of maquiladora facilities have become common, as 
plant owners increasingly take advantage of various legal loopholes and 
official disinterest in order to avoid obligations under the terms of 
the labor law and/or collective bargaining agreements. Owners have 
abandoned thousands of employees to whom they owe, at a minimum, 
severance pay, only to reestablish their business under a new name in 
other maquiladora industrial parks.
    One of the most notorious of those cases is Euromoda, a firm-owned 
by one Leopoldo Nunez. Nunez operated Euromoda for 17 years in the 
country's capital, producing for such well-known U.S. brands as 
Victoria's Secret. In 1997 he declared bankruptcy leaving 366 workers 
(85 percent of whom were women--most single mothers) jobless. The 
workers have not received legally mandated severance pay.\8\
---------------------------------------------------------------------------
    \8\ Listen to the testimony of Maria Moreno, formerly an operator 
at Euromoda: ``Eleven years of my life were spent in Euromoda. When 
they closed it I realized that I did not have anything more than the 
very same hands that I had when I entered this factory to work without 
rest. Now, to have nothing, not even the severance pay that by law they 
owe to me, and that the owner, Mr. Nunez, denies to me. . . .'' 
Interview by Nino Pena, FENATRAZONAS, March 17, 1999.
---------------------------------------------------------------------------
    The ostensibly broke businessman then transferred his capital to 
two new businesses. One of the businesses produces the same general 
product line formerly offered by Euromoda.
    The National Federation of Free Trade Zone Workers (FENATRAZONAS) 
believes that a series of plant closings similar to that at Euromoda 
mark the reversal of progress toward greater respect for workers' 
rights. According to FENATRAZONAS, the Dominican Labor Ministry now 
assumes a generally negative posture towards pro-union maquiladora 
workers, in contrast to the 1993-1996 period. A 1997 decree by the 
Dominican President proclaiming the formation of a Tripartite 
Commission empowered to design and execute social and economic benefit 
programs has become a dead letter. Maquiladora employees are working 
harder and longer for less.

                     The U.S. Economy Will Be Hurt

    There are over one million people making apparel and textile 
products in the U.S. They will be the primary losers of jobs as 
companies relocate in response to the perverse incentives of this NAFTA 
parity proposal.
    U.S. apparel and textile industry employment trends have changed 
dramatically in the five years since NAFTA. Average employment in the 
U.S. apparel industry has shrunk at an annual rate of 6.6 percent since 
NAFTA. In comparison, apparel industry employment shrank at an average 
annual rate of only 1.6 percent over the course of the five years 
preceding NAFTA.

                                     Table 2.--Pre- and post-NAFTA job loss
----------------------------------------------------------------------------------------------------------------
                                             Production workers      Total lost jobs   Average annual    Change
                                        ---------------------------------------------------------------  in rate
                                                                                       change           of losee
                                           1990     1994     1998   1990-94  1994-98    (%)    1994-98  1994-98/
                                                                                      1990-94            1990-94
----------------------------------------------------------------------------------------------------------------
Textile................................    592.9    574.5      505    -18.4    -69.5     -0.8     -3.2      4.08
Apparel................................    868.5    814.7    619.9    -53.8   -194.8     -1.6     -6.6      4.18
----------------------------------------------------------------------------------------------------------------

    Extending NAFTA to the CBI countries will mean accelerating even 
further the already staggering job losses that are occurring in the 
apparel and textile industries.
    Apparel industry workers who lose their jobs suffer serious 
declines in their standard of living. A U.S. Department of Labor survey 
in February 1998 of apparel workers who lost their jobs between 1995 
and 1997 showed that over half were unemployed or out of the labor 
force. Only about one-third of the workers who lost their job found 
full-time employment. Of those, the average worker suffered a loss of 
pay of 20%.

                      Other Problems With The Bill

    As I understand the bill, it gives apparel products from CBI 
countries the same quota-free and duty-free treatment as imports from 
Mexico under NAFTA for five years during which time the U.S. and the 
CBI nations are to negotiate possible accession to NAFTA or a 
comparable agreement. The bill also permits the import into the U.S. of 
apparel made from specified amounts of non-CBI and non-U.S. origin 
fabric as if they were the product of the agreement countries.
    I fail to see how this benefits CBI countries. It would assist and 
encourage increased use of the CBI countries by China and others as a 
way of selling into the U.S. market without quota or tariff 
restrictions. We oppose this provision of the bill. Under the Canadian 
Free Trade Agreement, almost the entire TPL in wool was used for only 
one product--wool fabric for suits--and that concentration had a 
devastating effect on U.S. suit manufacturers.
    This legislation guarantees the loss of hundreds of thousands of 
jobs in the domestic textile and apparel industries. Further 
compounding the cruelty of this unemployment is the transference of 
over $1 billion in five years of forgone duties from the U.S. Treasury 
to the importers and manufacturers of the production shifted from the 
U.S. to the CBI. The companies and shareholders make out fine, while 
workers simply lose their job. This is unacceptable. At a minimum, 
funding for the Trade Adjustment Assistance program for displaced 
workers should be increased so that displaced workers receive 75% of 
their former earnings and maintain their health insurance for a year.
          * * * * *
    H.R. 984 does not address the main economic problem of workers in 
the Caribbean and Central America: the lack of decent paying jobs. The 
economics of expanding mass markets are straightforward: either people 
have the ability to purchase or they don't. Either we pursue policies 
in the CBI to increase the ability of people to buy products or we are 
saying that we don't really care, that we are engaged in a charade that 
benefits an elite in CBI countries and U.S. importers at the expense of 
workers in CBI countries and in the U.S.
    Members of our union, and the hundreds of thousands of apparel and 
textile workers who have lost their jobs, find it hard to understand 
why the Committee believes that extending NAFTA to the Caribbean--a 
policy that has been a windfall for corporations but a disaster for 
workers--will improve the conditions of work and enhance the living 
standards of working people in the Caribbean Basin and in the U.S. They 
have a hard time understanding why workers have been all but forgotten 
in this debate.

             Appendix.--Meaningful Worker Rights Protection

    1. Additional trade benefits for CBI countries should be conferred 
only after an initial review of each country's record of respect for 
internationally recognized worker rights.
    2. There should be an annual review of each country, which allows 
individuals and organizations to petition, testify and present 
documentation pertinent to continued favored status of beneficiary 
countries. If GSP language is used to define worker rights and the 
review process, the GSP phrase ``Taking or have taken steps'' to 
protect internationally recognized worker rights should be amended to 
read ``are adhering to and enforcing internationally recognized worker 
rights.''
    3. Any sanctions following demonstrated worker rights abuses should 
be focused more carefully on the offending parties. For example, 
violations found in a particular maquiladora or plant should lead to a 
loss of benefits for the offending maquila or employer and any retailer 
or manufacturer using that facility at the time of the abuse. In a free 
trade zone where there is a pattern of abuse there should be a loss of 
benefits for all companies in the zone. In this way, responsibility for 
enforcing worker rights could be centered on offending zone owners and 
operators and employers without penalizing legitimate parties.
    4. There should be no tariff preference levels. The benefits of the 
program should accrue exclusively to parties in the region.
    5. Appropriate funds must be allocated to verify compliance with 
worker rights and remedy abuses in CBI countries, and mitigate the 
economic dislocation and hardships of workers in the U.S. caused by 
this legislation.

                                

    Chairman Crane. Thank you. And let me reassure all of you 
that any written statements you have will be made a part of the 
permanent record beyond your oral presentation.
    Since Mr. Rangel has to question and run, we will yield to 
him now to ask questions of you, Mr. Levinson, and then he can 
be excused?
    Mr. Rangel. Thank you, Mr. Chairman, and let me join in 
welcoming Evelyn Dubrow once again to this room where she 
enjoys honorary membership. We welcome you back.
    I was looking forward to meeting with Jay Mazur because I 
know how strongly he feels about this particular piece of 
legislation. And I was sharing with the Subcommittee Chairman 
that there seems to be such a sharp conflict in the conditions 
of work at these different places that over the Easter recess I 
was thinking about seeing whether you would put together, a 
list of the countries where you believe there is a violation of 
workers' rights, so that we can take a look at that. In 
addition to that, there's some serious question about loss of 
American jobs in the textile and apparel industry. And, as you 
can see from our list of witnesses, some people from those 
industries are supporting the bill.
    Last, the question of transshipment, which has always been 
a very, very serious problem for all of us. And we've had 
assurances that these countries are not, as a result of the law 
and their abiding by the law, that they're not using their 
countries for transshipment. So where you have evidence that 
you can direct us to, we would like to do that.
    In summary, I would hope that since so many of your workers 
come from these areas and indeed send money back to these 
countries, to their families, and would have a concern about 
the working condition of their relatives and friends that are 
back there, that I would be supporting the union and the 
workers by personally taking a look and seeing what is 
happening back home while they're working hard trying to 
support their families that are still in the Caribbean.
    So it's difficult to do this when you have the narration in 
testimony, but having worked with you before and with my long 
history of working with the union that you represent, if you 
can present to me in terms this is where, if you're really 
concerned about these conditions, this is where you should be 
going, it would be very, very helpful to me and our colleagues.
    Mr. Levinson. Congressman, we would be glad to do that and, 
in fact, I think my president would be more than glad to even 
perhaps arrange a trip where we would like to show anyone who's 
interested in some of the conditions that we've described in 
our submitted testimony. I would be glad to--and Jay Mazur 
would be glad to work with you on that.
    Mr. Rangel. OK, I'll look for the outline and then I'll 
probably have some meetings with the representative--with USTR, 
the State Department, and the Trade Commission so that we can 
try to make certain we all are reading from the same page.
    Mr. Levinson. Thank you.
    Mr. Rangel. Thank you and give my best to Mr. Mazur.
    Mr. Levinson. Thank you, will do.
    Chairman Crane. Thank you.
    And with that, we will now get back to the regular schedule 
proceeding first with Mr. Rayner and the little red light there 
indicates when the 5-minute limit has elapsed. And you are not 
exactly instructed to abide by the light but as close as 
possible. And any printed statements, as I say, will be part of 
the permanent record.

   STATEMENT OF F. RONALD RAYNER, PRESIDENT, NATIONAL COTTON 
                       COUNCIL OF AMERICA

    Mr. Rayner. Thank you, Mr. Chairman. My name is Ronald 
Rayner. I'm a cotton farmer with a family farm in Goodyear, 
Arizona. And I am the current president of the National Cotton 
Council.
    I appreciate the opportunity to speak to you today about 
the Ca- ribbean Basin parity legislation. We believe this 
legislation is vitally important to the U.S. cotton industry. 
Mr. Chairman, the National Cotton Council has been supportive 
of the Caribbean Basin trade bill because we believe the right 
CBI bill will enable our industry to compete more effectively 
with low price textile imports. CBI parity offers the 
opportunity to increase the use of U.S. cotton and U.S. cotton 
textiles. That is the reason we're supportive of this 
initiative. A competitive edge that a CBI bill can give to our 
product is crucial to our industry. If, however, CBI 
legislation also enables our major textile competitors to take 
advantage of the duty preferences under consideration for the 
Caribbean, the bill will not be as beneficial to our industry.
    The U.S. cotton industry is facing serious economic stress 
from cotton producer to manufacturer. The combination of 
decreased demand, low world prices, currency-driven surges in 
Asian textile imports, and increasingly higher production costs 
are taking a substantial toll. The domestic mill use of U.S. 
cotton fell this year by about 1 million bales to less than 
10.5 million. At the same time, textile imports from regions 
other than the Caribbean and NAFTA increased by 1.2-million 
bales annually. We did not have to lose that demand.
    Council economists have estimated that the right Caribbean 
Basin parity bill will increase total annual demand for U.S. 
raw cotton, cotton yarn, and cotton textiles by at least 1 
million bales within 3 years. If we had enacted CBI parity 
legislation effective for 1998, we would have already seen a 
dramatic increase in the use of U.S. cotton and cotton 
textiles. We estimate the right parity bill would have 
increased use by as much as 650,000 bales by the end of 1999. 
That additional use could have helped to blunt the textile 
import surge caused by the Asian financial crisis.
    Mr. Chairman, we need to bring the divergent sides to a 
compromise and get this bill passed as soon as possible. We 
applaud your determination to get a CBI parity bill passed. We 
are supportive of many of the provisions in the House bill and 
Senator Graham's bill as well. We support granting trade 
preferences to apparel that are composed of U.S. fabric and 
U.S. yarn, what is known as 807 and 809 categories. We can also 
support trade preferences applicable to apparel articles that 
are knitted or woven in the Caribbean region from U.S. yarn. 
The Council does not, however, support the inclusion of tariff 
preference levels as significant exemptions to rules of origin. 
The Council also opposes extending trade preferences to textile 
or apparel articles that originate in the Caribbean region but 
are not composed of U.S. yarn or U.S. fabric. We do not want to 
enable our competitors to benefit from this trade preference.
    The National Cotton Council supports a CBI bill that will 
maximize the use of U.S. cotton and cotton textile components 
including U.S. yarn. A CBI bill that ties the granting of 
preferences to the use of U.S. textile components is a bill we 
will support. It will help our industry. It will help the 
Caribbean.
    I will be happy to take questions.
    [The prepared statement follows:]

Statement of the F. Ronald Rayner, President, National Cotton Council 
of America

    Mr. Chairman, my name is Ron Rayner. I am a cotton producer from 
Goodyear, Arizona, and the current President of the National Cotton 
Council.
    The National Cotton Council is the central organization of the 
United States cotton industry. Its members include producers, ginners, 
oilseed crushers, merchants, cooperatives, warehousemen, and textile 
manufacturers. While a majority of the industry is concentrated in 17 
cotton producing states, stretching from the Carolinas to California, 
the downstream manufacturers of cotton apparel and homefurnishings are 
located in virtually every state.
    The industry and its suppliers, together with the cotton product 
manufacturers, account for one job of every thirteen in the U.S. Annual 
cotton production is valued at more than $5 billion at the farm gate. 
In addition to the fiber, cottonseed products are used for livestock 
feed, and cottonseed oil is used for food products ranging from 
margarine to salad dressing. While cotton's farm gate value is 
significant, a more meaningful measure of cotton's value to the U.S. 
economy is its retail value. Taken collectively, the business revenue 
generated by cotton and its products in the U.S. economy is estimated 
to be in excess of $50 billion annually. Cotton stands above all other 
crops in its creation of jobs and its contribution to the U.S. economy.
    International trade and the treaties that govern it are extremely 
important to U.S. cotton. The United States depends on exports to 
dispose of approximately 40% of its annual cotton production. It also 
depends upon a healthy U.S. textile industry as a market for 60% of 
annual production. Unique among the world's cotton producing countries, 
the U.S. cotton industry spends some $65 million annually on market 
development and research to expand these markets and improve its 
competitiveness with man-made fibers and foreign-grown cotton.
    Unlike much of United States agriculture, cotton's major 
competitors in the world market are either developing countries or non-
market economies, namely China, Pakistan, the former Soviet Union, and 
India. U.S. cotton must, therefore, compete with countries whose cotton 
sectors are either shielded from real-world market conditions or are 
aggressively sponsored by their governments as part of a development 
strategy.
    I appreciate the opportunity to speak to you today about Caribbean 
Basin parity legislation. We believe this legislation is vitally 
important to the U.S. cotton industry.
    Mr. Chairman, the National Cotton Council has been supportive of a 
Caribbean Basin trade bill because we believe the right CBI bill will 
enable our industry to compete more effectively with low priced textile 
imports. CBI parity offers the opportunity to increase the use of U.S. 
cotton and U.S. cotton textiles. That is the reason we are supportive 
of this initiative. The competitive edge that a CBI bill can give to 
our product is crucial for our industry.
    If, however, CBI legislation also enables our major textile 
competitors to take advantage of the duty preferences under 
consideration for the Caribbean, the bill will not be as beneficial to 
our industry.
    The U.S. cotton industry is facing serious economic stress. From 
cotton producer to manufacturer, the combination of decreased demand, 
low world prices, currency-driven textile import surges and unremitting 
production costs are taking a substantial toll.
    The annual domestic mill use of U.S. cotton has fallen by about one 
million since last year to 10.4 million. Over the same time period, 
cotton textile imports from regions other than the Caribbean and NAFTA 
increased by 1.2 million bale equivalents.
    We did not have to lose that demand.
    The right Caribbean Basin parity bill could increase demand for 
U.S. raw cotton and U.S. cotton yarn by at least 1 million bales 
annually within 3 years. And this increase in demand does not come at 
the expense of our trading relationship with Mexico.
    Cotton knit products comprise about 50 percent of total U.S. retail 
purchases of cotton products. A substantial portion of cotton knit 
products consumed in the United States are sourced from non-NAFTA, non-
Caribbean and non-U.S. producers.

