Part of the Mariana Islands Archipelago, the CNMI is a chain of 14 islands in the western Pacific Ocean—just north of Guam and about 3,200 miles west of Hawaii. The CNMI has a total population of 53,890, according to preliminary results of the CNMI’s 2016 Household, Income, and Expenditures Survey. Almost 90 percent of the population (48,200) resided on the island of Saipan, with an additional 6 percent (3,056) on the island of Tinian and 5 percent (2,635) on the island of Rota. Error! No text of specified style in document. for matters relating to foreign affairs and defense affecting the CNMI. The Covenant initially made many federal laws applicable to the CNMI, including laws that provide federal services and financial assistance programs. However, the Covenant preserved the CNMI’s exemption from certain federal laws that had previously been inapplicable to the Trust Territory of the Pacific Islands, including certain federal minimum wage provisions and immigration laws, with certain limited exceptions. Under the terms of the Covenant, the federal government has the right to apply federal law in these exempted areas without the consent of the CNMI government. Section 902 of the Covenant provides that the U.S. and CNMI governments will designate special representatives to meet and consider in good faith issues that affect their relationship and to make a report and recommendations. Error! No text of specified style in document. immigration benefits, that is, the ability to live, and in some cases work, in the CNMI permanently or temporarily. DOI’s Office of Insular Affairs coordinates federal policies and provides technical and financial assistance to the CNMI. The Covenant requires DOI to consult regularly with the CNMI on all matters affecting the relationship between the U.S. government and the islands. In May 2016, President Obama designated the Assistant Secretary for Insular Affairs as the Special Representative for the United States for the 902 Consultations, a process initiated at the request of the Governor of the CNMI to discuss and make recommendations to Congress on immigration and labor matters affecting the growth potential of the CNMI economy, among other topics. The 902 Consultations resulted in a report to the President in January 2017, which we refer to as the 902 Report. DOL requires employers to fully test the labor market for U.S. workers to ensure that U.S. workers are not adversely affected by the hiring of nonimmigrant and immigrant workers, except where not required by law. DOL also provides grants to the CNMI government supporting youth, adult, and dislocated worker programs. From 1999 through 2015, DOL provided such grants under the Workforce Investment Act of 1998 (WIA) and the Workforce Innovation and Opportunity Act of 2014 (WIOA). Error! No text of specified style in document. figure shows, from the lowest point in 2013, the number of employed workers increased by approximately 8 percent by 2015 (from 23,344 to 25,307). However, the number employed in 2015 (25,307) was still approximately 31 percent less than the number employed in 2007 (36,524). Error! No text of specified style in document. workers fell from a peak of almost 38,000 in 2002 (roughly 75 percent of the employed workers) and was under 13,000 in 2015. In contrast, since 2002, the number of domestic workers has fluctuated year to year, ranging from about 10,500 to about 13,500, but increased by 17 percent from 2013 to 2015. In 2007, the minimum wage provisions of the Fair Labor Standards Act of 1938 were applied to the CNMI, requiring the minimum wage in the CNMI to rise incrementally to the federal level in a series of scheduled increases. Under current law, the next minimum wage increase will occur on September 30, 2017, and the CNMI will reach the current U.S. minimum wage on September 30, 2018 (see table 1). Based on our preliminary analysis, we estimate that approximately 62 percent (15,818 of 25,657) of the CNMI’s wage workers in 2014, assuming they maintained employment, would have been directly affected by the federally mandated 2016 wage increase, which raised CNMI’s minimum wage from $6.05 to $6.55 per hour. Since 72 percent of the total foreign workers made less than or equal to $6.55 per hour in 2014, they were more likely to have been directly affected by the 2016 wage increase than domestic workers, with only 41 percent making less than or equal to $6.55. The Consolidated Natural Resources Act of 2008 amended the U.S.