[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
TRADE PREFERENCES FOR HAITI
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TRADE
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 22, 2004
__________
Serial No. 108-63
__________
Printed for the use of the Committee on Ways and Means
U.S. GOVERNMENT PRINTING OFFICE
99-681 WASHINGTON : 2005
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
E. CLAY SHAW, JR., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
WALLY HERGER, California BENJAMIN L. CARDIN, Maryland
JIM MCCRERY, Louisiana JIM MCDERMOTT, Washington
DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. MCNULTY, New York
JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio XAVIER BECERRA, California
PHIL ENGLISH, Pennsylvania LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona EARL POMEROY, North Dakota
JERRY WELLER, Illinois MAX SANDLIN, Texas
KENNY C. HULSHOF, Missouri STEPHANIE TUBBS JONES, Ohio
SCOTT MCINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia
Allison H. Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
______
SUBCOMMITTEE ON TRADE
PHILIP M. CRANE, Illinois, Chairman
E. CLAY SHAW, JR., Florida SANDER M. LEVIN, Michigan
AMO HOUGHTON, New York CHARLES B. RANGEL, New York
DAVE CAMP, Michigan RICHARD E. NEAL, Massachusetts
JIM RAMSTAD, Minnesota WILLIAM J. JEFFERSON, Louisiana
JENNIFER DUNN, Washington XAVIER BECERRA, California
WALLY HERGER, California JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania
JIM NUSSLE, Iowa
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
version. Because electronic submissions are used to prepare both
printed and electronic versions of the hearing record, the process of
converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
__________
Page
Advisory of September 22, 2004, announcing the hearing........... 2
WITNESSES
Graham, Hon. Bob, a U.S. Senator from the State of Florida....... 6
DeWine, Hon. Mike, a U.S. Senator from the State of Ohio......... 9
______
Avondale Mills, Inc., Stephen Felker, on behalf of National
Council of Textile Organizations............................... 21
J.C. Penney Purchasing Corporation, Janet E. Fox................. 28
Perry Manufacturing Company, William K. Woltz, Jr................ 18
UNITE HERE, Mark Levinson........................................ 32
Vetements Textiles, S.A., Jean Edouard Baker..................... 25
Yazaki North America, Nigel Thompson............................. 38
SUBMISSIONS FOR THE RECORD
U.S. Association of Importers of Textiles and Apparel, statement. 50
Camara Nacional de la Industria Textil, Ciudad, Mexico, statement 52
Haitian Manufacturers Association, Delmas, Haiti, Marie-Claude
Bayard, statement.............................................. 53
Haitian Project, Inc., Port-au-Prince, Haiti, Patrick Moynihan,
statement...................................................... 56
National Retail Federation, statement............................ 57
TRADE PREFERENCES FOR HAITI
----------
WEDNESDAY, SEPTEMBER 22, 2004
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Trade,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:08 p.m., in
room 1100, Longworth House Office Building, Hon. Philip M.
Crane (Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON TRADE
CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
September 22, 2004
TR-6
Crane Announces Hearing on
Trade Preferences for Haiti
Congressman Philip M. Crane (R-IL), Chairman, Subcommittee on Trade
of the Committee on Ways and Means, today announced that the
Subcommittee will hold a hearing on possible expansions of trade
preferences for Haiti. The hearing will take place on Wednesday,
September 22, 2004, in the main Committee hearing room, 1100 Longworth
House Office Building, beginning at 2:00 p.m.
Oral testimony at this hearing will be from public witnesses. Any
individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Subcommittee and
for inclusion in the printed record of the hearing.
BACKGROUND:
Haiti is currently eligible for trade preferences under the
Caribbean Basin Economic Recovery Act (P.L. 98-67, P.L. 106-200, and
P.L. 107-210), which allows it to:
Export to the United States duty-free knit (and knit-to-
shape) apparel made from regional fabric made with U.S. yarn, subject
to a cap for the entire region; and
Export to the United States duty-free woven apparel made
of U.S. yarn and fabric, subject to a cap for the entire region.
On July 16, 2004, the Senate passed by unanimous consent S. 2261,
the ``Haiti Economic Recovery Opportunity Act of 2004,'' to allow Haiti
to export to the United States duty-free apparel made from inputs
sourced anywhere in the world, subject to a cap. The cap for such trade
would be initially set at 1.5 percent of U.S. imports and would
gradually increase to 3.5 percent after 7 years. This cap is equivalent
to the third-country fabric benefit established for all sub-Saharan
African countries in the recently-enacted AGOA Acceleration Act (P.L.
108-274).
Other bills to grant additional trade preferences to Haiti have
also been introduced in both the House and Senate, including H.R. 1031,
the ``Haiti Economic Recovery Opportunity Act of 2003,'' H.R. 4889, the
``Haiti Economic Recovery Opportunity Act of 2004,'' and S. 489, the
``Haiti Economic Recovery Opportunity Act of 2003.'' Some of these
bills would allow Haiti to source inputs for qualifying apparel only
from U.S. free trade agreement partners and countries participating in
the African, Caribbean Basin, and Andean trade preference programs. A
cap also would apply for such trade that would be initially set at 1.5
percent of U.S. imports and would gradually increase to 3.5 percent
after 7 years.
The Committee is currently considering all options to grant
temporary additional trade preferences to Haiti. In addition to the
bills already introduced, the Subcommittee is interested in receiving
testimony regarding:
Adjusting the rule of origin (ROO) for apparel from Haiti
to allow a value-added rule of origin.
Differentiating treatment between apparel made of knit
and woven fabric.
Allowing a single-transformation ROO for certain apparel
from Haiti.
Use of caps for additional benefits.
Providing additional trade preferences for Haiti in
products other than textiles and apparel.
Expanding the cap for certain qualifying apparel under
the Caribbean Basin Economic Recovery Act, as amended.
The Subcommittee welcomes comment from interested parties on these
and other options to provide meaningful trade preferences for Haiti. In
announcing the hearing, Chairman Crane stated, ``Haiti is the poorest
country in our hemisphere and is facing enormously challenging times.
One of the best ways to lift a country out of poverty and provide hope
to its people is to promote economic activity through increased trade
and investment. I hope to develop a bipartisan bill to provide such
benefits to Haiti in a manner that benefits American businesses and
workers as well.''
FOCUS OF THE HEARING:
The hearing will focus on whether to provide additional trade
preferences for Haiti and the impact on trade and development in Haiti
and on the U.S. and regional textile and apparel industries.
DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:
Requests to be heard at the hearing must be made by telephone to
Michael Morrow or Kevin Herms at (202) 225-1721 no later than the close
of business Friday, September 17, 2004. The telephone request should be
followed by a formal written request faxed to Allison Giles, Chief of
Staff, Committee on Ways and Means, U.S. House of Representatives, 1102
Longworth House Office Building, Washington, D.C. 20515, at (202) 225-
2610. The staff of the Subcommittee will notify by telephone those
scheduled to appear as soon as possible after the filing deadline. Any
questions concerning a scheduled appearance should be directed to the
Subcommittee staff at (202) 225-6649.
In view of the limited time available to hear witnesses, the
Subcommittee may not be able to accommodate all requests to be heard.
Those persons and organizations not scheduled for an oral appearance
are encouraged to submit written statements for the record of the
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Witnesses scheduled to present oral testimony are required to
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In order to assure the most productive use of the limited amount of
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noted above.