------------------------------------------------------------------------
                                                             Millions of
                                                               480-Lb.
                                                                Bales
------------------------------------------------------------------------
U.S. Retail Purchases of Cotton...........................        19.39
  Portion that is knit products...........................         9.94
  Domestically supplied knits.............................         3.73
  CBI supplied knits......................................         1.55
  NAFTA supplied knits....................................         1.19
  Other sourced knits.....................................         3.46
  Woven and Other Products................................         9.45
------------------------------------------------------------------------

    The annual growth rate in U.S. retail purchases of all cotton 
textiles and cotton knit products has been about 7.5 percent for the 
past 3 years. If the U.S. cotton knit product market grows at only 5 
percent (roughly 60% of the recent average) for the next 3 years, it 
will add the equivalent of 500,000 bales of cotton use annually. CBI 
parity legislation should permit the Caribbean region to capture more 
than its previous market share of these additional U.S. retail sales, 
given the improved competitive position. Council economists predict 
that with CBI parity in place, the Caribbean region would be able to 
export an additional 90,000 bale equivalents of cotton annually by just 
maintaining its share of this market growth.
    Further, because of its enhanced competitive position, the CBI 
region should displace some amount of non-NAFTA cotton knit imports. If 
this legislation enables the CBI region to displace only 7.5% of non-
NAFTA cotton knit imports, that would add another 235,000 bale 
equivalents of demand for U.S. cotton and cotton textiles.
    With the right CBI bill in place, cotton knit imports from the 
Caribbean region would be almost entirely comprised of U.S. 
manufactured yarn spun from U.S. raw cotton.
    If the right CBI parity legislation had been effective for 1998, we 
would have likely seen an additional 325,000 bales of demand for 1998, 
increasing to 650,000 this year. The lost opportunity for this 
additional 650,000 bales of spinning activity has hurt the U.S. cotton 
and cotton textile industries. That additional use could have more 
effectively blunted the textile import surge caused by the Asian 
financial crisis.
    Mr. Chairman, if we cannot bring the divergent sides to a 
compromise and get this bill passed soon, we are all fiddling while 
Rome burns.
    The National Cotton Council supports a CBI bill that will maximize 
the use of U.S. cotton and cotton textile components, including U.S. 
yarn. Specifically, the Council has committed to support the following 
components in a CBI bill--
     Duty and quota free access to apparel assembled in the 
Caribbean region from fabric that was cut in the United States and 
formed in the United States from U.S. yarn (so-called 807-A category);
     Duty and quota free access to apparel assembled and cut in 
the Caribbean region from fabric that was formed in the United States 
from U.S. yarn and assembled with U.S. sewing thread;
     Duty and quota free access for apparel made from knit and 
woven fabric formed in the CBI region from U.S. yarn.
    As part of our discussion with a broad coalition interested in CBI 
legislation, including U.S. apparel manufacturers, many U.S. textile 
companies, textile importers and apparel retailers, we have also agreed 
to support a de minimis provision permitting up to 25 percent of the 
value of the garment for findings and a single transformation rule for 
brassieres.
    While we are supportive of many provisions in the House Bill, there 
are certain aspects we cannot support. The Council and the members of 
the coalition oppose the inclusion of tariff preference levels or any 
additional exceptions to rules of origin.
    We oppose extending the trade preferences to textile or apparel 
articles that originate in the Caribbean region but are not composed of 
U.S. yarn or U.S. fabric.
     First, allowing Caribbean apparel and fabric to qualify 
will enable our competitors to benefit from this trade preference;
     Second, this is a trade preference bill--not a free trade 
arrangement. By this legislation we will give special access to our 
markets in return for nothing. The full benefits of a NAFTA type 
arrangement should be reserved for a trade agreement whereby both sides 
give and get trade benefits.
    We urge this Committee and the Congress to consider Caribbean Basin 
parity legislation either on its own merits or as part of a hurricane 
relief package. We are very concerned that combining this trade bill 
with another trade preference initiative will undermine the support of 
the U.S. cotton industry.
    Mr. Chairman, I applaud your determination to get a CBI parity bill 
passed. The National Cotton Council will support this effort to the 
extent the benefits to our industry outweigh the risks.
    A CBI bill that ties the granting of preferences to the use of U.S. 
textile components is a bill we will support. It will help our 
industry. It will help the Caribbean.

                                

    Chairman Crane. Thank you, Mr. Rayner.
    Mr. Conner.

STATEMENT OF JIM H. CONNER, EXECUTIVE VICE PRESIDENT, AMERICAN 
      YARN SPINNERS ASSOCIATION, GASTONIA, NORTH CAROLINA

    Mr. Conner. Mr. Chairman, my name is Jim Conner and I'm 
executive vice president of the American Yarn Spinners 
Association, on behalf of whom this testimony is given.
    The AYSA has been a consistent supporter of special trade 
preferences for the CBI and that support continues today with a 
new urgency to work for passage of legislation based on the 
yarn forward concept.
    Two years ago, I accompanied six chief textile executive 
officers of our member companies on a trip to five countries to 
the region, that is, the Dominican Republic, Costa Rica, 
Honduras, El Salvador, and Guatemala. The purpose of the trip 
was to explore market opportunities for U.S. yarn in the 
Caribbean region. The resounding message we got from that trip 
was that these countries would rapidly become dominant 
suppliers of apparel to the U.S. market. Needless to say, the 
question from government officials, including the President of 
Costa Rica, was the possibility of locating yarn producing 
facilities in the region.
    We came back and did the follow-up studies that led to the 
conclusion that relocating capital intensive yarn production to 
the region was not economically feasible. For instance, the 
energy cost to operate modern efficient spinning mills today 
exceeds the labor costs. Frequent power outages, coupled with 
energy costs as much as four times that in the United States, 
offset other incentives for locating yarn plants in the region 
at this time. For the foreseeable future, it will simply be 
more economical and efficient to produce and ship yarn to the 
region than to ship fiber and spin it into yarn there. We 
wanted to bring this to your attention because that is the 
economic reason for the yarn forward concept.
    The emergence in recent years of apparel production in the 
Caribbean, however, is a matter of keen interest to U.S. yarn 
spinners, particularly knit apparel. And that is because a 
great deal, some 75 percent, of our production goes to knit 
fabrics. Sixty-eight percent of the total U.S. sales yarn 
production is spun from cotton fiber, practically all of which 
is supplied by U.S. cotton farmers. The remainder is spun from 
man-made fibers, predominately supplied by U.S. chemical fiber 
producers, all of whom would benefit from the right kind of CBI 
bill.
    Faced with ever-increasing competition from imports of knit 
apparel from Asia and a declining domestic market, U.S. sales 
yarn producers and our fiber suppliers face a perilous future 
unless we can develop partnerships to use our yarn in this 
hemisphere. A growing number of U.S. knitters have found it 
necessary to establish partnerships or joint ventures in Mexico 
and the Caribbean to get closer to the apparel assembly 
operations being established there.
    Circular knit fabric production in the United States 
declined between 1994 and 1997. While data is not available for 
1998, the chief executive officer of a major U.S. knit fabric 
producer was quoted recently as follows: ``During the last 
year, circular knit fabric capacity, due to consolidation and 
plant closings, dropped at least 25 percent.''
    The situation was, of course, exacerbated last year by 
imports of knit fabrics and finished garment from Asia. 
Nonetheless, the loss of knitting capacity has created a void 
in the yarn market of crisis proportions. It is estimated that 
knit fabric production in the Caribbean region already exceeds 
200 million pounds annually and will continue to grow, offering 
U.S. spinners an opportunity to fill that void.
    We believe a regional fabric provision using U.S. yarn in 
the Caribbean will enable our spinners to recapture business 
lost to Asia. Furthermore, we believe our domestic knitter 
customer base can be stabilized as domestic fabric producers 
enjoy the benefits of apparel assembly in the region with U.S. 
fabric.
    In conclusion, we believe the right CBI bill can benefit 
U.S. producers of fiber, yarn, and fabric. And we welcome the 
opportunity to work with the Committee in developing and 
supporting such a bill.
    Thank you, Mr. Chairman, for the opportunity to be with you 
today.
    [The prepared statement follows:]

Statement of Jim H. Conner, Executive Vice President, American Yarn 
Spinners Association, Gastonia, North Carolina

    Mr. Chairman, my name is Jim H. Conner and I am executive vice 
president of the American Yarn Spinners Association, on whose behalf 
this testimony is given. The Association is composed of some 100 
corporations who operate 275 plants for the production of yarn which is 
sold to other segments of the textile industry for conversion into 
fabric and other textile products.
    The American Yarn Spinners Association has been a consistent 
supporter of special trade preferences for the CBI region, as long as 
U.S. yarn producers share in the benefits of the Caribbean Trade 
Partnership. That support continues today with a new urgency to work 
for passage of legislation based on the yarn forward concept.
    Two years ago I accompanied six chief executive officers of our 
member companies on a trip to five countries in the region, i.e. the 
Dominican Republic, Costa Rica, Honduras, El Salvador, and Guatemala. 
The purpose of the trip was to explore market opportunities for U.S. 
yarn in the Caribbean region. The resounding message from the trip was 
that these countries would rapidly become dominant suppliers of apparel 
to the U.S. market. Needless to say, the question from government 
officials, including the President of Costa Rica, was the possibility 
of locating yarn-producing facilities in the region. Follow-up studies 
led to the conclusion that relocating capital-intensive yarn production 
to the region was not economically feasible. For instance, the energy 
cost to operate a modern efficient spinning mill exceeds labor costs. 
Frequent power outages, coupled with energy costs as much as four times 
that in the United States, offset other incentives for locating yarn 
plants in the region. For the foreseeable future, it will simply be 
more economical and efficient to produce and ship yarn to the region 
than to ship fiber and spin it into yarn there.
    The emergence in recent years of apparel production in the 
Caribbean, however, is a matter of keen interest to U.S. spinners, 
particularly knit apparel. According to the U.S. Bureau of Census, knit 
fabrics constitute the dominant market for U.S. spinners, and consumes 
75 percent of U.S. sales yarn production. Sixty-eight percent of total 
U.S. sales yarn production is spun from cotton fiber, practically all 
of which is supplied by U.S. cotton farmers. The remainder is spun from 
manmade fibers, predominantly supplied by U.S. chemical fiber 
producers, all of whom would benefit from the right kind of CBI bill.
    Faced with ever-increasing competition from imports of knit apparel 
from Asia and a declining domestic market, U.S. sales yarn producers 
and our fiber suppliers face a perilous future unless we can develop 
partnerships to use our yarn in this hemisphere. A growing number of 
U.S. knitters have found it necessary to establish partnerships or 
joint ventures in Mexico and the Caribbean to get closer to the apparel 
assembly operations being established there.
    Circular knit fabric production in the U.S. declined 24 percent 
between 1994 and 1997. While data is not available for 1998, the chief 
executive officers of a major U.S. knit fabric producer was quoted 
recently as follows: ``During the last year (1998), circular knit 
fabric capacity, due to consolidations and plant closings, dropped at 
least 25 percent.''
    The situation was, of course, exacerbated in 1998 by imports of 
knit fabrics and finished garment from Asia. Nonetheless, the loss of 
knitting capacity has created a void in the yarn market of crisis 
proportions. It is estimated that knit fabric production in the 
Caribbean region already exceeds 200 million pounds annually and will 
continue to grow, offering U.S. spinners an opportunity to fill that 
void.
    We believe a regional fabric provision using U.S. yarn in the 
Caribbean will enable our spinners to recapture business lost to Asia. 
Furthermore, we believe that our domestic customer base can be 
stabilized as domestic fabric producers enjoy the benefits of apparel 
assembly in the region with U.S. fabric.
    Since most woven apparel fabric produced in the U.S. is produced by 
firms who spin their own yarn in vertical plants, weavers buy 
relatively smaller volume of yarn on the outside than do knitters. 
Nonetheless, the press has been full of announcements in recent weeks 
about the closing of U.S. weaving mills, again contributing to the 
declining domestic yarn market.
    In conclusion, we believe that the right CBI bill can benefit U.S. 
producers of fiber, yarn and fabric. We welcome the opportunity to work 
with the Committee in developing and supporting such a bill.

                                

    Chairman Crane. Thank you, Mr. Conner.
    And our next witness in order is Mr. Moore.