– CNMI Covenant to apply federal immigration law to the CNMI, following a transition period. Among other things, the act includes several provisions affecting foreign workers during the transition period. Error! No text of specified style in document. status that allows them to work in the CNMI. Dependents of CW-1 nonimmigrants (spouses and minor children) are eligible for dependent of a CNMI-Only transitional worker (CW-2) status, which derives from and depends on the CW-1 worker’s status. In accordance with the Consolidated Natural Resources Act, DHS, through USCIS, has annually reduced the number of CW-1 permits, and is required to do so until the number reaches zero by the end of a transition period. Since 2011, DHS has annually determined the numerical limitation, terms, and conditions of the CW-1 permits (see table 2). The act was amended in December 2014 to extend the transition period until December 31, 2019, and eliminate the Secretary of Labor’s authority to provide for future extensions of the CW program. Error! No text of specified style in document. Error! No text of specified style in document. associated states, and could allow them to live and work either in the United States and its territories or in the CNMI only. Since 1990, the CNMI’s tourism market has experienced considerable fluctuation, as shown by the total annual number of visitor arrivals (see fig. 2). Total visitor arrivals to the CNMI dropped from a peak of 726,690 in fiscal year 1997 to a low of 338,106 in 2011, a 53 percent decline. Since 2011, however, visitor arrivals have increased by 48 percent, reaching 501,489 in fiscal year 2016. Error! No text of specified style in document. Korean visitors enter the CNMI under the U.S. visa waiver program, Chinese visitors are not eligible and are permitted to be temporarily present in the CNMI under DHS’s discretionary parole authority, according to DHS officials. DHS exercises parole authority to allow, on a case-by-case basis, eligible nationals of China to enter the CNMI temporarily as tourists when there is significant public benefit, according to DHS data. From fiscal year 2011 to 2016 the percentage of travelers that arrived at the Saipan airport and were granted discretionary parole increased from about 20 percent to about 50 percent of the total travelers, according to our analysis of CBP data. Error! No text of specified style in document. If all CW-1 workers, or 45 percent of the total workers in 2015, were removed from the CNMI’s labor market, our preliminary economic analysis projects a 26 to 62 percent reduction in the CNMI’s 2015 GDP, depending on the assumptions made. To estimate the possible effect of a reduction in the number of workers with CW-1 permits in the CNMI to zero—through the scheduled end of the CW program in 2019—we employed an economic method that enabled us to simulate the effect of a reduction under a number of different assumptions. Error! No text of specified style in document. 50 percent likelihood that it would have ranged from $462 million to $583 million, which is 37 to 50 percent lower than the actual value; and 25 percent likelihood that it would have ranged from $353 million to $462 million, which is 50 to 62 percent lower than the actual value (see fig. 3). Across the full range of probable outcomes, the elimination of the CW program would result in a 26 to 62 percent decline in the CNMI’s 2015 GDP, a relatively large negative effect on the economy. Error! No text of specified style in document. The CNMI economy currently is experiencing growing demand for workers, particularly among occupations in construction and hospitality. Since fiscal year 2013, demand for CW-1 permits has doubled, and in fiscal year 2016, demand exceeded the numerical limit (or cap) on approved CW-1 permits set by DHS. Approved CW-1 permits grew from 6,325 in fiscal year 2013 to 13,299 in fiscal year 2016. In 2016, when the cap was set at 12,999, DHS received enough petitions by May 6, 2016, to approve 13,299 CW-1 permits, reaching the cap 5 months prior to the end of the fiscal year. On October 14, 2016, 2 weeks into fiscal year 2017, DHS announced that it had received enough petitions to reach the CW-1 cap and would not accept requests for new fiscal year 2017 permits during the remaining 11 months. In interviews, some employers reported being surprised to learn that the cap had been reached when they sought renewals for existing CW-1 workers. See table 3 for the numerical limit of CW-1 permits and number of permits approved by fiscal year. Error! No text of specified style in document. Legend: – = Not applicable; CNMI = Commonwealth of the Northern Mariana Islands; CW-1 = CNMI- Only transitional worker; DHS = U.S. Department of Homeland Security.