Chairman CRANE. Good afternoon. This is a hearing of the
Committee on Ways and Means Subcommittee on Trade to explore
options to expand trade preferences for Haiti. Haiti is the
poorest country in our hemisphere and the country is facing
enormously challenging times. Political and economic
instability has exacerbated Haiti's lack of development and
investment and worsened the already-extreme poverty levels. One
of the best ways to lift the country out of poverty and provide
hope to its people is to promote economic activity through
increased trade and investment. Several bills have been
introduced to grant additional trade benefits to Haiti, and
Congressman Shaw in particular has been an active advocate for
Haiti.
Haiti is quite dependent on the United States for its
trade. In 2003, over 90 percent of all Haitian exports went to
the United States, and apparel accounted for nearly 90 percent
of those exports. At the same time, imports from Haiti barely
register in U.S. domestic markets. Haiti's textile and apparel
shipments to the United States last year amounted to less than
one-half of 1 percent of U.S. market share.
My goals today are to explore practical options to help
Haiti become more competitive in textile and apparel production
and also to find ways to assist Haiti in diversifying its
exports into other industries outside of textiles and apparel.
The Subcommittee will explore options to provide meaningful and
practical benefits to Haiti and also to promote regional
integration that benefits U.S., Haitian, and regional
producers. I hope that the discussion today will focus on the
merits and disadvantages of various proposals and the witnesses
will avoid staking out all-or-nothing positions. Now, I would
like to yield to our Ranking Member on the Subcommittee, Mr.
Levin, for any remarks he would like to make.
Mr. LEVIN. Thank you, Mr. Crane. I am very glad we are
holding this hearing. Clearly, we need to address the
challenges facing Haiti. They are a neighbor of ours and what
happens there by definition affects the people who reside
there. It also affects us. As we look at this issue, and quite
a bit relates to textile and apparel, but beyond, I think we
need to look at the context directly affecting Haiti and also
the broader context that affects trade.
Point one in that regard, in terms of apparel and textiles,
we know at the end of the year that the quotas are going to be
eliminated. This is going to have a major impact throughout
this hemisphere and beyond. So, if we look at the issue of how
we can assist Haiti, I think we have to keep that in mind and
also realize that when the quotas come off, there is going to
be in particular a major influx of products from China and
perhaps other countries within Asia, but primarily China.
Second, as we look at this issue in terms of its broader
context, we need to keep in mind the present Caribbean Basin
Initiative (CBI) (Trade and Development Act of 2000, P.L. 106-
200) preferences because obviously a change as to one country
can impact other countries, especially those that are
neighboring. I would like us--I would hope that we would keep
this broader context in mind as we understand the urgency--
urgency--of the challenges facing Haiti.
The third point in this regard is I think we should also
remember there are other countries which are going to be
impacted by the end of the quotas and some of them have no
preferences whatever in terms of access to the United States
and they include Afghanistan and Nepal, which have small
exports here in the apparel and textile field. There are
countries which do and that is Cambodia and Bangladesh.
The next point I would like to make in terms of the
context, and the Chairman related to the poverty that is in
Haiti. If we are going to assist countries to pull themselves
out of poverty, it is critical that they do so and help to do
so in ways that the people themselves pull themselves out of
poverty, that poverty diminishes for the entire nation, but in
particular for people who are in poverty.
In that regard, I have been reviewing some of the documents
that relate to the role of workers within Haiti, including
those in the apparel and textile industry and we need to, if we
are going to take steps here, and I hope we do, be sure that we
do so in ways that will really be beneficial to those who are
working who are, in most cases, impoverished.
Today, the dynamic within Haiti is such that workers are
often threatened, sometimes beaten from information we have.
When you use that kind of violence, it is often done with
impunity, in part because of the weak legal structure there.
So, we are going to hear some testimony, as I understand it
today, that will address this issue and I hope we will take it
seriously. Where we have, for example, when it came to Cambodia
some years ago, improvement was undertaken and it has meant a
lot to the people there.
One last point I would like to make in terms of the broader
context is this. We haven't really had much consideration
within this place as to the impact of the elimination of quotas
and we really, I think, have been mistaken in not doing so. Mr.
Rangel and others and I introduced legislation about a week ago
that would require this Administration to undertake some action
that would relate to the dynamics of the removal of the quotas.
This will have an impact on workers and businesses in this
country and in the neighboring countries within the Caribbean
because we have, and I think that is a good idea, an integrated
apparel and textile market in the Caribbean area.
So, in a way, Haiti needs to be looked at it by itself
because of the urgent needs, but also, if we are going to be
effective in addressing those needs, we are going to have to
keep in mind the broader context, and the points, if I might
say so, that I have suggested. Thank you very much, and I look
forward to the testimony of, I think, two of our most
distinguished colleagues across--I won't say ``the most''
because I will get in trouble with somebody, but two of our
most distinguished colleagues across the rotunda. Thank you.
Senator DEWINE. You will get in trouble with your brother.
Mr. LEVIN. That is what I meant, my brother.
Chairman CRANE. With that, I would like to welcome Senator
Graham and Senator DeWine to present their testimony before the
Committee.
STATEMENT OF THE HONORABLE BOB GRAHAM, A U.S. SENATOR FROM THE
STATE OF FLORIDA
Senator GRAHAM. Mr. Chairman, Senator DeWine and I
appreciate the opportunity to discuss this important issue, an
issue which has become even more urgent in light of the events
of the past few days. In deference to your time, I will speak
to the context, the situation in Haiti that we think calls for
the United States' attention and action and then Senator DeWine
will discuss the specifics of why we think the legislation that
has passed the Senate and is before you today is an appropriate
remedy, or at least the beginnings of a remedy to some of the
most difficult issues in Haiti. I will, if permissible,
summarize my statement and submit the full statement for the
record.
Mr. Chairman, we have had a recurring series of engagements
in Haiti in the last 15 years. In the 1990s, a crumbling
economy and political instability drove many Haitians into the
ocean to the State that Congressman Shaw and I represent. We
became the recipient of thousands of people arriving in
impoverished conditions on leaky and unsafe boats, only more
fortunate than those who had perished at sea.
The situation continued to deteriorate. In 1994, the United
States committed 20,000 troops to an intervention in Haiti.
Unfortunately, in my opinion, we did not make an adequate
commitment to helping Haitians rebuild, and 10 years later, in
2004, we had to send more troops as the Haitian government
found itself overwhelmed by chaos, unrest, and gang violence. I
am concerned that if we don't get it right this time and ensure
that Haiti has the capacity to stabilize, we will find
ourselves in another 10 years with another intervention into
Haiti.
The consequences of a weak and unstable Haiti can be seen
both inside its borders and among its neighbors. Haiti is one
of the poorest countries of the world and its people are
tragically malnourished. The serious internal problems in Haiti
have made it ill-prepared to deal with short-term crises and
natural disasters. I just draw your attention to the current
news reports, which indicate that at least 700 people have been
lost in Haiti as a result of the recent floods and that there
are another 1,000 missing with the sad expectation that many of
those will be added to the list of fatalities.
Haiti's grinding poverty also has contributed to its
chronic political instability, which causes large numbers of
refugees to attempt to enter the United States and other
Caribbean countries. Particularly affected by that have been
the Bahamas and the Dominican Republic, both countries which
could face political destabilization if there was another
substantial wave of refugees from Haiti.
It is a reality that the future of Haiti does not lie in
the United States nor does it lie in any of its neighbors, but
rather it lies in the Haitian people. Despite incredible
hardships, the Haitian people have continued to persevere.