 STATEMENT OF CARLOS MOORE, EXECUTIVE VICE PRESIDENT, AMERICAN 
                TEXTILE MANUFACTURERS INSTITUTE

    Mr. Moore. Thank you, Mr. Chairman. My name is Carlos 
Moore. I'm executive vice president of the American Textile 
Manufacturers Institute, the national trade association of the 
textile mill products industry. Our members account for nearly 
75 percent of the textile fibers processed in the United 
States. That includes some eight million bales of U.S. cotton 
out of the nearly 11 million bales consumed in the United 
States. Our firms have a long history of business relations 
with firms in the Caribbean region. For decades, our mills have 
furnished fabric and cut pieces to the region for assembly into 
garments and return to the United States.
    This relationship was strengthened in 1986 with the 
creation of the Special Access Program. Since that program went 
into effect, CBI exports of apparel to the United States have 
grown from less than $800 million a year in 1986 to $8.3 
billion last year. I want to emphasize that this growth was 
achieved under a program that mandates the use of fabrics made 
in the United States.
    You've already heard that CBI countries are facing a slow 
down in their garment industries mostly because of the flood of 
Asian textiles and apparel into the U.S. market driven by 
devalued currencies in Asia. In our own market, our industry 
has witnessed prices for Asian fabrics that have declined by 10 
percent since the currency crisis began there. Yarn prices have 
fallen as much as 23 percent from Asia.
    The cumulative effect of this crisis on the U.S. industry 
is very sobering. More than 50 U.S. textile plants have closed 
or announced they were closing during the last 14 months. More 
than 30,000 U.S. textile workers have lost their jobs. Textile 
shipments fell by almost 4 percent in 1998. The prognosis is 
not promising. Fourth quarter data from 1998 show that all 
indicators have worsened during the year.
    A properly designed Caribbean parity bill can help both 
Caribbean and U.S. companies and workers cope with this Asian 
problem. Therefore, ATMI urges the Committee to re-balance the 
competitive situation, both for the domestic textile industry 
and for the Caribbean region, by extending duty-free and quota-
free entry for A, apparel sewn in the CBI from fabric produced 
and cut in the United States and made of U.S. yarn; and, B, 
apparel cut and sewn in the Caribbean with U.S. thread from 
fabric produced in the United States of U.S. yarn.
    These 807A/809 approaches, such as approved last year by 
the Senate Finance Committee, would result in an improved 
economic partnership between the U.S. textile industry and 
garment makers in the Caribbean. This re-balancing will 
certainly help our industry and the region compete when quotas 
disappear under the WTO phaseout in 2005, as has already been 
mentioned.
    We believe, however, that H.R. 984 contains a number of 
counterproductive elements that would cause unnecessary harm to 
segments of the U.S. textile industry. Our concerns are given 
in detail in my written statement. But in summary, I would like 
to mention first: we strongly object to the provision that 
provides quota-free entry for apparel which originates in the 
territory of a partnership country. This is not allowed under 
NAFTA. It should not be allowed here. For example, this permits 
fabrics and yarns from any country, China or India, for 
example, to benefit from this approach.
    Second, we strongly oppose the inclusion of Tariff 
Preference Levels, TPLs. These permit fabric produced anywhere 
in the world to be used in apparel sewn in the Caribbean and 
imported duty-free and quota-free into the United States. They 
displace U.S. production and jobs and should be eliminated from 
the bill.
    The provision which permits access for apparel made from 
fabric knit in the CBI is similarly objectionable and 
unnecessary. We have a very diverse fabric knitting industry. 
U.S. mills can provide the knit fabric needed by CBI apparel 
manufacturers. If this provision is enacted, the stark reality 
is that additional fabric knitted in the region will be at the 
expense of U.S. knitters and U.S. jobs.
    Also, the repeated references in the bill to ``textile and 
apparel articles'' or ``textiles and apparel'' should be 
revised to cover only apparel articles of Chapters 61 and 62 of 
the harmonized system.
    The best and quickest way to increase jobs and to add 
income in the Caribbean region is to increase garment 
manufacturing which employs much more labor than textile 
manufacturing. For example, a $5 million investment in garment 
making would create jobs for over 500 apparel workers. The same 
investment would not even be enough to build a waste treatment 
plant to service an integrated textile mill. A dollar invested 
in apparel making generates 33 times the number of jobs that an 
equivalent dollar creates in textile manufacturing.
    Finally, the bill fails to include an enforcement provision 
for origin verification identical to NAFTA. Production 
verification is the cornerstone of effective enforcement.
    I would like to conclude by saying that we urge the 
Committee to act quickly, but to act in a way that will restore 
the balance between the region and U.S. production and jobs for 
the good of both regions and the 600,000 employees in textiles 
in the United States and the over 500,000 garment-making 
employees in the Caribbean by approving an 807A/809 CBI bill 
and deleting the objectionable provisions that we've described 
today.
    Thank you.
    [The prepared statement follows:]

Statement of Carlos Moore, Executive Vice President, American Textile 
Manufacturers Institute

    This statement is submitted by the American Textile Manufacturers 
Institute (ATMI), the national association of the domestic textile mill 
products industry. Collectively, ATMI's member companies produce 
virtually every kind of yarn, fabric and textile furnishing made and 
sold in the United States\1\ and account for approximately 75 percent 
of the textile fibers processed in the U.S.
---------------------------------------------------------------------------
    \1\ Silk, ramie and jute products being the only notable 
exceptions.
---------------------------------------------------------------------------
    ATMI's member firms have a long history of commercial relations 
with firms in the Caribbean/Central American region (hereafter 
``CBI''). For decades, American textile mills have furnished fabric and 
cut pieces to the region for assembly into garments and return to the 
U.S. American mills have long been the primary source of raw materials 
for the burgeoning CBI garment-making industry. An ATMI member was the 
first U.S. textile company to own and operate a garment-making facility 
in Central America. There has been a true partnership between the 
American textile industry and the CBI garment industry, one that has 
proven mutually beneficial and rewarding.
    This alliance was strengthened in 1986 with the creation of the 
Special Access Program (SAP). Since the SAP went into effect, CBI 
exports of apparel to the U.S. have grown from less than $800 million 
annually (1986) to $8.3 billion last year. This growth was achieved 
under a program which mandates the use of fabric made in the United 
States.
    ATMI believes a well-constructed legislative initiative is needed 
to further strengthen and enlarge the economic partnership between the 
U.S. and the CBI region. The nations of the Caribbean are currently 
facing special and difficult challenges, not the least of which is 
increased competition from Asia in the form of rapidly rising apparel 
exports to the U.S. fueled by the severe currency devaluations in Asia 
during the last two years.
    Prior to 1997, the CBI was competing head to head with the Far East 
in garment exports to the U.S.--and winning. From 1987 to 1997, the 
CBI's share of the U.S. apparel import market grew from 2.5% to 25%; at 
the same time, the Far East's share declined from 71% to 37%. However, 
since 1997, the CBI's competitive advantage has rapidly eroded. Apparel 
imports into the U.S. from the region are no longer increasing and, in 
fact, during the fourth quarter of 1998 actually declined. During this 
same period of time, apparel imports from the Far East increased by 
$280 million.
    In our view, the CBI is at a crucial window of opportunity: either 
legislation will be enacted by Congress that permits the CBI to compete 
successfully against the devalued currencies of the Far East, or the 
CBI may lose the opportunity even to maintain what has been its most 
vibrant and productive export sector. But it must be the right 
legislation, or else that window will once again close, as it did in 
the last Congress.
    There are grounds for hope. Despite the severe declines in Asian 
prices, textile and apparel trade between Mexico and the United States 
has shown no sign of weakening. In fact, trade ties between the two 
countries have grown even stronger over the last year as Mexico has 
continued to gain market share faster than other countries. The figures 
below testify to the power of tariff elimination to benefit both the 
U.S. textile industry and foreign countries.

------------------------------------------------------------------------
                                                    Increase ($ mil)
                                               -------------------------
                                                  1997-98      1993-98
------------------------------------------------------------------------
U.S. Textile Exports1 To Mexico...............        +$802      +$3,040
Mexican Apparel Exports to U.S................      +$1,127      +$5,100
------------------------------------------------------------------------
1 Includes cut pieces of U.S. fabric.

    The CBI apparel industry is not alone in being threatened by 
historically low prices for Asian imports. The Asian crisis has taken a 
toll on the U.S. textile industry. Prior to last year, exports of U.S. 
textile products (including cut fabric pieces) to the CBI had been 
showing regular healthy increases year-in, year-out, averaging 19%. In 
1997 alone, the increase was $760 million. In 1998, that increase fell 
to $199 million.
    Damage from the Asian crisis has not been isolated to the CBI. 
Exports of U.S. textile products to Asia, formerly a billion dollar 
export market, fell by 24 percent in 1998 and exports to all markets 
outside of North America were down 16 percent.
    In our home market, the U.S. textile industry has also been 
confronted by a wave of low-priced Asian imports. Overall prices for 
Asian fabrics have declined by ten percent since the Asian currency 
crisis began while yarn prices have fallen by 23%. Prices for certain 
Asian fabrics have dropped by as much as 45%. Not surprisingly, textile 
imports from Asia have surged, increasing last year by almost 900 
million square meters, or 15%.
    The cumulative effect of this crisis on the U.S. industry is 
sobering. More than 50 U.S. textile plants have closed or announced 
they were closing during the last 14 months and more than 30,000 U.S. 
textile workers have lost their jobs. Textile shipments fell in 1998 by 
almost 4 percent while new orders fell by more than 5 percent. And the 
prognosis is for these difficult times to grow even more difficult.
    Fourth quarter data from 1998 show textile shipments down 7 
percent, new orders and unfilled orders down 11 percent and textile 
fiber consumption off 12 percent. What all this means is that the U.S. 
textile industry is facing large-scale job losses unless measures are 
taken to rebalance the competitive situation.
    Current Economic Condition, U.S. Textile Industry:
    Job losses, 1998: -30,000
    Plants closed (last 14 months): 45
    Shipments, 4th quarter: -7%
    New orders, 4th quarter: -11%
    Unfilled orders, 4th quarter: -11%
    Fiber consumption, 4th quarter: -12%
    We ask the Committee to keep in mind that this crisis occurred 
because of excess capacity in Asia encouraged by cozy finance and 
industry relationships, lack of sound fiscal policy and the 
subsidization of that excess capacity on a massive scale by Asian 
governments. The U.S. textile industry and its workers should not have 
to bear the brunt of irresponsible policies and predatory practices on 
the part of foreign governments.
    As a result, ATMI urges that the Committee substantively help to 
rebalance the competitive situation both for the domestic textile 
industry and for the Caribbean region by extending duty-free and quota-
free entry for: (a) apparel sewn in the CBI from fabric produced and 
cut in the U.S., and made of U.S. yarn; and (b) apparel cut and sewn in 
the CBI with U.S. thread from fabric produced in the U.S. of U.S. yarn. 
Such an 807A/809 approach, as approved last year by the Senate Finance 
Committee, would result in an improved economic partnership between the 
U.S. textile industry and garment makers in the Caribbean.
    A study by the economic consulting firm Nathan Associates shows 
that by taking this simple step, U.S. textile exports to the region can 
be boosted by $1.9 billion per year and that net U.S. textile 
employment would increase by 35,000 jobs. As our experience with NAFTA 
has shown, real and immediate gains in exports of U.S. textile products 
to the CBI, as well as in imports of garments assembled in the CBI from 
U.S. fabric and yarn, would result if such a move is taken.
    Unfortunately, the committee is considering H.R. 984, which 
contains a number of counterproductive elements that would cause 
unnecessary harm to segments of the U.S. textile industry. These 
elements and ATMI's grounds for objection are as follows:
    Quota-Free Entry Using Foreign Components.--ATMI strongly objects 
to the provision (Section 104, para. (b) (2) (A) (iii) (I)) which 
provides quota-free entry for apparel which ``originates in the 
territory of a partnership country.'' This means that fabric from 
anywhere in the world could enter any of the CBI countries--it would be 
entered duty-free, of course--be cut and sewn into apparel and shipped 
to the U.S. with no restraint whatever. Not only is this a de facto 
abrogation of the Uruguay Round Agreement on Textiles and Clothing, it 
is bad trade policy. Why should China, India, Pakistan and other 
undeserving countries be given this extraordinary entree to the U.S. 
market at no cost to them? This is not allowed under NAFTA and it 
should not be allowed here.
    Tariff Preference Levels (TPLs).--Section 104 B (I), (ii) These 
permit fabric produced anywhere in the world to be used in apparel sewn 
in the CBI and imported duty-free and quota-free into the United 
States. TPLs are loopholes that unnecessarily displace U.S. production 
and jobs. Little, if any, of the apparel currently exported from the 
CBI nations to the U.S. uses fabric not available from U.S. textile 
mills.
    It is noted that the NAFTA agreement (and the precursor U.S.-Canada 
Free Trade Agreement) contains TPLs. It should also be noted, however, 
that they have been greatly abused. The original intent of TPLs was to 
permit the use of fabrics and yarns not available in any of the 
participating countries. Unfortunately, that is not what has happened 
under NAFTA. Canada has used its TPLs to export to the United States 
textile and apparel products made of non-North American yarns and 
fabrics freely available in North America. As a result, textile mills 
in Europe and Asia are getting a $300 million free ride into the U.S. 
market annually on the coattails of Canada's TPLs. This has severely 
damaged U.S. manufacturers of wool suits and wool fabric and harmed 
producers of many other garments and fabrics.
    More recently, Mexican officials acknowledge that Mexico's TPLs are 
also now being used to export textiles and apparel made from Asian 
yarns and fabrics that could just as easily have been sourced from 
textile mills in Mexico and the United States. The fact that these TPLs 
lay essentially unused until the Asian currency devaluations caused 
Asian fabric prices to plummet is indicative of how the original intent 
behind these preferences has been perverted. This situation must not be 
duplicated in the CBI.
    The unavailability or short supply of any yarns or fabrics--which, 
it will be noted again, is highly unlikely to begin with--can better be 
dealt with by the specific enumeration of exempt fabrics and yarns 2 
and/or a ``short supply'' provision 3 , just as was done in NAFTA. 
There is no need for TPLs.
---------------------------------------------------------------------------
    \2\ See NAFTA Annex 401-B, Chapter 62 and headings 6205.20-6205.30.
    \3\ See NAFTA Annex 300-B, Section 7, para. 2.
---------------------------------------------------------------------------
    Apparel Made From Fabric Knit in CBI.--(Section 104, (2) (A) (ii) 
(iii)) This provision is similarly unnecessary. The United States 
boasts the world's most diverse fabric knitting industry. U.S. mills 
can provide all the knit fabric needed by CBI apparel manufacturers. 
Enactment of this provision would encourage foreign, not local or U.S., 
investors to install knitting capacity in the region. The investors 
will almost certainly be Asian and they will leap at the chance to get 
their fabric into the U.S. market duty-free. They should not be given 
license to do so.
    The stark reality is that every pound of fabric knitted in the 
region by these outsiders will be at the expense of U.S. knitters. It 
is simply wrong to enact provisions which will take existing business 
away from American producers, business which has been carefully 
nurtured over the years, and will, as well, deny them any future 
business, all in favor of Asian interests.
    Preference for Textile Articles.--(Section 104, Para.2) The 
repeated references to ``textile and apparel articles'' and ``textile 
or apparel articles'' should be revised to cover apparel articles of 
HTS Chapters 61 and 62 only. The legislation's stated objective to 
``promote the growth of free enterprises and economic opportunity,'' 
can best be realized by providing job opportunities in the labor 
intensive apparel manufacturing sector rather than in the textile 
sector. For example, a five million dollar investment in garment making 
would create jobs for over 500 apparel workers; the same investment 
would not even be enough to build the waste treatment plant to service 
an integrated textile mill. A dollar invested in apparel making 
generates 33 times the number of jobs that an equivalent dollar creates 
in textile manufacturing.
    Transshipment Provisions Not Included.--The bill fails to include 
provisions for origin verification identical to those in Article 506 of 
NAFTA. Such Article 506 procedures are absolutely essential to ensure 
that goods entering the U.S. with preferential treatment are indeed 
entitled to these benefits. Failure to include these provisions would 
almost certainly lead to the region being used as an illegal 
transshipment point by Asian manufacturers and/or encourage the use of 
non-U.S. produced fabric in apparel entering the U.S. duty-free.
    The record shows that there have been repeated violations of the 
requirements of the SAP and NAFTA even with verification procedures in 
place. U.S. Customs has already discovered transshipment activity by 
Asian manufacturers in nine CBI countries 4. An absence of such Article 
506 procedures would lead to a tidal wave of illicit imports.
---------------------------------------------------------------------------
    \4\ Jamaica, Panama, Costa Rica, Guatemala, Belize, Honduras, 
Haiti, the Dominican Republic and St. Lucia.
---------------------------------------------------------------------------
    ATMI notes language contained in Section 104, Subsection 5 of H.R. 
984 which indicates congressional desire to have the beneficiary 
partnership countries accede to NAFTA or enter into a NAFTA-comparable 
agreement with the United States. ATMI is wholly supportive of this 
policy and would welcome a NAFTA-type agreement with any or all of the 
parties.
    However, H.R. 984 would grant overly generous privileges and 
preferences to the CBI countries in a unilateral fashion. CBI countries 
will have little incentive to make the commitments needed to join in a 
full free trade agreement if they get nearly all the benefits of such 
an agreement via H.R. 984.
    In the final analysis, legislation which grants preference to 
apparel made in the CBI region solely from American-formed fabric and 
yarn is the best course of action to pursue. Such legislation would 
convey benefits to everyone involved--American apparel importers, CBI 
garment makers, U.S. textile mills--while harming none of them. Such an 
approach has a precedent--the Special Access Program. The historical 
record clearly shows the efficacy of this approach: a ten-fold increase 
over twelve years in the dollar value of CBI apparel exports to the 
United States; an increase in the CBI's share of U.S. apparel imports 
from 6.5 percent (1986) to 23.8 percent (1998); and a nine-fold 
increase in U.S. exports of textiles and cut-pieces to the region.
    There is clearly a compelling need to extend duty-free treatment 
immediately to CBI apparel items made from U.S. fabrics and U.S. yarns. 
Failing that, the Caribbean will lose its competitive edge and the 
region will be placed in even greater economic stress. And the U.S. 
textile industry will face larger and more serious job losses and even 
more plant closings in the face of unprecedented price declines from 
Asia. We urge the Committee to act quickly to restore this balance for 
the good of both the nations of the Caribbean and the United States 
textile industry and our 600,000 employees by approving an 807A/809 CBI 
bill in lieu of H.R. 984.

                                Appendix

    ATMI wishes to point out what we believe are certain technical 
errors in the language of H.R. 984. In Section 104, para. (b) (2) (A) 
(ii) (I) the line should read ``is assembled in a partnership country, 
wholly from fabrics formed and cut. . . .'' Likewise, in para. IV of 
this subsection, the word ``wholly'' should be moved from after the 
word ``fabrics'' to after the word ``country''.

                                

    Chairman Crane. Thank you, Mr. Moore.
    Mr. Lamar.

   STATEMENT OF LARRY K. MARTIN, PRESIDENT, AMERICAN APPAREL 
  MANUFACTURERS, ARLINGTON, VIRGINIA, AS PRESENTED BY STEPHEN 
            LAMAR, DIRECTOR OF GOVERNMENT RELATIONS

    Mr. Lamar. Thank you. I am Steve Lamar, director of 
Government Relations at the American Apparel Manufacturers 
Association, the national trade association of the U.S. apparel 
industry. I appreciate the opportunity to appear before the 
Subcommittee on the subject of Central American and Caribbean 
reconstruction.
    Mr. Chairman, let me congratulate you and your colleagues 
for your strong leadership in introducing H.R. 984, the CCARES 
bill. Let me also congratulate Senator Graham for introducing a 
similar bill in the Senate. These measures, which contain a 
crucial Caribbean Basin trade enhancement provision, will be 
important to foster long-term reconstruction from the 
hurricanes that recently devastated the Caribbean Basin region. 
Our member firms have made enactment of this legislation a top 
priority for 1999.
    As you know, AAMA has long supported enactment of CBI trade 
enhancement legislation as a key component to ensure the 
competitiveness of the U.S. apparel industry. Sadly, the need 
for this legislation has been reinforced by two hurricanes that 
visited severe devastation upon areas of Central America and 
the Caribbean. It has now become a vital tool to sustain 
economic recovery in the region.
    Let me speak for a moment on these two points. First, the 
hurricanes. Before the hurricanes struck, the apparel sector 
was already emerging as an engine of economic growth. Now with 
severe damage to many other export industries, such as tourism, 
bananas, and coffee, the apparel sector takes on added 
significance as a source of much-needed foreign exchange and 
employment.
    The apparel sector is ready to put people to work 
immediately. In many parts of the region, the apparel sector 
has escaped severe damage. Other sources of traditional 
employment were not so lucky and are not likely to recover for 
many months or years.
    Moreover, throughout the crisis, the apparel industry has 
emerged as a source of stability and relief. Many factories 
doubled as shelters and hospitals and served as distribution 
points for donations, both through official and private 
channels. I might add that members of our own association 
contributed more than $5 million worth of direct aid to the 
region immediately after the hurricanes and continued to pay 
workers even when they could not get to their jobs. Keeping the 
apparel industry viable, through expanded access to the U.S. 
market, reinforces this stabilizing role.
    Let me also speak for a moment about the apparel industry. 
Our industry relies upon programs like the CBI, and subsequent 
improvements made through the Special Access Program, to allow 
us to meet the challenges of low-cost foreign imports. Broadly, 
these programs give us lower average costs, make U.S. companies 
more competitive, and allow us to maintain significant 
employment in the United States. Moreover, as you've already 
heard, our supplier industries have a strong interest in an 
apparel industry that is located close to U.S. shores.
    But these programs, which were tailored for the late 
1980's, no longer make as much sense for U.S. apparel firms. 
Preferential benefits accorded Mexico under NAFTA, the imminent 
phaseout of the quotas under the Uruguay Round, and the 
discounts induced by the Asian economic crisis have largely 
eroded the benefit of the CBI. Just like we no longer use IBM 
PS 2 computers we had on our desks in the early 1990's, our 
members are finding they have less use for the CBI program.
    To remain competitive, many apparel firms now find it 
increasingly more cost-effective to source garments out of 
Asia. Although we would prefer to do business in the CBI, we 
have greater control and it is closer to our customers, we are 
finding we cannot stay in business unless we shift some of our 
production East.
    Unfortunately, we are already seeing the effects of this 
diversion. For years, we have warned that growth rates for the 
CBI were down because new investment was being directed to 
Mexico. In 1998, for the first time ever, the CBI actually lost 
share of the U.S. apparel import market. That same year, 
Mexico's market share increased. More ominously, the U.S. 
market share by ASEAN nations increased by about 50 percent.
    Let me leave you with a bottom line economic fact. At the 
end of the day, our members essentially do business where the 
Government tells us. In the 1980's and the early 1990's, 
through a deliberate policy to promote regional stability and 
ensure our competitiveness, the Government encouraged us to do 
business in the Caribbean Basin. Now with the global changes 
that are occurring, and absent enactment of CBI trade 
enhancement, the Government is essentially telling us to do 
business in Asia.
    If we are forced to source more of our garments from Asia, 
we will buy less U.S. cotton, less U.S. yarn, and less U.S. 
fabric. This will have a detrimental impact on U.S. workers and 
U.S. suppliers to our industry. Moreover, as we shut down 
facilities in San Pedro Sula, and replace them with ones in 
Shanghai, CBI workers and regional economic prosperity suffer 
as well.
    The continued health of the CBI region is tied inextricably 
to the growth of the region's apparel assembly industry. 
Apparel assembly creates thousands of jobs in the region and 
generates millions of export revenues that are used to sustain 
development goals. Improving economic conditions contributes to 
political stability, deters illegal immigration, and creates an 
alternative to the production and trafficking of illegal drugs. 
And as we have seen, a prosperous Caribbean Basin means more 
exports of U.S. consumer goods, capital equipment, and farm 
products.
    At the same time, the apparel industry in the region is 
vital to the continued economic health of the U.S. apparel 
industry. These strategic partnerships enable us to stay 
competitive to meet the challenges of low-cost foreign imports, 
maintain significant apparel employment in the United States, 
and maximize the use of U.S. inputs--again, such as U.S. 
cotton, U.S. yarn, and U.S. fabric.
    There has long been a need for CBI enhancement legislation. 
It should have been enacted 5 years ago. The damage caused by 
the hurricanes makes it even more imperative that it be enacted 
now.
    I appreciate the opportunity to submit this testimony, and 
I would be pleased to respond to any questions you may have.
    [The prepared statement follows:]

Statement of Larry K. Martin, President, American Apparel Manufacturers 
Association, Arlington, Virginia, as presented by Stephen Lamar, 
Director

    Thank you. I am Larry Martin, President of the American Apparel 
Manufacturers Association (AAMA). We appreciate the opportunity to 
appear before the Subcommittee on the subject of Central American and 
Caribbean reconstruction.
    AAMA is the trade association of the U.S. apparel industry, 
representing about 85 percent of clothes sold at wholesale. While the 
industry is large, most of the companies are relatively small. Three-
fourths of our members have sales under $20 million and more than half 
have sales under $10 million. Our members employ most of the 725,000 
Americans working at apparel manufacturing jobs in the U.S. They also 
operate in Mexico under NAFTA, in Central America and the Caribbean, 
and some import from other sources.
    Mr. Chairman, let me congratulate you and your colleagues--Mr. 
Rangel, Mr. Kolbe, Mr. Matsui, and Mr. Jefferson--for your strong 
leadership in introducing H.R. 984--the Caribbean and Central America 
Relief bill. This measure--which contains a crucial Caribbean Basin 
trade enhancement provision--will be important to foster long term 
reconstruction from the hurricanes that recently devastated many of the 
countries of the Caribbean Basin Initiative (CBI) region. It is also 
critical for the long-term health of the US apparel industry.

                        Hurricane Reconstruction

    AAMA has long supported enactment of CBI trade enhancement 
legislation. Sadly, the need for this legislation has been reinforced 
by two hurricanes that visited severe devastation upon areas of Central 
America and the Caribbean. Expanding the US/CBI trade relationship will 
be a vital element in helping the countries of the Caribbean and 
Central America recover from the devastation caused by Hurricanes Mitch 
and Georges.
    Short-term relief is important in helping these countries weather 
the immediate crisis. US support for long term reconstruction, however, 
will be necessary to sustain economic growth in the region. Regional 
leaders agree.
    In a November 9 letter to President Clinton, the five Central 
American Presidents asked for Caribbean Basin trade enhancement 
legislation as an element of the reconstruction effort for Central 
America. In a November 24 guest editorial in the Washington Post, Costa 
Rican President Miguel Rodriguez reiterated this point, stating that 
Caribbean trade enhancement would be a ``necessary part of a program of 
recovery of our region.'' Since then, and as most recently as 2 weeks 
during the President*s trip to Central America, these leaders had made 
repeated calls for CBI trade enhancement.
    A CBI trade enhancement package would buildupon the successful US/
Caribbean partnerships already at work in dozens of locations across 
the region. It would expand US market opportunities for apparel and 
other products assembled in Central America and the Caribbean. And 
because most of that apparel is manufactured using US textiles and 
related inputs, American workers and their firms would benefit as well.
    Before the hurricanes struck, the apparel sector was already 
emerging as an engine of economic growth. Now, with severe damage to 
many other export industries--such as tourism, bananas, and coffee--the 
apparel sector takes on added significance as a source of much-needed 
foreign exchange and employment.
    The apparel sector is ready to put people to work immediately. In 
many parts of the region, the apparel sector has escaped severe damage. 
For example, by mid-November, 1998, Honduran apparel production had 
again reached 92 percent of pre-hurricane production. Other sources of 
traditional employment are not likely to recover to this level for many 
months or years.
    Throughout the crisis, the apparel industry has emerged as a source 
of stability and relief. Many factories doubled as shelters and 
hospitals, and served as distribution points for donations--both 
through official and private channels. I might add that members of our 
association contributed more than $5 million worth of direct aid to the 
region immediately after the hurricanes and continued to pay workers 
even when they could not get to their jobs. Keeping the apparel 
industry viable, through expanded access to the US market, reinforces 
this stabilizing role.
    Over the past 15 years, the US government and private sector have 
invested substantial political and financial capital to secure peace 
and economic prosperity in this region. Passage of a Caribbean Basin 
trade enhancement package--as an element of hurricane reconstruction--
keeps that investment viable.

                    Apparel Industry Competitiveness

    While the havoc caused by the hurricanes brings urgency to the need 
for CBI enhancement legislation, AAMA has felt a strong need for it 
since the onset of negotiations over NAFTA.
    AAMA supports the maintenance of a large and viable U.S. apparel 
manufacturing industry. American apparel companies are not in business 
to move jobs offshore. Every one of our members would rather do all its 
manufacturing in the United States and not have to deal with the 
complexity of offshore production. However, we must compete with low-
wage imports, which have taken over half of our market. In order to 
compete with low-wage imports, many U.S. companies opened production in 
Mexico and the CBI countries. Firms often found sourcing from the CBI 
countries best fit their operations, even though apparel was 
specifically excluded from the CBI program.
    This exclusion was partially offset by the 807 program, which gives 
us lower average costs, makes U.S. companies more competitive and 
allows us to maintain significant employment in the U.S. Under 807, a 
$10.00 garment usually has $6.00 in U.S. components and about $4.00 in 
value-added by offshore assembly. The duty is assessed on only the 
value-added. That duty is usually about 20 percent, which on $4.00 is 
80 cents. This is equivalent to 8 percent on the value of the entire 
garment. With wholesale and retail markups, a garment from the CBI 
region carries a penalty of approximately $3.00, as compared to the 
same garment coming from Mexico.
    In 1986, 807 was modified by the creation of the 807-A program. 
Under it, duty still was paid, but only on the value-added in the 
region. However, the creation of Guaranteed Access Levels (GALs) 
essentially made many products from the region quota-free. 807-A was 
duplicated for the Mexican industry and named the Special Regime.
    It is important to realize the production moved was no longer 
viable in the U.S. Without the incentives of 807-A, NAFTA and hopefully 
CBI enhancement, that production would go to the Far East where there 
would be little U.S. involvement in the manufacturing process. Although 
Asia is further away from the U.S. market, its access to lower priced 
inputs, especially since the onset of the financial crisis, makes it 
extremely competitive.
    With the implementation of NAFTA, which AAMA strongly supported, 
apparel assembled in Mexico of U.S. formed fabric enters our market 
quota and tariff-free. However, duties are still charged on the value 
added to imports from the CBI countries. This places the CBI countries 
at a great competitive disadvantage vis-a-vis Mexico, and the progress 
the U.S. fostered in the Caribbean Basin will in large part be 
reversed. Competition from Mexico will force many local and U.S. firms 
out of business or to move their investments from the CBI countries to 
Mexico or Asia.
    With the elimination of tariffs under NAFTA, this 8 percent cost no 
longer is added to the price of garments coming from Mexico. Couple 
this with slightly easier and cheaper transportation between Mexico and 
the U.S. vs. that between the Caribbean and the U.S. and Mexico has a 
significant advantage. Eight percent may not appear to be a significant 
saving, but the average profitability of an apparel firm in the U.S. is 
much less than that.
    The effects of NAFTA on the CBI region have become apparent. Since 
NAFTA went into effect on January 1, 1994, apparel imports from Mexico 
have increased 611 percent. While starting from a larger base, imports 
from the CBI have increased at one-third that rate.
    Now, for the first time, the CBI region actually is losing share of 
the import market. In 1998, the CBI region accounted for 23.8 percent 
of the garments imported into the United States, a decline from the 
25.1 percent in 1997. During that same year, the market share of Mexico 
and other regions--such as ASEAN--continued to increase.
    807 production created thousands of good jobs in Mexico and the 
Caribbean Basin. We estimate 15 apparel jobs in the U.S. are created by 
every 100 jobs in 807 production in the region. This is in addition to 
the thousands of U.S. jobs it maintains in the textile, transportation 
and other industries. These jobs in Caribbean Basin, the related U.S. 
apparel jobs and the jobs in ancillary industries will not come to the 
U.S. if the Caribbean should be shut down. They will migrate to the Far 
East.