Again, referencing Congressman Shaw, we both had the
opportunity to see the many Haitians who come to our State and
their enormous courage and resilience and desire for self-
improvement. If you go to a local community college in South
Florida, you will see a very large percentage of the students
being Haitians who are there to try to make their lives better.
That is why Senator DeWine and I are before you today to
speak about the Haiti Economic Recovery Opportunity Act of 2004
(HERO) (S. 2261). This legislation will modify our trade laws
to allow Haitian manufacturers to ship apparel into the United
States duty-free and to give them flexibility about the types
of fabrics that they use. This will, of course, benefit
American consumers, but the principal impact will be to give
hope to the people in Haiti.
Senator DeWine will outline the details of the act, which
draw heavily upon the African Growth and Opportunity Act (AGOA)
(Trade and Development Act of 2000, P.L. 106-200), which was
passed recently by this Committee and by the Congress. Senator
DeWine and I have worked with our colleagues to pass this
legislation, which gives Haitians the economic opportunity that
they so desperately need and desire. We do not wish to stand by
and watch while a country of 8 million people wrestles with
horrible poverty and instability just a few hundreds of miles
off our shore. We feel that we have an obligation to help. We
believe the HERO Act is one way that we can help the people of
Haiti and it will also be good for the people of the United
States.
[The prepared statement of Senator Graham follows:]
Statement of The Honorable Bob Graham, United States Senator from the
State of Florida
As a longtime neighbor of Haiti, I have witnessed firsthand the
effects that grinding poverty and political instability have had on the
Haitian people. I have also seen the impact that Haiti's troubles have
had on its neighbors, including the United States.
In the early 1990s, a crumbling economy and political instability
drove large numbers of Haitians to risk their lives in leaky boats, as
they attempted to cross hundreds of miles of ocean to reach Florida.
The situation continued to deteriorate, and in 1994 the United States
was forced to intervene. Unfortunately, we did not make a commitment to
helping Haitians rebuild, and in 2004 we had to send troops once more,
as the Haitian government found itself overwhelmed by unrest and gang
violence. We must be sure to get it right this time, and ensure that
Haiti is able to stabilize, or we will find ourselves going back in
2014.
The consequences of a weak and unstable Haiti can be seen both
inside Haiti's borders, and among its neighbors. Haiti is among the
poorest countries in the world, and its people are tragically
malnourished. The World Health Organization reports that the average
daily caloric intake for Haitians is the lowest in the western
hemisphere and compares with the most impoverished countries of Africa.
These serious systemic problems make Haiti especially ill-prepared
to deal with short-term catastrophes and natural disasters. Earlier
this week Haiti was hit by a tropical storm that killed over seven
hundred people, and the United Nations predicts that this number will
continue to rise as many people now listed as missing are found. Many
of these people were killed when their poorly constructed homes were
destroyed by flood waters or mudslides. Even with the help of the
United Nations peacekeeping force currently in the country, overtaxed
Haitian emergency workers are hard pressed to cope with the large
numbers of people who have been injured or left homeless. According to
an article in yesterday's Washington Post, the main hospital in the
large northwestern city of Gonaives faces severe shortages of food,
water and antibiotics. Health care services are undoubtedly even worse
in rural areas, and we can expect this to contribute to the rising
death toll in the days ahead.
Haiti's grinding poverty also contributes to it's chronic political
instability, which causes large numbers of refugees to attempt to enter
the United States or other Caribbean countries. Here in the United
States we have been challenged to respond to immigration crises
stemming from Haiti, and this challenge has been even harder for some
of Haiti's other neighbors. Our friends in the Dominican Republic and
the Bahamas have struggled to deal with large numbers of Haitian
entrants, and another large-scale migration crisis could destabilize
either of these countries.
There is one hope for the future of Haiti, however, and it lies, as
you might expect, with the Haitian people. Despite incredible hardship,
the Haitian people have continued to persevere. Over the past three
decades, tens of thousands of Haitian refugees have come to live in my
home state of Florida, and I have been continually impressed by their
strong work ethic and their determination to build better lives for
themselves and for their children. If we give the Haitians the
opportunity to begin rebuilding their shattered economy, they have the
potential to get their country back on its feet.
This is why I have crossed the Hill today to come speak to you
about the HERO, or Haiti Economic Recovery Opportunity Act. This
legislation will modify our trade laws to allow Haitian manufacturers
to ship apparel into the United States duty-free, and give them
flexibility about the type of fabrics they may use. This will of course
benefit American consumers, but the real impact will be felt in Haiti,
where apparel manufacturing is one of the few functioning industries.
A similar provision exists in the African Growth and Opportunity
Act, or AGOA, which has helped expand economic opportunity to the least
developed countries in Africa. By giving this same opportunity to Haiti
we can help the least developed country in our own hemisphere and give
Haitians an opportunity to begin rebuilding their shattered economy.
Haiti must not be a place where the only jobs available are with gangs
and drug traffickers, and by creating inducements for foreign
investment, we can make it possible for hard-working Haitians to earn
an honest living.
Over in the Senate, Senator DeWine and I worked with our colleagues
to pass a bill that gives Haitians the economic opportunity they so
desperately need. We do not wish to stand by and watch while a country
of eight million people wrestles with horrible poverty and instability
several hundred miles off our coast. We feel that we have an obligation
to help, and we believe the HERO Act is one way that we can help the
people of Haiti, and that it will also be good for the people of the
United States.
STATEMENT OF THE HONORABLE MIKE DEWINE, A U.S. SENATOR FROM THE
STATE OF OHIO
Senator DEWINE. Mr. Chairman, I want to thank you for
holding this hearing and thank the Committee. It has been a
real pleasure to work with Congressman E. Clay Shaw and with
Senator Graham on this legislation. This bill, as the Senator
said, is really straightforward. It is modeled after the
successful AGOA and it would grant duty-free entry to apparel
articles assembled in Haiti contingent upon Presidential
certification that the new Haitian government is, in fact,
making significant political, economic, and social reforms. The
bill caps the amount of duty-free exports from Haiti at 1.5
percent of the total amount of U.S. apparel imports, and the
cap will ultimately grow to the modest amount of 3.5 percent
over a 7-year period of time.
Simply put, Mr. Chairman, this bill would allow Haiti to
use, for example, approved fabric and American buttons, sew it
all together, and then ship it to the United States duty-free.
As my colleague has said, Mr. Chairman and Members of the
Committee, there is a reason for doing this for Haiti. Some
people may ask, why Haiti and why this bill? I think the answer
is very clear, besides the obvious humanitarian reasons. The
answer is it is in our National interest to do it. Senator
Graham has pointed out, and I know this Committee knows very
well the tragedy that is Haiti. The Senator has pointed out
that twice in the last decade, we have had troops down there.
Every time we commit troops, there is a terrible cost,
potential loss of life.
I have visited Haiti now, I think, 14 times in the last
decade. The poverty of Haiti, as you know, just can't be
described. It is comparable to the poorest of the poor
countries in Africa. My wife and I have watched as children
have died in front of us. It is an ecological disaster. The
flooding that is going on in Haiti today that is very much
under-reported because there is very little communication that
is going to show thousands of people who have died, just
because the country is an ecological disaster.
We are liable to see boat people again if the situation
does not get better. It is only an hour and a half from Miami.