                        Regional Economic Goals

    CBI trade enhancement makes good foreign policy. The United States 
needs to remain engaged in the region to promote stable, democratic 
governments and market-oriented economies. Our interests in this regard 
our clear:
     Political and economic turmoil in the CBI often manifests 
itself in the US through increased narcotics trafficking or waves of 
immigrants and refugees.
     Many US residents and communities share family ties with 
individuals in Central America and the Caribbean.
     The Caribbean Basin is the 9th largest destination of US 
exports worldwide, and is one of the few regions where we maintain a 
consistent trade surplus.
     US commercial and security interests demand uninterrupted 
access to transit routes through the Caribbean Sea and the Panama 
Canal.
    The continued economic health and of the CBI region is tied 
inextricably to the growth of the region's apparel assembly. The jobs 
available in the apparel industry, as well as supporting industries, 
are key sources of employment throughout the region. Export revenues 
generated by apparel assembly encourages Caribbean Basin governments to 
increase and accelerate economic reform, including investment 
liberalization, protection of intellectual property rights, promotion 
of worker rights, and expansion of market access. Strong economic 
conditions contribute to political stability, deter illegal 
immigration, and create an alternative to the production and 
trafficking of illegal drugs. Caribbean Basin trade enhancement only 
accelerates this process.

                               Conclusion

    Although unintentional, passage of NAFTA adversely affected the 
competitiveness of the CBI region by diverting existing and potential 
investment from the region in favor of Mexico and, increasingly, Asia. 
CBI trade enhancement assures a level playing field will exist between 
the CBI region and Mexico. Without it, U.S. companies already in the 
region, competitively disadvantaged by the elimination of Mexican duty 
rates and quotas, will move new investment elsewhere and disinvest 
existing manufacturing facilities. If the apparel sector leaves Central 
America and the Caribbean for Asia, US workers, US supplier industries, 
and Caribbean regional economic stability will suffer.
    There has long been a need for CBI enhancement legislation. It 
should have been enacted 5 years ago. The damage caused by the 
hurricanes make it even more imperative that it be enacted now.
    Once again, we appreciate the opportunity to submit this testimony. 
We would be pleased to respond to any questions you may have.

                                

    Chairman Crane. Thank you, Mr. Lamar.
    And our last witness, Mr. Autor.

STATEMENT OF ERIK O. AUTOR, VICE PRESIDENT, INTERNATIONAL TRADE 
              COUNSEL, NATIONAL RETAIL FEDERATION

    Mr. Autor. Thank you, Mr. Chairman. My name is Erik Autor. 
I'm vice president of International Trade Counsel of the 
National Retail Federation. I appreciate the opportunity to 
testify in support of H.R. 984, the Caribbean and Central 
American Relief and Economic Stabilization Act.
    NRF is the largest trade association that speaks for the 
U.S. retail industry. NRF members cover the spectrum of 
retailing, including department, specialty, discount, 
catalogue, Internet, and independent stores. NRF's members 
represent an industry that employs more than 22 million, about 
one in five American workers, and registered sales of more than 
$2.6 trillion in 1998.
    NRF and the U.S. retail industry strongly support H.R. 984 
because it would provide immediate tangible benefits to 
Caribbean Basin Initiative countries, several of which were 
devastated by recent hurricanes. This bill will give those 
countries the benefits they need to attract new business and 
investment quickly thereby creating jobs, income, and economic 
opportunity in countries struggling to recover from natural 
disasters. The legislation's textile and apparel provisions are 
particularly critical in this effort, by encouraging U.S. 
apparel producers to manufacture products in partnership with 
their CBI counterparts. In turn, U.S. retailers, who buy 
clothing from U.S. apparel producers, will be better able to 
give our U.S. customers a good selection of value-priced 
apparel.
    We commend Representatives Crane, Kolbe, Rangel, Jefferson, 
and Matsui for their insistence that the trade-related relief 
in H.R. 984 be meaningful and effective. The CBI region is a 
very important source of apparel products for the U.S. retail 
industry. We have long supported giving CBI countries trade 
benefits that parallel those provided to Mexico, particularly 
for textile and apparel products.
    We are disappointed that efforts to pass such legislation 
have so far been stalled by certain domestic interests who 
would limit the trade benefits so as to help mainly themselves 
rather than the CBI countries. By seeking to deny trade 
benefits to apparel products made from fabric produced in the 
CBI region, these advocates of ``enhanced'' CBI trade 
legislation would, in fact, ensure that manufacturing in CBI 
countries remains limited to assembly of U.S. garments. Such 
restrictions would ultimately hurt the economic development of 
CBI countries by preventing CBI producers from moving into 
related, higher-paying, and more technologically sophisticated 
production sectors. Watering down the textile and apparel 
provisions in this bill will also continue to handicap the 
ability of the CBI region to compete with Asia and Mexico.
    In contrast, H.R. 984 would promote broader, deeper 
economic development in the CBI by encouraging both apparel 
production and assembly and the development of a textile 
industry to supply that apparel production.
    H.R. 984 also promotes U.S. economic interests. Between 
1992 and 1998, U.S. exports to the CBI countries increased 76 
percent to $19.2 billion. Imports from the CBI region increased 
82 percent over the same period reaching $17.1 billion, 
resulting in a $2.1 billion trade surplus with the region. Most 
of this trade involves textiles and apparel.
    The current CBI program allows U.S. apparel producers to 
ship cut U.S. fabric to a CBI country for assembly into 
clothing that is then re-exported to the United States. The 
importer pays duty only on the value added in the CBI country. 
The program has been a boon to U.S. textile and apparel 
producers, U.S. retailers, and the CBI countries.
    However, NAFTA gave Mexico a significant advantage over its 
CBI competitors: immediate duty-free treatment on apparel from 
Mexico that is assembled from fabric formed and cut in the 
United States. Because U.S. tariff rates are so high on many of 
these products, a portion of retail sourcing shifted to Mexico 
from both Asian and CBI sources. Thus, even without the damage 
due to the hurricanes, the CBI apparel industry suffered a 
significant loss in competitiveness relative to Mexico.
    Focusing solely on likely increases in U.S. imports as a 
result of additional trade preferences for CBI countries 
overlooks the growth potential for U.S. exports of yarn, 
fabric, notions, and production machinery. Increased production 
of those products as a result of providing CBI countries true 
NAFTA parity would also create jobs in the United States.
    It's puzzling why the U.S. textile industry, which 
supported NAFTA and touts the benefits of that agreement, would 
seek anything less for CBI countries. H.R. 984 also promises 
the United States social and political benefits as well. CBI 
countries must have the incentive and the means to move up the 
economic ladder by offering their citizens better jobs in 
legitimate industries. Otherwise, they face the risk of 
political and economic instability resulting from unemployment 
and the temptation to engage in activities harmful to the 
United States, such as drug trafficking or illegal immigration.
    NRF looks forward to working with the members of the 
Committee in both Houses to ensure rapid enactment of CBI 
legislation that is meaningful and that will accomplish U.S. 
economic, political, and social goals for the CBI region.
    In conclusion, open trade has played a key role in our 
strong growing economy and low unemployment. We have no excuse 
but to further liberalize trade boldly, not timidly, as some 
suggest. H.R. 984 presents us with a perfect opportunity to set 
the example and ensure our own economic future.
    Thank you.
    [The prepared statement follows:]

Statement of Erik O. Autor, Vice President, International Trade 
Counsel, National Retail Federation

                            I. Introduction

    My name is Erik O. Autor. I am Vice President and International 
Trade Counsel, to the National Retail Federation (``NRF''). I am 
pleased to have the opportunity to appear before you today in support 
of H.R. 984, the ``Caribbean and Central American Relief and Economic 
Stabilization Act (CCARE).''
    NRF is the nation's largest trade association that speaks for the 
U.S. retail industry. NRF members cover the entire spectrum of 
retailing, including department, specialty, discount, catalogue, 
internet, and independent stores, as well as 32 national and 50 state 
retail associations. In all, NRF's members represent an industry that 
encompasses over 1.6 million retail establishments, employs more than 
22 million people--about 1 in 5 American workers--and registered sales 
of more than $2.6 trillion in 1998.
    NRF and the U.S. retail industry strongly support H.R. 984 because 
it provides immediate, tangible benefits to Caribbean Basin Initiative 
(CBI) countries, a number of which were hard-hit by recent hurricanes. 
This bill will give those counties the benefits they need to attract 
new business and investment quickly, which will, in turn, create jobs, 
income, and economic opportunity in countries struggling to get back on 
their feet after devastating natural disasters. The legislation's 
textile and apparel provisions are particularly critical in this 
effort, by encouraging U.S. apparel producers to manufacture products 
in partnership with their CBI counterparts. In turn, U.S. retailers, 
who buy clothing from U.S. apparel producers, will be better able to 
supply our customers in the United States with a good selection of 
value-priced apparel. Representatives Crane, Kolbe, Rangel and Matsui 
are to be commended for their insistence that the trade-related relief 
in Title I of the legislation be meaningful and effective, and we thank 
them for their persistence and hard work in maintaining the integrity 
of this critical trade initiative against those who seek to water it 
down.

 II. H.R. 984 Will Promote the Meaningful Development of CBI Economies

    The U.S. retail industry has long supported giving CBI countries 
trade benefits that parallel those provided to Mexico, particularly for 
textile and apparel products. We are disappointed that several years 
spent seeking meaningful legislation for the region have so far been 
stalled by certain parochial domestic interests, who would limit the 
trade benefits so as to benefit themselves, rather than the CBI 
countries. By seeking to deny special trade benefits to apparel 
products made from fabric produced in the CBI region, these advocates 
of ``enhanced'' CBI trade legislation would, in fact, ensure that 
manufacturing in CBI countries remain limited to assembly of U.S. 
garments. Such restrictions would ultimately hurt CBI producers and 
their workers by preventing CBI countries from moving their economies 
to the next level of development in related, higher-paying and more 
technologically-sophisticated production sectors. Watering down the 
textile and apparel provisions in this bill will also continue to 
handicap the ability of the CBI region to compete with Asia and Mexico.
    But H.R. 984 has a bigger economic vision for the CBI region, and 
for that it has the full and strong support of the NRF and the U.S. 
retail industry. H.R. 984 would promote broader, deeper development in 
the CBI by encouraging not only apparel production and assembly, but 
also the development of a textile industry to supply that apparel 
production. In addition, by allowing eligibility to CBI-made apparel 
produced from specified volumes of fabrics that are unavailable from 
the United States or the CBI region, H.R. 984 would enable CBI 
producers to accept orders from U.S. retailers for certain fashion 
products that can only be made with these fabrics.
    Overall, H.R. 984 will significantly help countries in the region 
to diversify their economies, the importance of which should not be 
underestimated. In the banana dispute with Europe, the United States 
has argued that Caribbean countries should be weaned away from 
overreliance on inefficient banana production. Encouraging the 
expansion of local apparel and textile production capability, is an 
obvious way to help these countries along the right path.

               III. H.R. 984 Also Promotes U.S. Interests

    H.R. 984 also promotes many U.S. interests. The Subcommittee is 
probably aware that, on trade, the United States enjoys strong export 
growth to the CBI, and annual trade surpluses with the region. U.S. 
exports to CBI countries increased 76 percent between 1992 and 1998, 
reaching $19.2 billion. Imports from the region increased 82 percent 
over the same period, reaching $17.1 billion. Thus, we ended 1998 with 
a $2.1 billion trade surplus with the CBI.
    Most of this trade involves textiles and apparel. Half our imports 
from the region in 1998 and 24 percent of our exports were either 
textile or apparel products. The current CBI program allows U.S. 
apparel producers to ship cut U.S. fabric to a CBI country for assembly 
into finished clothing, which is then re-exported to the United States. 
The importer pays duty only on the value added in the CBI country. 
Quotas on these products are typically non-existent or liberal enough 
so as not to be a restraint on trade. The program has been a boon to 
U.S. textile and apparel producers, U.S. retailers, and CBI apparel 
producers.
    However, the implementation of NAFTA gave Mexico one particularly 
significant advantage over its CBI competitors: the immediate duty-free 
treatment on imports of apparel from Mexico that are assembled from 
fabric wholly formed and cut in the United States--the so-called ``807A 
imports.'' Because U.S. tariff rates are so high on these products, a 
portion of retail sourcing shifted to Mexico from both Asian and CBI 
sources. The tariff break was too important to ignore in the highly 
competitive U.S. apparel retail market. Even without the added 
dislocation caused by the hurricanes, the apparel industry in CBI 
countries has suffered a significant loss in competitiveness relative 
to Mexico. It is high time to rectify the disadvantage to these 
important neighbors and trading partners.
    In focusing on the likely increase in U.S. imports, what is often 
overlooked in the debate over additional trade preferences for CBI 
countries is the growth potential for U.S. exports of yarn, fabric, and 
notions, not to mention the potential for export growth from U.S. 
machinery and equipment manufacturers. Increased production of those 
products as a result of providing CBI countries true NAFTA parity would 
also create additional jobs in the United States. Thus, we find it 
ironic that one industry--the U.S. textile industry--that supported 
NAFTA and so strongly lauds the benefits its has received as a result 
of the textile and apparel provision of that agreement would seek 
anything less for countries in the CBI. If NAFTA has been good for the 
textile industry, why would NAFTA parity for the CBI not also be 
equally good for the textile industry?
    Moreover, H.R. 984 promises the United States social and political 
benefits as well. Only if these economies are able to move up the 
economic ladder by offering their citizens better and better jobs in 
legitimate industries will they be able to guard against the 
instability (both political and economic) that results from massive 
unemployment and the temptation to move instead into endeavors harmful 
the United States, such as drug trafficking. Only by providing 
incentives to create new good jobs in the CBI region can the United 
States forestall waves of illegal immigration of people looking for a 
better life.

                             IV. Conclusion

    The Federation looks forward to working with the Chairman, his co-
sponsors and others in the House and eventually the Senate to ensure 
that legislation that is meaningful, that will accomplish U.S. goals of 
promoting economic development and political and social stability in 
important U.S. neighbors, will finally be enacted this session of 
Congress.
    We are at an important crossroads in shaping trade policy in the 
United States. The world is looking to the United States for leadership 
on trade. Up until today, we have had a long and laudable history of 
promoting trade liberalization, even in the face of strong political 
opposition. We exhort other countries to follow the same course, even 
those facing economic recessions and strong domestic pressures for new 
barriers to foreign competition. Today we are blessed with a strong and 
growing economy, and unemployment rates among the lowest in recent 
memory. This enviable situation has come in no small measure, as a 
result of open trade. Further trade liberalization will only continue 
this trend. In short, we have no excuse but to liberalize boldly, not 
timidly as some suggest. It should be kept in mind that this trade 
program will set the standard for such initiatives in the future. H.R. 
984 presents us with a perfect opportunity to lead by example.

                                

    Chairman Crane. Thank you, Mr. Autor.
    Mr. Moore, your president, Doug Ellis, has been quoted as 
saying that NAFTA is working for the U.S. textile industry. Why 
wouldn't NAFTA rules on textile and apparel imports from CBI 
regions, including eligibility for regional fabrics, work for 
the textile industry as well as NAFTA has?
    Mr. Moore. Mr. Chairman, if you would, the Committee, the 
Congress, the Administration, would like to add the Caribbean 
countries to NAFTA as full-fledged partners, we would support 
that wholeheartedly. What this is is a unilateral grant of 
access to our market. It is not a full blown free trade 
agreement. Therefore, it seems to us that we have to construct 
a CBI parity approach that favors the countries that 
participate in it, that is, the Caribbean and the United 
States, does not favor others with TPLs and other things like 
that. We recognize that if there is a full-blown free trade 
agreement like NAFTA or if the Caribbean countries come into 
NAFTA, there will be negotiations that will deal with the 
issues you've raised. This is a one-way deal right now.
    Chairman Crane. Mr. Lamar, why is passage of H.R. 984 
urgent for the companies you represent? And will it help your 
firms in the CBI region compete against Asian competition, 
particularly as we move toward the 2005 date when all textile 
and apparel quotas will be phased out?
    Mr. Lamar. It's our No. 1 priority. It's essential that we 
get this enacted. The apparel industry is finding, as I 
mentioned in my testimony, that the incentive structure right 
now is to source garments from the Far East, from Asia and not 
to source garments from the CBI. And what that is doing then is 
that is moving us away from places where we are more 
comfortable doing business, where we are closer to our 
customers, closer to our traditional suppliers into places 
where we have a little bit less control. And that affects the 
ability I think of the entire garment chain to stay 
competitive.
    It also hurts our ability to maintain the maximum amount of 
employment here in the United States because the support 
industries that are built up here that support the economies--
our assembly operations in the Caribbean--would be gone if we 
were to source garments from Asia.
    Chairman Crane. Thank you.
    Mr. Levin.
    Mr. Levin. Just a few questions. It's late and thank you 
for your patience. And we're going to be spending a lot more 
time on this I hope in a expeditious manner. So I won't try to 
cover even a part of the waterfront. Mr. Autor, let me say 
something to you, if I might, in a kindly way. You hold a 
responsible position within the National Retail Federation. And 
I think we need to discuss these issues acknowledging that 
there are countervailing and competing interests. And I don't 
really think it's fair to say that those interests that are 
opposed to yours are parochial domestic interests. Your 
interests then are parochial domestic interests, no? Unless 
somehow you classify yours as non-parochial.
    I don't think we'll get very far if we don't acknowledge 
the people who are on the panel with you represent legitimate 
domestic interests that have some stake in the outcome. And 
where you say ``they would limit trade benefits to benefit 
themselves rather than CBI countries,'' just a note about that. 
You're reflecting interests, mainly those of your members, not 
mainly the benefits to CBI countries. I assume that the people 
who pay your dues are your primary constituents, right? And so 
I just want to urge everybody to try to be a bit acknowledging 
that there's a clash here, if you want to put it that way, of 
legitimate, non-parochial interests. And we have an array of 
industry here that takes somewhat different positions and it's 
somewhat understandable.
    So I hope we can solve these differences. I don't think 
they're small ones. The difference between H.R. 984 and the 
Graham bill are significant. And we need to address them.
    So you hold a responsible position, otherwise I wouldn't 
comment. And maybe you didn't write this, somebody else did?
    Mr. Autor. Well, I appreciate your comments on that. I 
think it's a fair point.
    Mr. Levin. And I appreciate your saying that. These trade 
issues get so instantaneously polarized. They shut out 
intelligent discussion. There's been an impact on the textile 
and apparel industry in this country. And there's a question--
you can reach the conclusion if you want that it doesn't matter 
if any of that is done here, but a lot of people disagree with 
that, including myself.
    And, Mr. Lamar, I'm going to want to have some further 
discussions with you because I'm not quite sure where you come 
out or why you come out there. You seem to be saying that, as 
you said here, that your primary interest--let me see if I 
underlined this. You're not in the business to shift jobs--
``American apparel companies are not in business to move jobs 
offshore.'' But then you seem to say because the interplay with 
NAFTA and the reality of imports, the influx of imports and 
competition from Asia, that ``we don't need to maintain the 
provisions in the Senate bill.'' It seems to be where you're 
coming out. The requirements for use of fabric and yarn from 
this country when the work is done in the Caribbean, that it's 
no longer relevant. Maybe I'm not quite capturing what you're 
saying, but I think that's what you're saying. And I just 
urge--we have some realistic and factual discussions about that 
because I think there's contradictory evidence in the way of 
what has happened to Caribbean imports after NAFTA. It doesn't 
quite fit together.
    But the main point I want to make is we have a series of 
bills: Mr. Crane's bill, Mr. Rangel's, we have the bill that 
Senator Graham introduced, we have the Administration's 
proposal. Let's see if we can knock heads together while 
talking to each other and see if we can come out with a bill 
that is a sound one.
    Thanks very much.
    Chairman Crane. Thank you, Sandy.
    Mr. Becerra.
    Mr. Becerra. Thank you, Mr. Chairman. And I recognize we 
have votes, so I will try to be brief. Rather than ask 
questions, maybe I can do what Mr. Levin did and just make a 
couple of comments and see if we can follow-up on some of the 
panelists. Let me thank you all for your testimony. A 
question--or actually a comment I guess now at this stage to 
Mr. Levinson. I believe you were present when the Ambassadors 
from the various countries testified. Several of them said that 
the conditions for some of the workers in the textile/apparel 
industries in their countries were actually fairly good when 
you compare them relative to some of the other industries and 
some of the other professions that are out there. I know the 
testimony that was submitted on behalf of UNITE points out a 
few particular instances where you point to the contrary. It 
would be helpful for us to have as much information and 
evidence you can point to to help us try to make sense of this, 
and also to be able to raise those questions to the Ambassadors 
as we get the information from you.
    To the folks representing the industries involved, I was 
looking over again the testimony of the union, UNITE, and they 
mention that some 70,000 jobs have been lost in the textile 
industry and close to 200,000 jobs have been lost in the 
apparel industry in the 1994 to 1998 period. That's about four 
times what was lost in the 4 years prior to that and that's 
sort of the NAFTA, pre-NAFTA, post-NAFTA breakdown. The point I 
guess that UNITE is making is that, in fact, we will be losing 
jobs and while we were losing jobs to begin with before NAFTA, 
we're losing them at an accelerated pace. It would be helpful 
to hear your thoughts because you're the industries impacted 
and certainly you're concerned not just with your workers, but 
also with the livelihood of the companies. It would be helpful 
if we had a chance to engage in further discussion with you 
about how we can address some of these things that will happen 
regardless of whether or not we accelerate the trade movement 
or not. But certainly there will be people who are affected 
detrimentally who can't pick themselves up and go to some other 
place and start anew. There are some companies, businesses that 
will have the wherewithal to do that, to perhaps begin the 
business offshore, hopefully, in Central America or the 
Caribbean versus in far away Asian countries, but individuals 
who are employed can't do that. And chances are they're not 
highly skilled so they won't be able to quickly find something 
else. It would be helpful if there were more discussion among 
those who are representing the workers and those who are 
representing the industries and, of course, those of us in 
Government, discuss further how we address this because one way 
or the other, we're going to see the effect that some people 
will lose jobs. And, of course, I'm not going to discount the 
fact that others will gain jobs as we begin to export more into 
those regions as well. That all becomes very important as we 
try to resolve this and reconcile the hurt and the gain that 
will occur. And I know that most of us would like to see 
something that comes out that benefits us in the long-run 
because come 2005, I believe most of us do recognize that all 
of sudden the table for competition will have changed. So to 
the degree that there is that opportunity, as Mr. Levin said, 
to have further discussion, I know a number of us would be very 
interested in doing that.
    So with that said, Mr. Chairman, I will go ahead and 
conclude and thank all the panelists for their time.
    Chairman Crane. Well, and it's not just Xavier that might 
want to have contact with all of you as we go forward. But we 
do appreciate very much your participation, your patience 
today. We're sorry for speaking and running this way, but we've 
got four votes in a row coming up.
    And with that, the Committee stands adjourned. And, Evie, 
we love you.
    [Whereupon, at 4:13 p.m., the hearing was adjourned.]
    [Submissions for the record follow:]

Statement of Seth M. Bodner, American Apparel Alliance, New York, NY

    This statement is filed on behalf of a group of trade associations 
representing domestic apparel and sewn products companies and including 
more than 2000 domestic producing companies making clothes and other 
sewn products in America. Our participating associations are as 
follows:
    American Apparel Alliance, consisting of the National Knitwear and 
Sportswear Association and the American Apparel Producers Network.
    The following supporting associations also join in this statement:
    The Apparel Contractors Alliance of California based in Los Angeles 
and consisting of the Garment Contractors Association of Southern 
California; American Chinese Garment Contractors Assoc.; Korean 
American Garment Industry Assoc.; Northern California Chinese Garment 
Contractors Assoc.; The Atlantic Apparel Contractors Association, 
Bethlehem, PA; The Greater Blouse, Skirt & Undergarment Association of 
NYC; The Korean Apparel Manufacturers Association of Greater New York; 
and SEAMS (South Eastern Apparel Manufacturers and Suppliers Assoc.) 
Columbia, SC.
    Our associations are comprised of companies which manufacture 
clothing and sewn products in the U.S. for major labels, private store 
labels, catalogs and for their own labels. some of our members provide 
design and related fashion services to such apparel production 
companies. Our members are in many states across the country.
    Frequently, they manufacture for retail stores and are in direct 
competition with other suppliers to the same retailers. In some cases 
they purchase their own raw materials such as yarn or fabric, and in 
other cases their customer provides these materials and they process 
them into finished clothing or other sewn products. Those in the 
knitting industries have a significant capital investment in equipment, 
while those in the cut and sew products area somewhat less so. In all 
cases, however, the investment in plant and equipment is a relatively 
important one to the enterprises involved. Many of these companies are 
small, family owned businesses in which the business is both their 
livelihood and their estate. Other firms are substantially larger. All 
would be directly and adversely affected by this legislation. Given the 
diversity of our membership and its nationwide distribution, we are 
confident that our views reflect those of other companies in the 
industry who while not our members, have decided to attempt to remain 
in business within the United States rather than moving offshore.
    We strongly oppose this legislative give away of our industry and 
the domestic jobs it represents. More than 730,000 Americans still earn 
their living in garment production jobs in the United States. CBI 
preferences, even the most limited form, would force hundreds and 
perhaps thousands of apparel plant closings and the accelerating loss 
of tens of thousands of U.S. production jobs. For many garment 
production workers, the employment alternatives if any are available, 
will be a lower paying service industry positions. The wage losses for 
many will be substantial. The human disruption of this would be felt 
wherever apparel is produced, virtually every state in the country. 
Many small towns and inner city residents will be harmed.
    This bill is being promoted by associations and companies all too 
willing to give away the businesses of others in furtherance of their 
own specific business interests. As the ATMI statement by Mr. Carlos 
Moore summed up,

          Such legislation [i.e. H.R. 984 redrafted to suit ATMI] would 
        convey benefits to everyone involved-American apparel 
        importers, CBI garment makers, U.S. textile mills--while 
        harming none of them.