It is in our backyard. It is our neighbor. If you compare the
poverty of Haiti versus the poverty of any other country in the
Western Hemisphere, the poverty is double. It is twice as poor,
if you could put it that way, of any other country in the
hemisphere.
So, it is, I would maintain, and Congressman Levin has made
a very good case that we have to look at this holistically, and
I agree. I would also say, as we look at it holistically, Haiti
is a special case, and I think it is a special case not only
from a humanitarian point of view, but in our national
interest. Haiti is in our backyard. We don't want troops down
there again. There is a fledgling government that, frankly, we
have an interest in seeing that it does, in fact, survive and
not go into turmoil and chaos again.
What does this bill do? I take the Chairman's admonition
very seriously that we should not be wed to one bill, and I
hear him. What would the bill that we have been able to pass in
the Senate do? It would create a lot of jobs in Haiti. I don't
think any of the experts you are going to hear testify after
us, and they are the experts, will deny that. It would create a
lot of jobs. I think if this bill does not pass, with the new
change in the rules governing quotas, we will see a lot of the
few jobs that are left in Haiti, the few assembly jobs that are
left, you will see them very quickly leave. Haiti at one time
had 70,000 to 90,000 assembly jobs before the embargo. Today,
it is probably--no one knows for sure--it is probably in the
neighborhood of 30,000. With this bill, these jobs would take
off. Without this bill and no change in the status quo, these
jobs, the 30,000 that they have now will just collapse because
of the change in the law.
What will this bill do? If the bill does not pass, these
jobs are going to go somewhere else and they are not going to
stay in the region. I think most experts will tell you they
will go to the Far East. They will go a long, long way away.
These are not U.S. jobs, and I think we ought to just hit that
issue right up front. I come from a State that has lost a lot
of other type manufacturing jobs and I wouldn't be here today
if I thought the passage of this bill would cost U.S. jobs. In
fact, I think it will have a benefit for U.S. jobs. Let me tell
you why. These jobs are either going to be in Haiti or they are
going to be thousands and thousands of miles away. If they are
in Haiti, we have the possibility at least that some of that
product--a button, a zipper, something that is a value-added--
will have to come out of the United States. If they are made
thousands and thousands of miles away, that will not be the
case.
Second, anybody who has been in Haiti knows the vast
majority of money that is made in Haiti ultimately gets spent
in the United States. They import most of their food. They
import most of their products. Most everything comes from the
United States. So, eventually, we are going to benefit from the
prosperity of Haiti or just the ability of the Haitians to
live. We will benefit from that. It will also, finally, help
stabilize this country that is in our own backyard, and for
foreign policy reasons, for our own national interest, we have
an interest in seeing that happen.
Finally, anybody who has been in Haiti, and I know Members
of the Committee have been in Haiti, but this is something we
ought to do for humanitarian reasons. We have some obligation,
I think, to help people who want to work, to help people who
want nothing more for their families than you and I want for
our families, and that is to get them enough to eat everyday
and possibly even to educate them.
I have seen, my wife and I have seen, been into these
assembly factories. I haven't seen them all, Congressman. I
haven't been in all of them, but I have been in some of them,
and I will tell you that there are people who are lined up who
want these jobs. Haitians are hard-working people. They want
what we want. I think this bill will go a long way to give them
that opportunity. I thank the Chairman.
[The prepared statement of Senator DeWine follows:]
Statement of The Honorable Mike DeWine, United States Senator from the
State of Ohio
Mr. Chairman, thank you for this opportunity to testify before the
Committee in support of expanded trade preferences for Haiti, and
specifically in support of the Haiti Economic Recovery Opportunity Act.
I want to echo Senator Graham's comments.
I have visited Haiti 14 times over the last decade and have seen--
up-close--the poverty and the potential of this nation and its people.
Haiti needs our compassion. Haiti needs our support. Haiti needs this
bill. Why? Because Haitians are dying everyday from diseases and
abysmal living conditions--conditions that they could improve if they
had jobs and money for doctors and medicine.
Senator Graham and I have sponsored this bill because Haiti is the
poorest country in our hemisphere--it lies in our own backyard--and
deserves the same preferences we gave the poorest countries in Africa,
many of which have higher per capita incomes than the people of Haiti.
Mr. Chairman, our bill is straight forward. It is modeled after the
successful African Growth and Opportunity Act. It would grant duty-free
entry to apparel articles assembled in Haiti contingent upon
Presidential certification that the new Haitian government is making
significant political, economic, and social reforms. The bill caps the
amount of duty-free exports from Haiti at 1.5 percent of the total
amount of U.S. apparel imports, and the cap grows to the modest amount
of 3.5 percent over seven years. Simply put, Mr. Chairman, this bill
will allow Haiti to use, for example, Peruvian fabric and American
buttons, sew it all together, and then ship it to the U.S. duty free.
There is one specific aspect of this bill that I want to emphasize,
and that is the importance of providing a third country fabric
preference for Haiti. Third country fabric preference is a fancy way of
saying that Haiti can use materials from anywhere in the world and
still receive duty-free treatment. As you will hear from witnesses
today, economic analysis clearly shows that third country fabric
preferences are the only way to truly stimulate the least developed
countries of the world. This was true in Africa, and it is true for
this bill.
Mr. Chairman, there is a mistaken notion that this bill, and third
country fabric preferences, specifically, would cost U.S. jobs. This
simply is not the case. Like many of you, I represent a state where the
manufacturing sector is hurting, and I would not ask any of you to
choose between U.S. jobs and jobs in Haiti. With the HERO bill, we can
have both.
Mr. Chairman, in 2005, the quotas that currently keep countries in
the Far East, and especially China, from flooding the global textile
market with cheap products will be removed. This will devastate the
apparel industry in our hemisphere. Some lucky countries will have the
benefits of the Central American Free Trade Agreement, but everyone
else, including Haiti, will lose their industries as companies go to
the Far East.
This does not have to happen. If HERO becomes law, the assembly
industry in Haiti would stay and expand, thereby increasing Haiti's
demand for U.S. products. This would mean a greater demand for U.S.
goods, such as elastic and thread from North Carolina companies; and
bags, boxes, and trim from Florida. But, if HERO does not become law,
the industry will leave Haiti, and those U.S. companies that export
these components to Haiti will be short yet another customer.
It is important to note that HERO's impact would extend beyond the
U.S. textile and apparel industry. The trade figures show that Haitians
buy American goods. For every dollar worth of goods the United States
buys from Haiti,these poor impoverished people buy two dollars worth of
American products. Think about it--that is a one hundred percent return
on investment. Now, think about what that return would be if the
Haitian people have more money in their pockets to spend on U.S. goods.
This is a prudent investment for the United States. This bill is good
for Haiti, and this bill is good for the United States.
Mr. Chairman, while certainly, there are other things we could do
to help Haiti, at this late date in the Congress, there is only one
bill that has a chance of passing and providing the assistance that
Haiti so desperately needs. If the HERO bill does not pass both houses
by the end of the year, it will be too late. In 2005, once the quotas
are removed, what little industry remains in Haiti will leave, and it
will not come back. That means 30,000 more Haitians will be unemployed,
and what little is left of Haiti's economy will crumble. The jobs in
the United States that depended on Haiti's apparel industry will be
forfeited, and all because we failed to act when we had the
opportunity.
In closing, I'd like to focus on the bigger picture. We are here
because just an hour and a half flight off the Florida coast lies a
country--the least developed in our hemisphere--where 80 percent of the
people live in abject poverty, and almost as many are unemployed,
living lives with little hope and opportunity.
I have been there 14 times. I have watched desperate mothers feed
their children mud, because they didn't have a job, and didn't have the
money to buy food. I have seen and held sick, malnourished, dying
children in my arms. On behalf of the parents of these children--and
especially for the children, themselves--I am here today urging you to
do everything in your power to pass this bill. It is simply the right
thing to do.
Chairman CRANE. Let me express my appreciation to both of
you for your testimony, but most especially for your
involvement in what to me is a very important issue right now.
I commend the Senate for the action that it has taken already
and I am hopeful that we can act on this and have it resolved
in the House and the Senate before this session breaks up. Does
anyone else want to make a comment to our distinguished guests?
Mr. LEVIN. Just briefly. Mr. Shaw, you can go ahead if you
want to.
Mr. SHAW. Go ahead.
Mr. LEVIN. I don't really have any questions. I do hope we
can work together actively on this, and I think it may be more
beneficial instead of a lot of back and forth here. I am not
sure we can write a final product. Maybe we could, but I am not
sure we can, today. Anyway, we shouldn't be facing each other
like this but around the table, I think. So, I hope we will be
able to do that. The time is really short, but we ought to
utilize whatever time we have to see if we can produce a
product that addresses these needs and makes good trade sense.
I look forward to that.
Senator DEWINE. I appreciate that very much.
Chairman CRANE. Thank you. Mr. Shaw?
Mr. SHAW. Thank you, Mr. Chairman, and I ask unanimous
consent to insert an additional statement into the record.
Chairman CRANE. Without objection.
[The information was not received at the time of printing.]
Mr. SHAW. I also ask unanimous consent to insert a letter
that I received from Florida Governor Jeb Bush. Governor Bush
has been very active in seeking aid for Haiti and the Haitian
people. As a matter of fact, he is in the Capitol today--I just
left him--and he asked specifically how the HERO legislation
was going. I told him I would let him know after this hearing,
but from what I hear already, I think it is going very well.
[The information was not received at the time of printing.]
I also ask that a letter from the U.S. Conference of
Catholic Bishops in support of the trade preferences for Haiti
be included, as well.
[The information was not received at the time of printing.]
Finally, at each Member's desk you will find a copy of a
December 7, 2003, feature on Haiti conducted by the South
Florida Sun Sentinel. I think it is one of the most graphic
snapshots of what was happening down there, and I can tell you
it has not gotten any better.
I want to commend both of my friends, Bob Graham and Mike
DeWine. Bob, we are certainly going to miss you, and I have an
idea that you are not going to complete retirement. You
certainly deserve all of the best in sending you off. I know
both of your dedication to the problems in Haiti and trying to
work them out. Mike, what you have done with kids down there is
legendary. I would like the Committee to know that Mike has
called me at home on the weekend and wanted to know how this
legislation is getting around. I wanted to ask him how he got
my telephone number, but----
[Laughter.]
In any event, he has been steadfast in working through this
legislation, and what you all did in carrying it through the
Senate, I think is phenomenal. Bob, you and your wife, Adele,
who I went to high school with at Miami Edison, have been very
active in bringing Haitian art back in order to support the
high school that Adele and I went to that now is probably 95
percent Haitian and really a failing school, which it is very
difficult not to be a failing school when you are a school of
immigrants, as Miami Edison is today. The proceeds from the
sale or the auction of these items goes to hire the good
students as tutors to help the others along, which I think is
just a marvelous program. Actually, I have tried to duplicate
that up in some of the areas in Palm Beach County where we have
a heavy Haitian population.
The Haitian people are a very gentle people. They are
hardworking people. They are caring people. They are religious
people. They certainly deserve a better slice of life than what
they have gotten. I have said it before and I will say it
again. You cannot have a democracy where there is no economy,
and there is no economy in Haiti. There is 70-percent
unemployment. You have got a textile industry that used to be
very active that is all but dried up. They need to be spurred
on. This legislation, and there are two bills that are the
subject of this hearing. One is identical to the Senate bill
and the other is a little more restrictive as to where some of
the supplies come from for putting the apparel together.
I join the Chairman in expressing the wish that we would be
expeditious in handling this through. We always blame the
Senate for being slow. I would hate to lose this opportunity
not to at least match their speed and seeing that something
happens with this legislation and that it gets to the
President's desk before the end of this Congress. It is
important to us, and I think both you gentlemen have expressed
it very well in your testimony that this is for our benefit as
well as the Haitians, and it is a win-win. The tragedy, as Bob
Graham expressed, of Hurricane Jeanne and the tremendous loss
of life really brings home how desperate this country is, how
desperate these people are, and how desperately they need our
help. As Mr. Levin said, the best thing we can do for them is
to supply jobs, and these are not exploiting American jobs. It
is good for Haiti. It is good for the United States. It will
make this Congress look very good to go ahead and pass this
very quickly, and I yield back the balance of my time.
Mr. HOUGHTON. Mr. Chairman?
Chairman CRANE. Yes, Mr. Houghton? Mr. Houghton, and then
Mr. Becerra.
Mr. BECERRA. I will yield to Mr. Houghton.
Mr. HOUGHTON. Thank you. I can't disagree with what Mr.
Shaw says, what the Senators say, Mr. Levin. It is a great idea
to be able to help the Haitian people through getting duty-free
entry through textiles. Before you have duty-free entry, you
have got to have an investment. Somebody has got to put up a
plant.
One of the things I worry about, and I am sure you
gentlemen know a heck of a lot more than I do--although I have
just finished reading that wonderful book about Paul Farmer,
Mountains Beyond Mountains--there has to be an idea that your
investment is not going to be jeopardized, and I don't know
what happens to the election. I don't know whether there is
going to be a coup. I have no idea. Is there any way to make
sure that the incentive for people over and above the duty-free
entry is going to be there to put that investment in so you can
create those jobs?
Senator GRAHAM. As Senator DeWine said in his explanation
of the legislation, it has a condition before these benefits go
into effect, and that condition is essentially that the
President of the United States must certify that the country is
stable and is making progress. I agree with you that that
stability is a key to long-term success, but it is a little bit
like the chicken and the egg. If you create the market for
products such as this will for apparel, then you hopefully will
create the investment necessary to fill that market. I think
this bill is well balanced in its recognition of the necessity
of a stable environment and then the incentive to use that
stable environment to create jobs.
Senator DEWINE. Mr. Chairman, if I could just add to that,
I totally agree. I think we have to move on several different
tracks. The bill that we just marked up in the U.S. Senate
Committee on Appropriations contains money to work on the
judicial system and to work on the police, both of them long-
term problems for Haiti. They are not going to be solved
overnight and we have to work on them. The Haitians have to
work on these problems.
You are absolutely correct, but I think we also have to
move along economically at the same time, and frankly, there
are businesses who look at Haiti because of the comparative
advantages of labor and for other reasons and they will make
those decisions. I truly believe with the passage of this bill,
they will make decisions to move forward and to expand in
Haiti. They have done it in the past.
Mr. HOUGHTON. Thank you very much.
Chairman CRANE. Thank you. Mr. Becerra?
Mr. BECERRA. Thank you, Mr. Chairman, and thank you, as
well, for quickly bringing this matter to a hearing so that we
could hear not only from our colleagues on the Senate side, but
from those who are interested in trying to help move this issue
along faster for the people of Haiti. I want to extend to the
two Senators not only a welcome, but our appreciation for your
efforts, not just now on this issue today but in the past. You
have been leaders on the issues affecting Haiti and I think
that the Haitian people probably recognize very well that there
are two champions here sitting before us trying to help once
again. So, I thank you for the work that you have done in the
past.