    We guess it depends on what you mean by ``everyone.'' Mr. Moore 
conveniently failed to note that among those not included in his 
``unharmed'' group is the entire domestic apparel production industry. 
They too are ``involved'' even if not party of his definition of 
``everyone.''
    At the same time, these CBI-apparel-import-promoting-associations 
seek every possible draft change which will prevent import competition 
for their products, even if it comes at the expense of others in the 
domestic production chain. Not one of them proposed even a modestly 
balancing effort to give domestic apparel producers who do not move 
their companies offshore, access to imported yarns or fabrics on a duty 
free and quota free basis for use in production in the United States. 
In short, they are quite prepared to give away tariff and quota 
protection for products they don't make, but are unwilling to compete 
on a similar basis themselves. They want the ultimate protection, a 
lock on future business from a whole region of the world coupled with 
continuing protection of their home market.
    Some claiming to speak for the ``American'' apparel industry, in 
fact are representing the interests of American companies already 
heavily importing apparel from the Caribbean. The situation they 
espouse may improve the competitive 1positions of their 
``companies'' but that should not be equated with improving the 
competitive position of domestic apparel production, as their 
``companies'' have become major importers and offshore manufacturers. 
Many of them have shut U.S. production operations in favor of opening 
new factories or contracting with existing ones in the Caribbean and 
importing the production to be sold under their brands. they have done 
this to take advantage of existing provisions of law which make it 
feasible. Now, they want more. Relief from duties. Why not? If the 
government is willing to give, why not take?\1\
---------------------------------------------------------------------------
    \1\ One company, Fruit of the Loom, not only closed numerous U.S. 
factories, but even relocated its corporate persona to the Cayman 
Islands to avoid U.S. taxes on its offshore profits. Perhaps others 
will follow suit if this legislation is passed, producing in the 
Caribbean through offshore companies, taking the profits in those 
offshore companies, and dramatically reducing their tax liability for 
sales actually made in the US market.
---------------------------------------------------------------------------
    In our view, preferential trade legislation for apparel imports 
from the CBI is unnecessary, unfair and untimely.
    Unnecessary for the Caribbean because, even without special 
legislation, apparel imports from the Caribbean area have grown during 
the past decade at annual rates in excess of 17%. (Chart Attached.) 
That dramatic growth continued through last year, notwithstanding the 
defeat of Parity Legislation on Nov. 4, 1997 by a vote of 182 to 234. 
As imports grow at high rates, it is not surprising that any country 
finds its share of the total market declining, but that is scarcely as 
relevant as the increase in the absolute volume of imports. Sales of 
Caribbean produced goods in the U.S. are increasing. It is U.S. 
producers who find not only their market their share declining, but in 
many cases, their absolute volume of production. And domestic pricing 
has never been more difficult. Hundreds of smaller U.S. firms are being 
forced into reduced production or even closure under the current import 
surge and the market conditions it brings. Adding to that import 
pressure by eliminating duties and quotas on Caribbean and Central 
American production will exacerbate these conditions.
    Unfair for three basic reasons. First, unfair because of its total 
disregard of previous commitments made to this industry and its workers 
by both the Administration and the Congress, including the Ways and 
Means Committee.
    These commitments were made in connection with the Uruguay Round 
Implementing Legislation. This committee was directly involved. 
Congressional Promises and Administration Promises. When Congress 
passed the GATT/WTO bill in 1993, our industry was given to understand 
that as a result of the GATT negotiations, quotas would be eliminated 
``gradually over an extended period.'' (Pres. Clinton in transmittal 
letter on implementing legislation to the Speaker of the House.) Ten 
years to be exact. Tariff reductions also were negotiated on a ten year 
schedule. That phase out schedule was adopted, implicitly, if not 
explicitly, in the implementing legislation putting the Round into 
effect as of January 1, 1995. The Administration followed provisions of 
the law in announcing the ten year phase out of quotas as per that 
understanding, by Federal Register notice of Jan. 30, 1995. As the Ways 
& Means Committee Report noted, ``. . . the implementing bill 
establishes the timetable and requirements . . . of products which the 
United States will integrate in conformity with . . . the Agreement. 
The SSA details the procedures that will be used. . . . The Committee 
intends that these requirements provide certainty and transparency for 
the industry, importers, and retailers as to the timetable for 
integration of specific products. in order to facilitate a smooth 
transition.'' (emphasis supplied.)
    By carving a multi-country loophole in the quota system so big as 
to mock the notion of gradual quota phase out, and by suddenly zeroing 
out duties that were carefully and deliberately negotiated to be either 
left alone, or slightly reduced over ten years, in the Uruguay Round 
deal, the proposed CBI legislation on apparel, (and similar legislation 
on Africa) would directly violate that Congressional intent and the 
clear promise it made to the industry and its workers. Instead of the 
promised ``certainty'' and ``smooth transition'' we would have a 
dramatic and stunning shock. Congress, which has recently spoken so 
forcefully about truth, trust and credibility, should keep its word to 
the domestic garment industry and workers.
    Second, unfair because domestic garment producers, both companies 
and workers, should not be asked to bear the burden of hurricane relief 
for those few countries in Central America that were impacted last 
year. Those are national issues and national responsibilities, not 
industry specific ones.
    H.R. 984 will have the same impact on domestic makers as would a 
tax on them with revenues dedicated to providing windfall benefits for 
a selected group of importing companies and their suppliers. 
Eliminating these duties will lower the costs of importing. We note 
that the Yarn Spinners' testimony recommended the elimination of duties 
on knit fabric made in the beneficiary countries with U.S. yarn. A 
market grab as nice for them as it would be crippling to domestic 
knitters and domestic apparel companies. All of these variations would 
take care of one group at the expense of domestic apparel, or knitting 
companies. Many will be forced to close, further enhancing the dominant 
position of their importing competitors.
    Targeting the garment industry as a ``foreign aid'' giveaway is 
fundamentally unfair. While this bill deals with garments from the 
Caribbean, will the response be different when the question is to 
permit extra steel to be imported to help Russia, or to permit 
continued subsidization of aircraft from financially challenged Brazil? 
or to bring peace to Sub-Saharan Africa? The possibilities are endless. 
The results likely to be meager. We note that the ATMI reacts 
vigorously to the possibilities of transshipments through Sub-Saharan 
Africa, a position with which we agree, but fails to see that the same 
problem will develop in Central America. Does the ATMI really believe 
that China will not attempt to transship through Panama, Honduras, 
Costa Rica, Guatemala, and El Salvador while devoting all of its 
efforts at Africa? Transshipment prevention language is fine in 
legislation, but in fact how will it be enforced? Who is to provide the 
appropriations to Customs to add the personpower required to cover this 
enormous range of countries. How will they know whose yarn is in these 
T-shirts and sweaters? Is Congress going to declare that it is more 
important for Customs to chase foreign yarn than heroin? We think not. 
It is simply fiction to believe that this type of import flood can be 
unleashed without it becoming a massive transshipment loophole.
    Third, unfair because the bill provides no offset to help U.S. 
located manufacturers by giving them duty and quota free access to 
materials such as yarn that are used in the production of apparel in 
the United States.
    While that would admittedly increase the budgetary costs of this 
bill and would increase total imports, elimination of the 7-15% duty 
rates on yarn and fabric imports from world suppliers would aid 
domestic garment producers struggling to remain viable. It would 
partially offset some of the damage that would otherwise be done to 
domestic production. Interesting that the Yarn Spinners Association did 
not suggest such a competitive balance.
    Untimely when the nation's manufactured goods trade deficit is 
running in excess of $250,000,000,000, presenting a massive challenge 
to the domestic economy. In 1998, the deficit in apparel alone neared 
$60 billion as CBI imports rose, Mexican imports soared and other 
garment sources took maximum advantage of depreciated currencies and a 
strong dollar.
    Domestic growth is being sharply curtailed by this net import 
deficit. Borrowing to pay for the deficit will be an annual cost for 
years to come. Changing the basic trade rules to add to the flow--
whether for apparel or other products--can hardly be in the national 
interest, whatever the alleged motivation.
    Just how big must the nation's manufactured goods deficit get 
before Congress considers policy alternatives other than increasing 
imports? Foreign countries continue to seek export markets as a 
solution to their financial woes while U.S. domestic consumption and 
household debt patterns are impacted not only by actual layoffs but by 
fear of a clouded economic future. The full impact of this mix cannot 
yet be measured as there is no experience of a deficit this large. 
Congress should be wary of the ``what, me worry?'' syndrome and avoid 
an overconfident piling on in the midst of an unstable international 
economic environment.
    Additionally, the Committee was told that this bill will provide so 
many jobs in Central America and the Caribbean that it will help 
stability in the entire area, reducing the flow of both immigrants and 
drugs, and even thereby helping secure our uninterrupted access to 
transit routes through the Caribbean Sea and the Panama Canal!
    How quickly some forget. Not too long ago, Los Angeles was seared 
by violence and became, for a brief moment, the subject of urgent 
national attention. Jobs were to be provided, economic doors unlocked. 
That aid disappeared under the pressure of a Florida hurricane, but 
problems remain. Unemployment continues to be a problem in the nation's 
inner cities, and in California, the garment industry is a major 
component of that State's domestic social stability. Its dislocation by 
this legislation will not be without cost.
    As for the drug trade, the Committee should be aware of the 
President's recent communications on this subject. In his December, 
1998 letter on drug trafficking to the Chairmen of the Foreign 
Relations committees of the House and the Senate, the President listed 
the following CBI countries as among the ``major illicit drug-producing 
or drug-transit countries: The Bahamas, Belize . . . Dominican 
Republic, Guatemala, Jamaica, Mexico and Panama.'' The President noted 
that,

          Geography makes Central America a logical conduit and 
        transshipment area for South American drugs bound for Mexico 
        and the United States, and that there has been evidence of 
        increased trafficking activity in this region over the past 
        year. Its location . . . combined with thousands of miles of 
        coastline, the availability of container-handling ports in 
        Costa Rica, Nicaragua, and Honduras, the presence of the Pan 
        American Highway, and the limited law enforcement capability, 
        have made the isthmus. attractive to the drug trade. Hurricane 
        Mitch has disrupted traffic flow through the region, but over 
        the longer term resumption or even an increase in trafficking 
        activity remains possible. (White House Release, Dec. 7, 1998) 
        emphasis supplied

    Any rapid increase in the flow of apparel containers from the 
Caribbean to the U.S. is virtually guaranteed to bring with it an 
increase in narcotics trade. Drug trafficking increased under NAFTA as 
the surge of vehicles largely overwhelmed Customs' capability to carry 
out physical inspections. Repeating that mistake with the entire 
Caribbean will be costly.
    Additional failures of this legislation.
    Incremental Trade: Nothing in this legislation calls for any 
reduction of apparel imports from any other source to offset the 
increases that will surely come from the Caribbean. This newly duty-
free trade will add to the flood, it will not displace it. China's 
leadership has just recently called for promoting exports ``through a 
thousand and one ways'' and we must assume they have no intention of 
ceding the U.S. market to Caribbean competitors. Indeed, Chinese 
companies will jump on any opportunity offered to ship goods through 
designated duty-free or quota-free areas.
    Substantive and drafting problems which combined would devastate 
the sweater knitting industry in America.
    (a) The exemption of ``knit to shape'' garments made with US 
yarns'' could force the exit of virtually the entire sweater and knit 
blouse and dress industry from this country. Indigenous knitwear 
manufacturers as well as investors from abroad would be able to avoid 
duty and quota on all of their production in the Caribbean by claiming 
to use, and perhaps even actually using some, US yarn. Knit products 
would be a major target of investors, and established importers who 
have searched the world for cheap production. Nice for the domestic 
yarn companies, but crippling to US knitwear manufacturers. Those 
domestic yarn companies selling to smaller knitwear manufacturers also 
would be destroyed by this legislation.
    (b) The provision for special treatment of ``handloomed, handmade, 
or folklore articles . . .'' is a corruption of a provision originally 
included in GATT textile agreements for the very limited purpose of 
making room for possible quota exemptions to assist cottage industry 
folklore products. The current WTO/ATC language is in Annex 3 of the 
Agreement on Textiles and Clothing where it defines certain products as 
exempt from restraint actions. In relevant part it reads as follows:

         ``3. Actions under the safeguard provisions . . . of this 
        Agreement shall not apply to: (a) developing country Members' 
        exports of handloom fabrics of the cottage industry, or hand 
        made cottage industry products made of such handloom fabrics, 
        or traditional folklore handicraft textile and clothing 
        products, provided that such products are properly certified 
        under arrangements established between the Members concerned.

    How far that is from the sweeping provisions of H.R. 984, under 
which any product of a handloom would be eligible for duty and quota 
exemption! The ``certification'' idea, originally confined to certain 
cottage industry and folkloric products, is used here in a craftily 
meaningless formulation. The President cannot refuse to certify that a 
handloom product was handloomed! And he is not asked to certify that it 
is a handloomed product of the cottage industry which should be 
considered for exemption because of its cottage industry origin. The 
Committee should be aware that much of the knitwear production of the 
Far East and South Asia is made on hand machines typically--if 
incorrectly--referred to as ``handlooms.'' Thousands of dozens of 
cotton sweaters and knit shirts from Cambodia that were placed under 
quota in just concluded negotiations were made on such hand powered 
machines. That type of industrial production would be duty and quota 
free under this bill, a total perversion of the original GATT/WTO 
language and a further undercutting of the ``smooth transition'' to 
regular GATT rules referred to by this Committee in its Uruguay Round 
report. These provisions would generate a flood of trade and 
effectively destroy much of the remaining domestic sweater industry.
    On behalf of domestic apparel production, we urge this Committee to 
re-evaluate this legislation and remove its company destroying, job 
destroying apparel provisions. Congress should honor its word to the 
domestic industry and its workers.
    Thank you for your attention to this very important matter.
    The American Apparel Alliance consists of the National Knitwear and 
Sportswear Association and the American Apparel Producers Network.
    Other Associations supporting this letter are:
     The Apparel Contractors Alliance of California based in 
Los Angeles and consisting of four garment contractor associations with 
more than 1200 companies throughout California as members;
     The Atlantic Apparel Contractors Association, Bethlehem, 
PA;
     The Greater Blouse, Skirt & Undergarment Association of 
NYC; and the Korean Apparel Manufacturers Association of Greater New 
York.
    The South Eastern Manufacturers and Suppliers Association, 
Columbia, SC.
    [Attachments are being retained in the Committee files.]

                                

Statement of J. Benjamin Zapata, Charge D'Affaires, Embassy of Honduras

    Thank you, Mr. Chairman, for the opportunity to provide written 
testimony in support of the CBI enhancement legislation which you and 
Congressmen Kolbe, Rangel, and Matsui have introduced in the House as 
the Caribbean and Central American Relief and Economic Stabilization 
Act (CCARES) or House Bill 984 (H.R. 984).
    My country, Honduras, believes that your proposed legislation 
provides the kind of economic opportunities necessary to strengthen our 
democracy and promote our economic recovery and long-term development 
in the aftermath of Hurricane Mitch's destruction. Moreover, CCARES is 
a critical step in the direction of free trade. Honduras, as a member 
of the World Trade Organization (WTO), believes that Congress and the 
Administration must work together to enact this bill and ensure that 
our countries develop a mutually beneficial trade relationship, 
particularly in the textile and apparel sector, under WTO rules.

          I. Leveling the Playing Field for the CBI Countries

    In order for Honduras and the CBI region to attract continued 
investment in the textile and apparel sector, they must receive trade 
benefits similar to those enjoyed by Mexico. Honduras' and the CBI 
region's main sources of competition are the Far East, where wages and 
working conditions are much lower, and Mexico where apparel made of 
U.S. formed fabrics enter the U.S. market duty and tariff free. For 
example, under current U.S. trade policies, the average duty for 
Honduran exports to the United States is 17.7%, as compared to 2.4% for 
Mexican exports. These different trade policies have provided Mexico 
with an increasing competitive advantage in the U.S. market over CBI 
suppliers (graph #1). As a result, Honduras is beginning to lose 
investment in its critical textile and apparel sector to Mexico. The 
attached letter to President Clinton from Jesus Canahuati, President of 
the Honduras Apparel Manufacturers Association discusses the 
difficulties created by Mexico's competitive advantage under NAFTA and 
provides specific proposals on measures that would allow Honduran 
exports to compete.
    CCARES is an important step in leveling the playing field for the 
CBI countries because it offers them trade benefits on the remaining 
30% of their exports to the U.S., which include textiles and apparel, 
that are not currently duty free under the existing CBI program. In 
order for the Honduran apparel manufacturing industry to flourish, the 
U.S.-CBI trade playing field needs to be as predictable and transparent 
as possible. The status of two specific elements--quotas and duties--
need to be clearly spelled out. H.R. 984 is good for Honduras because 
it states that goods will be quota free, and subject to the same duties 
as Mexican goods. Other elements included in H.R. 984 which are 
favorable to Honduras are:
     Goods from regional fabric (fabric knit or woven from 
yarns made in the CBI countries or the U.S.) qualify for the benefits 
of the program;
     Tariff Preference Levels (TPL's) similar to Mexico's are 
established for goods made from fabric sourced elsewhere. Mexico's 
experience shows just how highly utilized these TPL's are--in 1998, 
three of the six TPL's were 100% utilized; and
     CBI countries would immediately qualify for the same 
duties as Mexico.

                            II. Labor Issues

    CBI enhancement is a vital component of the long-term 
reconstruction effort in Honduras and complements the Administration's 
humanitarian relief package. Honduras was devastated by Hurricane Mitch 
and its traditional economic sectors were wiped out. It will take years 
to replace the soils, the crops and the infrastructure that support our 
agricultural and tourist sectors.
    An important element of Honduras' reconstruction after the 
devastation of Hurricane Mitch is that enhanced trade and access to the 
United States markets will promote economic revitalization and increase 
employment opportunities for Hondurans who may otherwise seek to 
emigrate. Fortunately, over a twelve-year period, the Honduran maquila 
(textile and apparel manufacturing) industry has evolved into one of 
the most important economic sectors and was largely unaffected by 
Hurricane Mitch (although apparel exports have been impacted as is 
shown in graph #2). To put Honduras' textile and apparel industry in 
perspective, 109,000 Hondurans are employed in the maquila industry as 
compared to 17,000 in the banana industry.
    The maquila employees are among the highest paid workers in 
Honduras and wage increases have exceeded the inflation rate. Moreover, 
Honduran maquila workers are paid 2.5 to 3 times what similar workers 
would receive for working in the textile and apparel industry in Asia. 
Recently, the United States Government Accounting Office (GAO), 
analyzed labor conditions in Honduras and found that the maquila 
industry met or exceeded international labor standards and conditions. 
Moreover, three years ago a Commission was established constituted by 
members of the Ministry of Labor, organized labor groups, and the 
Honduran Textile and Apparel Association, to discuss and resolve 
different aspects of problems in our industry. The Commission meets 
monthly and has been very successful in its mission.
    In addition, Honduras is a signatory of the International Labor 
Organization (ILO) and has strict laws on child labor, worker safety, 
minimum wage and other worker rights issues which are considered to be 
the foundation for a civil society. This is not to say that there have 
not been examples of unacceptable conduct by companies. But these 
examples are the exception, rather than the rule. The fact is that the 
maquilas and the companies that are part of the Honduran Textile and 
Apparel Association, are complying with and even exceeding our laws and 
standards.
    Many of the companies have cafeterias, doctors and nurses on staff, 
recreation facilities, and in some instances, day care facilities. 
These are modern, safe, and secure places to work. Many companies 
provide health care benefits and other fringe benefits which are not 
common in other industries. Honduras' maquilas were founded by 
Hondurans who saw an opportunity to compete in the world market and 
raise peoples' living standards by manufacturing goods and adding value 
in the textile/apparel sector.