I would love to hear a comment that you might have as we
get ready to hear testimony from some of the panelists who will
be coming before us. Perhaps you can give us some thoughts.
There will be testimony from a representative from the Union of
Needletrades, Textiles, and Industrial Employees, and Hotel
Employees and Restaurant Employees International Union (UNITE
HERE), the textile union here in the United States, talking
about how, because we know that Haiti has had some problems in
the past with its labor laws--in fact, my understanding is that
their labor code still extends back from the days of the
Duvalier dictatorship--that there have been difficulties.
They will be proposing, if they haven't already proposed in
the past, that we do something here to try to help ensure that
the benefits of this expanded trade with the United States,
which should, I hope, help, along with what I believe the
gentleman and our friend from New York was saying, that we have
further investment, but it should help the Haitian people if we
are able to extend these benefits to Haiti. If you have a
regime in place which doesn't really allow those benefits to
get down to those workers who are producing the fabric and the
apparel and garments, then we ultimately still lose out in
helping the Haitian people.
So, I wondered if you could comment. I don't know if you
had a chance to see the testimony of the gentleman from UNITE
who will be speaking, Mr. Levinson, but what he in essence
proposes that we consider doing--let me make sure I don't
misquote him--a couple of things. One, we initiate a labor
program in Haiti that would be run by the International Labor
Organization (ILO). That would be as a condition for this
additional trade benefit that would, in essence, allow there to
be a presence of some type of ILO program.
It wouldn't be--any extended benefits wouldn't be connected
to whatever the content of these reports would be, but it
would, in essence, put in place a program that would give Haiti
additional incentive to try to move forward and would
complement some of the provisions that are already in the HERO
Act to try to move Haiti along in progressing with its labor
laws. Is there any comment on that?
The second point, which would be to propose having a
workers' rights ombudsman that would be distinct from the
government, therefore hopefully not influenced by the
government, to help us process through some of the issues that
are affecting the labor laws and folks who work within the
regime of the labor laws in Haiti. Any comment?
Senator DEWINE. Congressman, I have not had a chance to
look at that testimony. I will look at it and I will react. I
can only tell you what my personal experience has been in
Haiti, and this was both under--primarily under the Aristide
government, but also since the Aristide government, as well,
and that is looking, going actually into some of these assembly
plants.
What I saw and what my wife saw on another occasion were
conditions that were humane conditions and situations where
people did, in fact, want to work, and where the wage that was
paid was a much higher wage than certainly the average wage in
Haiti, and situations where people, when you talk to the
people, they were supporting many other people in their family.
So, I think we always have to watch that. I think one of
the things that you might want to question some of the other
additional witnesses who you are going to hear from today about
their plans to go into Haiti and what their plans on how they
will operate. The big companies that we look at, for example,
J.C. Penney, they have certain codes of who they buy from, and
if these companies don't live up to that, they cut them off.
That is one way of policing. It is not the exclusive way,
shouldn't be the only way, but that certainly is one way.
My personal experience of what I have seen in the last few
years in Haiti is there has been something that I thought, I
think if you were there or anybody else on the panel was there,
you would say, yes, that is good. That is okay. These people
are doing much better than they would have been doing if they
didn't have a job, and a lot of people want this job.
Senator GRAHAM. I would have two comments. One is Haiti is
a member of, and I believe has ratified the core conventions
of, the ILO. One approach might be to assist Haiti in what is
missing in most place with the ILO conventions and that is
enforcement of the standards to which the county has already
committed itself. I would note that this is not an issue that
is singular to Haiti. This is probably an issue in many
countries in the Caribbean Basin area as well as elsewhere.
Second, I have been going to Haiti on a regular basis since
the early 1980s and one of the things that they had in place
before the bad times started about 15 years ago was an
ingenious system where people would start working in the plant
that required the least skills, because in many ways, that
plant was the most effective school that these people had ever
attended.
Those who showed the capability and dedication and a good
work ethic then would move to the plant next door, which had a
slightly higher skill requirement and compensation. They might
move from apparel to sewing what at one time was almost a
Haitian exclusive, American baseballs. Then they would move up
to a third or fourth or fifth rank so that the employment
structure served almost as a form of acceptance, graduation,
and moving forward. I would hope that with this kind of
legislation, that something analogous to that might be
reestablished to give Haitians not only the opportunity for the
first job, but to see the opportunity for a more skilled job
with higher income for their family.
Mr. BECERRA. Thank you. Thank you, Mr. Chairman.
Chairman CRANE. Thank you. Thank you very much, Senators,
and----
Mr. LEVIN. Mr. Chairman?
Chairman CRANE. Yes?
Mr. LEVIN. I might just add, as long as we are on this
subject, and we will talk about it subsequently, but I just
urge everybody to take a look at the most recent U.S.
Department of State report on human rights practices in Haiti.
It contains language like, ``frequent verbal abuse and
intimidation of workers and organizers were problems in the
assembly sector. Female workers in the assembly sector reported
that some employers sexually harassed female workers with
impunity. Workers had access to labor courts set up to resolve
common labor-management disputes. However, the court's
judgments were not enforced.''
So, I hope we can address these issues and move on with
legislation. I don't think we can do so if we simply ignore the
issue altogether. The certification processes in the bill
relate to several areas but don't touch this one. I am not
suggesting that we expect Haiti to become overnight in full
compliance in practice with everything they have signed onto,
but I do think, as we have said, unless there is some assurance
that the people who work will benefit or the poverty of Haiti
will remain as deep as it is today, and none of us wants that,
none of us. Thank you.
Chairman CRANE. Thank you. Yes, Mr. Rangel?
Mr. RANGEL. I will be brief, and thank you for this
opportunity. I can't let this go by without thanking you two
for the leadership that you provided in this and other areas,
especially as it affects the Caribbean. As relates to Haiti, I
cannot think of any country--maybe Sudan--that would get more
international sympathy because of the political problems that
they have faced for decades, the economic problems they face
today, and then, of course, the tragic effects of the
hurricane. This might give us an opportunity, if we think about
it, to try to bring our parties together.
It has been difficult to mention labor standards without
people asking, which side are you on? I think what Mr. Levin
was talking about is that as Americans, we have to have some
standard. We have to be able to say, not to please our labor
unions but to please ourselves, that we can't just have a drive
as to who can hire human beings for the least amount of money.
My background in history means you can go to slavery if that is
the standard that you are looking for, how cheap is the labor.
Again, as Mr. Levin said, we are not thinking about asking them
to meet American standards. Like most other things that we
enjoy as Americans, that is the dream. That is an aspiration.
That is a goal.
I am certain nobody should be overly impressed with the ILO
standards. That is a minimum. Then if I heard him correctly, he
is saying, and they don't have to have that. Just show us what
we can do so that no matter what level you are working on, that
you would know that if you are a democracy in your country, you
can aspire to be the boss of that shop, that there is no cap on
your thinking. If you don't have anything there except the
Chief Executive Officer (CEO) determining, how cheap can I get
the labor, I don't think we should feel proud of being
Americans and forcing people into this, because in our own
great Nation, the things that we take for granted were not
given to us by management but fought for by labor.
So, I don't know what the situation is over there in the
other body, but we here hope that we can take this, where we
have an overwhelming support for the objective, and begin just
to talk about what do you mean by ILO standards, because it is
not nearly as fearful as I think some people would want to
believe that it is. I just thank you for your effort and look
forward as always in working with you on this and other issues.
Chairman CRANE. Let me conclude by again expressing
appreciation to both of you for your leadership and your
involvement in this very important issue. We hope we can act
with dispatch.
Senator DEWINE. Thank you, Mr. Chairman.
Senator GRAHAM. Thank you.
Chairman CRANE. Thank you. Now I would like to call our
next panel, William Woltz, President and CEO, Perry
Manufacturing Company, Mount Airy, North Carolina; Stephen
Felker, President, Chairman, and CEO, Avondale Mills, Monroe,
Georgia, on behalf of the National Council of Textile
Organizations; Jean Edouard Baker, President, Vetements
Textiles, Port-Au-Prince, Haiti; Janet Fox, International
Merchandising Director and Vice President, J.C. Penney
Purchasing Corporation, Plano, Texas; Mark Levinson, Chief
Economist, UNITE HERE; and Nigel Thompson, Executive Vice
President of Planning and Development, Yazaki North America,
Canton, Michigan.
If you will all please take your seats, and after you are
seated, in front of each seat there is a little light that
gives you an indication of the time. We try and restrict
presentations to 5 minutes and anything beyond that will be
made a part of the permanent record. That light will go green,
and then yellow as the warning signal, and then turn red after
5 minutes. So, if you can, please try and keep your
presentations to 5 minutes or less. With that, we will start
out with Mr. Woltz.
STATEMENT OF WILLIAM K. WOLTZ, JR., PRESIDENT AND CHIEF
EXECUTIVE OFFICER, PERRY MANUFACTURING COMPANY, MOUNT AIRY,
NORTH CAROLINA
Mr. WOLTZ. Thank you very much for the opportunity to
address this body. I am William K. Woltz, Jr., President of
Perry Manufacturing, one of the premier private label
manufacturers in the United States. I am pleased to be here to
testify in support of legislation that will provide enhanced
benefits for the people of Haiti.
Headquartered in Mount Airy, North Carolina, Perry
Manufacturing has been in business for over 50 years and has
operated in a half-dozen countries. Perry Manufacturing owns
and operates its own factories that produce for some of the
largest retailers and brands sold in the United States and
around the world. We know how to build and run successful
sewing operations, operations that are a source of pride to us
and to our customers. Our customers are proud to have their
merchandise sewn in factories that have such a good work
environment. Wherever we operate, we are the best place to work
and we are able to attract and keep the highest quality
workforce. We employ 550 people in Haiti and have a building
under construction to add another 1,000 people. Haiti is a very
difficult and poor country to operate in. For years, Haiti has
had a limited duty-free benefit for garments sewn from U.S.
fabric without any resulting expansion of its apparel industry,
proving that the existing restricted benefit has been
meaningless for the communities in that impoverished state.
So, why did Perry decide to stay in Haiti and possibly
expand its operations? It is because of the possibility of
favorable trade legislation like HERO that will allow Haitian
apparel to compete on a duty-free basis in the United States.
The fashion industry is the overwhelming majority of the
apparel industry, and when the fashion industry establishes
itself in a country, it has staying power there. It doesn't
leap from low-cost country to low-cost country. The fashion
industry builds and requires skills in its labor force. Because
of its ability to change styles, use different kinds of
fabrications, knits and wovens, fashion builds a sewing supply
chain that employs a tremendous amount of people.
Without the use of third-party inputs, without the ability
to buy fabric wherever in the world it is most competitive,
there will be no fashion apparel industry in Haiti, and without
enhanced trade benefits, when global quotas are lifted on
January 1, 2005, Haiti will be in a disadvantaged position vis-
a-vis its Asian competitors and can never become the apparel
manufacturing player that it now has the opportunity to become,
and as a matter of fact, that it once was. Right now, Haiti has
a golden opportunity and the prospect of a bright future. With
legislation like HERO, the United States could act to transform
this poverty-stricken island into an apparel manufacturing
player. In order to compete for investments, Haiti must at
least have as good a deal as Africa, AGOA, in order to have a
chance to compete.
With HERO, Haitian factories can be world competitors and
will have the ability to use the fabrics that are required by
fashion and the ability to source these fabrics in the most
competitive manner. With HERO, Haiti becomes an attractive
market, and as it gains the ability to build a thriving apparel
industry, the ripple effect will be tremendous in Haiti.
Hundreds and hundreds of jobs are created in a ripple around
apparel plants, from feeding the workers to transporting the
workers to packaging to recapping tires. The list goes on and
on. The benefits extend to the United States and U.S. industry,
as well. Haiti can become an apparel center that will buy most
of its supplies, packaging, trim, and some of its fabric from
its neighbor, the United States. Haiti can become an apparel
center whose wages will be for the most part spent buying
products from the United States.
I believe that there is another key point. As long as the
sewing factories are in this hemisphere, the U.S. textile
industry has a chance to sell to these factories. When these
factories leave this hemisphere, the U.S. textile industry will
have no chance to sell to these factories. The HERO does not
preclude the use of U.S. fabric. As a matter of fact, I prefer
to buy U.S. fabric. I get 60-day terms when I buy U.S. fabric.
When I buy foreign fabric, I have to pay with a letter of
credit.
We are in a very competitive market in the fashion apparel
business where our retail customers are committed to delivering
higher-quality merchandise at lower prices to the American
consumer. In order to be a supplier to the major retailers and
major brands, Perry Manufacturing has no choice but to be in
that value-quality equation. Without the ability to use fabric
from anywhere in the world, Haiti will not be a part of that
supply chain. Absent HERO, the factories that are now running
or under construction in Haiti may or may not stay open or be
completed, and I speak as a businessman that is faced with this
very real calculation. The sewing industry will always go where
it can be competitive. With HERO, that place can be Haiti.
In closing, I would like to say there is a great
opportunity for the United States, and Florida in particular,
to supply all of the material used to build and create and
operate this industry. The HERO bill would create a viable
industrial complex just off the coast of the United States that
will help keep Haitians in Haiti where they will have
opportunity, create additional markets for American producers
of everything from cornflakes to batteries, and bring hope and
opportunity to this impoverished island. Thank you very much. I
will be pleased to answer any questions that you might have.
[The prepared statement of Mr. Woltz follows:]
Statement of William K. Woltz, Jr., President and Chief Executive
Officer, Perry Manufacturing Company, Mount Airy, North Carolina
Introduction
Good afternoon! I am William K. Woltz, Jr., President of Perry
Manufacturing, one of the premier private label manufacturers in the
United States, and I am pleased to be here to testify in support of
legislation that will provide enhanced benefits for the people of
Haiti.
Headquartered in Mt. Airy, N.C., Perry Manufacturing has been in
business for over 50 years and has operated in a half dozen countries.
Perry Manufacturing owns and operates its own factories that produce
for some of the largest retailers and Brands sold in the U.S. and
around the world. We know how to build and run successful sewing
operations, operations that are a source of pride to us and to our
customers--our customers are proud to have their merchandise sewn in
factories that have such a good work environment. Wherever we operate
we are the best place to work, we are able to attract and keep the
highest quality workforce.
Perry's Investment in Haiti
We employ 550 people in Haiti and have a building under
construction to add another thousand people, but Haiti is a very
difficult and poor country to operate in. For years, Haiti has had a
limited duty-free benefit for garments sewn from U.S. fabric without
any resulting expansion of its apparel industry, proving that the
existing restrictive benefit has been meaningless for the communities
in the impoverished island-state.