             III. H.R. 984 Allows CBI Countries To Compete

    It is my country's position that only H.R. 984, of the existing 
proposals, provides for the quota, duty and tariff treatment that 
allows the CBI countries to compete. We support allowing the use of 
regional fabrics and the inclusion of CBI countries in the world 
trading regime through the WTO, as allowed by H.R. 984. Moreover, 
unlike other proposals, H.R. 984 will maximize the opportunities for: 
(1) creating new jobs, (2) attracting investment, and (3) generating 
foreign reserves, which will in turn help to increase the trade 
exchange between the United States and Honduras (graph #3).
    To be effective, CBI enhancement legislation must address the 
existing trade imbalances in tariff and duty treatment between the 
United States and the CBI region, as compared to other countries. For 
numerous security and policy reasons, this is in the interest of the 
United States. The United States has a positive trade balance with 
Central America and the Caribbean, unlike its negative trade balance 
with Asia. In fact, the statistics demonstrate that in 1997, 73.9 % of 
Honduran exports went to the United States and $.61 of every dollar 
that Honduras earns by exporting to the United States is spent on 
purchasing and importing American goods and services. Trade between the 
United States and CBI countries has doubled since 1989 and is now 
reaching $18.5 billion as compared to $13 billion in exports to China 
during the same period. 1997 was the twelfth consecutive year that the 
U.S. has recorded a trade surplus with the CBI countries.
    The Honduran textile and apparel industry is the key to our present 
economy and the foundation of our future development (the attached 
letter from the President of the Central Bank of Honduras discusses the 
importance of this sector for the Honduran economy). The industry is 
forming the basis of a middle class society and so long as investment 
is retained and increased, the maquila sector will be the key to 
reconstruction, income parity, and the strengthening of democracy and 
civic institutions.
    A brief review of Honduras' relative position as compared to other 
countries demonstrates the importance of this sector to our economy. 
However, Honduras is beginning to lose investment to other regions 
because it does not have equal access to U.S. markets in critical 
sectors, and because Honduras pays wages 2.5 to 3 times higher than 
those in other parts of the world. This trend endangers Honduras' long-
term development and also undercuts Honduras' efforts to be part of the 
multilateral regime of which the United States has been a strong 
supporter.
    We support H.R. 984 because it is a true free and fair trade act. 
It avoids the ``unilateral sanction-based approach'' where Honduras' 
rights can be overridden by political decisions in the United States. 
The ``unilateral sanction based approach'' undermines the world-based 
trading system of which both the United States and Honduras form part. 
It also destroys the certainty and predictability that is essential to 
attract future investment.
    Similarly, H.R. 984 avoids proposals that include eligibility 
requirements and conditions prerequisite in order to qualify for 
``special aid packages'' which require countries to give up their 
negotiating positions on very contentious political issues that are 
more appropriate for other bilateral forums. These are unacceptable and 
violate the very principles of the WTO. Many of these provisions, which 
are contained in other proposals, would violate existing WTO 
principles.
    The same is true of proposals that include unilateral quota cut-
backs based on a finding of ``transshipments.'' Again, the unilateral 
discretion violates the WTO. Some proposals, instead of using Article 6 
safeguard provisions contained in the WTO's Agreement on Textiles and 
Clothing (ATC), allow the United States to impose new quotas on CBI 
countries. This eliminates the protections of the ATC, eliminates the 
review process by the textile monitoring body, and allows the U.S. to 
establish a new quota with a base limit based only on the non-
qualifying shipment to the U.S. The dispute settlement mechanisms 
outlined in the ATC should be supported so that both the U.S. and CBI 
nations have a means of recourse.
    The guarantee of no future quotas is very important in terms of 
investment and the incentive to U.S. importers to source their orders 
in Honduras. At this moment, there are no quotas on Honduran textile 
and apparel merchandise. However, the U.S. Government has the option to 
place a call (or new) unilateral quota--on Honduras at any time. So the 
``threat'' of quotas is still very prevalent and they are a strong 
deterrent to increasing production. In business terms, orders can be 
placed months or seasons, in advance. Any U.S. call could happen in the 
time-span of one to three months. The potential disruption to orders 
already in the pipeline is great.
    Clearly set duty provisions are also very important in terms of the 
future appeal of Honduran manufacturers to U.S. importers. Again, H.R. 
984 does an excellent job of clearly stating what future duties will 
be. Other trade proposals undercut the United States' perceived role as 
a champion of free and fair trade. H.R. 984 or CCARES, is a giant step 
in the right direction. It avoids the pit-fall of ``trade enhancement'' 
as a stalking horse for ``unilateral sanctions.''

                             IV. Conclusion

    In recent testimony, the United States Trade Representative pointed 
out to Congress that U.S. trade policy supports and advances the rule 
of law internationally by ensuring the enforcement of trade agreements 
and U.S. rights in the trading system. She went on to point out the 
success that the United States has enjoyed at the WTO. As the United 
States has recognized on numerous occasions, trade and growth are 
important components in raising standards of living, which in turn are 
accompanied by increased standards in areas such as labor and the 
environment. We commend you for introducing legislation that will lead 
to these developments in the CBI region, including Honduras.
    The CBI enhancement program outlined in H.R. 984 or CCARES levels 
the playing field for Honduras and the CBI region. The provisions of 
H.R. 984 ensure that Honduras will continue to be competitive. They 
also allow Honduras to develop value-added as a result of the skills, 
creativity and competitiveness of its people in the world market. H.R. 
984 ensures that existing investments in the region will not be lost 
and that trade will be a major factor in Honduras' reconstruction. For 
all of these reasons, the Government and people of Honduras ask that 
Congress to support your bill, H.R. 984.
    Mr. Chairman, I would like to commend you for your continued 
support of free enterprise and the opportunity for the Caribbean and 
Central American region to enter the global economy as an equal partner 
based on the international multilateral regime in place through the 
WTO. Thank you.

                                

                               Asociacion Hondurena
                                            De Maquiladores
                                                      March 9, 1999
President William Jefferson Clinton
The White House
1600 Pennsylvania Avenue
Washington, D.C. 20500

    Dear President Clinton:

    I would like to take this opportunity to thank you, your 
government, and the people of the United States for the support during 
the emergency and the reconstruction of our country after the 
devastation caused by Hurricane Mitch.
    I am writing to you today on behalf of the Honduran textile and 
apparel industry. In less than ten years, this industry has generated 
more than 110,000 jobs and 455 million dollars in value-added export 
revenues.
    The textile and apparel industry in Honduras has worked very hard 
to meet international labor standards and conditions. The wages in this 
industry are almost three times more than those of many Asian 
countries. The United States General Accounting Office published a 
report last year stating that Honduran Labor Laws met or exceeded 
international labor standards.
    Our industry has been able to attract United States investment 
thanks to the working philosophy that emphasizes the value of our 
people and theirs abilities.
    Despite all our efforts to stay competitive, recent data shows that 
our country is loosing investment to Mexico. This situation is a result 
of current United States trade policies favoring Mexico's exports. In 
1997, the average duty for our country's exports was 17.7% compared to 
2.4% of Mexico, creating an unfair trade condition.
    The only alternative to continue creating quality jobs and 
sustained economic growth through our industry is with the 
implementation of a trade bill that will allow our exports to compete 
under the same conditions afforded to Mexican products. Anything less 
could result in lost export revenues and, in turn, lost employment.
    For that reason we are asking you, Mr. President to include in your 
relief package trade measures allowing duty and access free entry for 
the following:
    Apparel made in CBI from regional fabrics using yarn made in the 
USA.
    Apparel knit-to-shape in the CBI (socks, hosiery) using yarn made 
in the USA.
    Apparel made from 807A and 809 using yarn made in the USA that 
permits all post garment operations (oven-baking, stone washing, 
printing, embroidery . . .)
    Single transformation for bras.
    25% de minimus rule for all apparel made in the region to 
incorporate findings, notions and trims.
    The textile and apparel industry in Honduras is committed in the 
reconstruction of our country. We need a new version of CBI that 
includes unrestricted and tariff-free access for textiles and apparel 
in order to enable us to provide the jobs that our country so 
desperately needs.
    May God bless you, your government, and the people of the United 
States of America.
            Sincerely,
                                        Jesus J. Canahuati,
                                                          President

      

                                

                          Banco Central De Honduras
                         Tegucigalpa, M.D.C. Honduras, C.A.
                                                   January 27, 1999
    Mr. Senator:

    I wish to thank your interest in promoting a legislation that will 
grant the countries of the Caribbean Basin Initiative, similar benefits 
as the ones contained in the North American Free Trade Agreement 
(NAFTA), opening in this way a trade opportunity for our country that 
will be of big support in its reconstruction task.
    As I stated in our brief meeting of Sunday, January 17, 1999, the 
benefits of this initiative will be of fundamental importance to our 
country; allowing it to compensate for the losses in employment and in 
foreign exchange generation due to the damages caused by Hurricane 
Mitch to the Honduran exporting sector.
    For the purpose stated above, it would be of great importance if 
the relief act could include:
    Apparel made in CBI from regional fabric using yarn made in the 
USA.
    Apparel knit-to-shape in the CBI (socks, hosiery) using yarn made 
in the USA.
    Apparel made from 807A and 809 using yarn made in the USA that 
permits all port-garment operations (oven-baking, stone washing, 
printing, embroidery . . .)
    Single transformation for bras.
    25% de minimum rule for all apparel made in the region to 
incorporate findings, notions, trims.
    In the following table you will find the growth projection of the 
maquila sector, first without the benefits and second, taking into 
consideration the benefits of 1999.

                               Scenario No. 1.--Projected Growth Without Benefits
----------------------------------------------------------------------------------------------------------------
                                                Real 1997     1998       1999       2000       2001       2002
----------------------------------------------------------------------------------------------------------------
Direct employment.............................  .........      100.1      112.1      123.3      133.1      142.4
(thousands) (Growth in %).....................        8.7      15.1%      12.0%      10.0%       7.9%       7.0%
Exports in USS (millions).....................      1,659    1,990.8    2,239.4    2,587.0    2,815.7    3,130.3
(Growth in %).................................                   20%      15.0%      13.0%      10.0%      10.0%
Contribution to the Balance                         190.1      377.8      560.9      646.8      735.7      813.9
Payments (Added value in Millions of US$)       .........      22.5%      17.4%      35.3%      12.2%      12.2%
----------------------------------------------------------------------------------------------------------------

            Sincerely yours,
                                                Emin Barjum Mahomar
[GRAPHIC] [TIFF OMITTED] T6685.006

[GRAPHIC] [TIFF OMITTED] T6685.007

[GRAPHIC] [TIFF OMITTED] T6685.008

                                

Statement of Mac Cheek, President, NILIT America Corporation, 
Greensboro, NC

    As President of Nilit American Corporation, I am pleased to provide 
this statement on why the Caribbean Basin Initiative parity legislation 
(H.R. 984) should be amended to avoid the impairment of bilateral trade 
under the U.S.-Israel Free Trade Area Agreement (``FTAA'').
    Nilit America is the U.S. subsidiary of Nilit Ltd., an Israeli 
company that spins (i.e., produces) fine denier nylon yarns for the 
hosiery market. The yarns produced by Nilit Ltd. are sold worldwide. 
The United States is an important market for the yarn spun by Nilit 
Ltd. Nilit America has established itself in North Carolina as an 
important supplier of yarn to the U.S. hosiery industry.
    Nilit has no general objection to the extension of additional trade 
benefits to the CBI countries. However, one aspect of the current CBI 
parity legislation would do irreparable harm to Nilit.
    Under current U.S. trade law, the CBI program provides preferential 
tariff treatment for textile and apparel products made from fabric 
produced in the United States, including fabric knit utilizing Israeli-
origin yarn. However, the currently drafted ``yarn-forward'' rule in 
H.R. 984 would change the status quo so that only apparel made from 
100% U.S. yarn would be eligible for CBI benefits. As currently 
drafted, H.R. 984 would expand CBI preferences to permit the duty free 
importation of products assembled in CBI-eligible countries. However, 
U.S. knit fabric or apparel components containing Israeli yarn, after 
assembly into apparel in a CBI-eligible country, would be ineligible 
for duty-free treatment upon reimportation into the United States.
    This change in the status quo would harm U.S.-Israel trade, U.S. 
apparel manufacturers, and U.S. consumers.
    Nilit would be irreparably harmed as the U.S. market accounts for a 
substantial portion of its business. Nilit developed this business in 
reliance on the U.S.-Israel FTAA. It would be flatly inconsistent with 
the purpose and objectives of the U.S.-Israel FTAA to seriously injure 
Nilit through an unrelated trade initiative that would have an 
immediate and direct adverse effect on Israel's exports to the United 
States.
    A yarn-forward rule in the CBI that precludes duty-free treatment 
for U.S. products knit with Israeli yarn would effectively drive Nilit 
out of the U.S. market. Creating an economic barrier to U.S. companies 
purchasing Israeli-origin yarn would harm both U.S. consumers and U.S. 
manufacturers that depend on inputs from Israel. For this reason, the 
National Association of Hosiery Manufacturers is on record supporting 
the continued ability of U.S. companies to utilize Israeli yarn without 
incurring the loss of CBI trade benefits.
    The ``U.S.-only'' yarn-forward rule would cause particular harm in 
the U.S. hosiery market. In this market, one domestic supplier with a 
domestic market share that exceeds 75 percent dominates the supply of 
yarns for the knitting of hosiery. Thus, the U.S.-only yarn-forward 
rule would create a virtual monopoly for one U.S. company. Because U.S. 
yarn production is highly concentrated, Nilit represents the only 
reliable long-term alternative supplier to the U.S. market of high-
quality nylon yarns. The ability of the U.S. domestic hosiery industry 
to have an alternative supplier of yarn provides a critical competitive 
advantage for the hosiery industry as it seeks to compete with imported 
hosiery. U.S. imports of hosiery, such as pantyhose, have been growing 
steadily and our understanding of the U.S. market confirms that this 
trend will accelerate, especially once U.S. import quotas are 
eliminated pursuant to the terms of the WTO Agreement on Textiles and 
Clothing.
    The U.S.-Israel FTAA was specifically intended to foster bilateral 
trade between the United States and Israel. Undermining the U.S.-Israel 
FTAA would send the wrong message to the business community--that the 
U.S.-Israel FTAA is less than a permanent framework in which to develop 
long-term trade relationships.
    We have been advised that the Government of Israel has previously 
expressed its concerns about the U.S.-only yarn-forward rule to the 
Office of the United States Trade Representative. The Government of 
Israel noted that the Caribbean legislation can be developed without 
damaging U.S.-Israeli trade by determining that Israeli-origin yarn 
will, in effect, be treated no less favorably than U.S.-formed yarn.
    This Committee has approved other trade measures to preserve U.S.-
Israeli trade under the FTAA. An amendment to eliminate the 
disadvantage to Israel imposed by the U.S.-only yarn-forward rule in 
H.R. 984 would preserve the status quo and not create any new benefit 
for Israeli-origin products. The amendment would consist of a simple 
provision that would not disrupt any other aspect of the CBI trade 
legislation.
    In sum, CBI parity legislation should preserve the integrity and 
objectives of the U.S.-Israel FTAA. Any unilateral proposed yarn-
forward rule in the CBI parity legislation should not, and need not, 
harm bilateral trade between the United States and Israel.
  

                                
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