So why did Perry decide to stay in Haiti and possibly expand its
operations? It is because of favorable trade legislation like HERO that
will allow Haitian apparel to compete on a duty-free basis in the U.S.
market.
The Global Fashion Industry
The fashion industry is the overwhelming majority of the apparel
industry and when the fashion industry establishes itself in a country,
it has staying power there--it doesn't leap from low-cost country to
low-cost country.
The fashion industry builds and requires skills in its labor force.
Because of its ability to change styles, use different kinds of
fabrications, knits and woven fabrics, fashion builds a sewing supply
chain that employs a tremendous amount of people. But without the use
of third-party inputs, without the ability to buy fabric wherever in
the world it is most competitive, there will be no fashion apparel
industry in Haiti. And without enhanced trade benefits, when the global
quotas are lifted on January 1, 2005, Haiti will be in a disadvantaged
position vis-a-vis Asian suppliers, and can never become the apparel
manufacturing player that it now has the opportunity to become and that
it once was.
Haiti's Golden Opportunity
Right now Haiti has a golden opportunity, and the prospect of a
bright future. With legislation like HERO, the United States could act
to transform this poverty stricken island into an apparel manufacturing
player. But in order to compete for investments, Haiti must at least
have as good a deal as Africa (AGOA) to have a chance to compete.
With HERO, Haitian factories can be world competitive, and will
have to have the ability to use the fabrics that are required by
fashion and the ability to source these fabrics in the most competitive
manner. With HERO, Haiti becomes an attractive market, as it gains the
ability to build a thriving apparel industry. The ripple effect will be
tremendous in Haiti; hundreds and hundreds of jobs are created in a
ripple around apparel plants from feeding the workers to transporting,
packaging, to recapping tires--the list just goes on and on.
Implications for the U.S. Textile Industry
The benefits extend to the U.S. industry as well. Haiti can become
an apparel center that will buy most of its supplies, packaging, trim
and some of its fabric from its neighbor, the United States. Haiti can
become an apparel center whose wages will be for the most part spent
buying products from the United States.
And I believe that there is another key point: As long as the
sewing factories are in this hemisphere, the U.S. textile industry has
a market to sell into. If these factories leave this hemisphere, the
U.S. textile industry will have to rely on selling to factories in Asia
or Africa where it will be impossible for them to compete. Indeed, HERO
does not preclude the use of U.S. fabrics. In fact, I prefer to buy
fabric from the United States. For one thing, I get terms in the United
States. Here we have a competitive market where retailers are committed
to delivering higher quality merchandise at lower prices to the
American consumer. In order to be a supplier to the major retailers and
major brands, Perry has no choice but to be in that value/quality
equation. Without the ability to use fabric from anywhere in the world,
Haiti will not be a part of that supply chain. Absent HERO, the
factories that are now running or under construction in Haiti may or
may not stay open or be completed. And I speak as a businessman faced
with this very real calculation. The sewing industry must go where it
can be competitive. With HERO that place can be Haiti.
Conclusion
In closing I'd like to say it is a great opportunity for the United
States and Florida in particular to supply all of the material used to
create and operate this industry.
The HERO bill would create a viable industrial complex just off the
coast of the United States that would keep Haitians in Haiti where
there will be opportunity, create additional markets for United States
producers of everything from Cornflakes to batteries, and bring hope
and opportunity to this impoverished country.
I would be pleased to answer any questions that you might have.
Chairman CRANE. Thank you. Mr. Felker?
STATEMENT OF STEPHEN FELKER, PRESIDENT, CHAIRMAN, AND CHIEF
EXECUTIVE OFFICER, AVONDALE MILLS, INC., MONROE, GEORGIA, ON
BEHALF OF THE NATIONAL COUNCIL OF TEXTILE ORGANIZATIONS
Mr. FELKER. Chairman Crane, Congressman Levin, Members of
the Subcommittee, thank you very much for the opportunity to
appear before you today. My name is Stephen Felker. I am
Chairman, President, and CEO of Avondale Mills, a privately-
held diversified textile manufacturer with headquarters in
Monroe, Georgia. We employ some 5,000 workers in North and
South Carolina, Georgia, and Alabama, where we spin, weave,
dye, and finish textiles made primarily of cotton. Our products
are used in the apparel, home furnishing, and industrial end
uses. I am also a member of the National Council of Textile
Organizations and a Vice President of the National Cotton
Council.
The U.S. textile industry has experienced a wave of plant
closings and job losses. In the last 6 years, we have lost some
220,000 textile jobs, fully 33 percent of our entire workforce.
We lost 50,000 jobs in 2003 alone. With this in mind, our
industry is fearful that the Senate-passed HERO would only lead
to more job losses. We are pleased that the Committee is
willing to consider alternative approaches to providing
assistance to Haiti.
Under the Caribbean Basin Trade Partnership Act (CBTPA)
(P.L. 106-200), which granted duty-free treatment to garments
made in the region of U.S. yarns and fabrics, the U.S. textile
industry has developed mutually beneficial trading partnerships
with apparel makers in many Caribbean countries. Haiti has been
a part of the success. In 2002, the value of U.S. textile
exports to Haiti had risen 176 percent over the 3 previous
years. In fact, 70 percent of Haiti's garment exports to the
United States are made from U.S. components.
We note, however, that U.S. exports to all CBTPA countries
slowed in 2003 from the 220-percent growth rate over the
previous 3 years to only 6-percent growth. The CBTPA apparel
trade, including with Haiti, is off this year, as my written
statement details. This we attribute in large part to increase
in imports of Chinese apparel, imports that are, frankly,
representative of the damage being done around the world due to
China's enormous disruptive currency manipulation, its enormous
subsidies, illegal tax rebates, and use of non-performing loans
to gain competitive advantage.
Now, how does Congress achieve a win-win solution that
benefits the workers of the United States and is consistent
with the fundamentals of CBTPA? Well, the one thing that
Congress must not do is enact the Senate-passed bill. It will,
frankly, mostly benefit Chinese and other Asian producers of
yarn and fabric. The U.S. textile industry and our workers will
be the losers, as will apparel producers in other CBTPA
countries.
Make no mistake, the Senate-passed bill creates an enormous
and irresistible incentive for apparel makers to shut down
their operations elsewhere in the Caribbean and Central America
and move to Haiti, where they can freely utilize Chinese
fabrics and Chinese yarns and still get the same zero-duty
access to the valuable U.S. market. Importers and retailers
will quickly shift their orders to Haiti and the price will be
paid by U.S. textile workers and by apparel workers in other
CBTPA countries. From a U.S. perspective, we will not only lose
our export market in Haiti, but also much of our export market
in other Caribbean and Central American countries.
The second problem is that the bill encourages
transshipment through Haiti. Haiti clearly lacks effective
legal and enforcement systems, Chinese manufacturers will be
able to easily transship apparel directly through Haiti in
order to take advantage of zero-duty benefits.
Now, let us focus on a solution. The number one challenge
of conducting business in the entire region is this lack of
working capital. We urge Congress to consider legislation that
makes financial and operational services of U.S. export credit
and financing agencies available to U.S. textile and apparel
companies. The Overseas Private Investment Corporation, the
Export-Import Bank of the United States, the Trade Development
Agency can be brought into this effort. Our industry has had
difficulty obtaining effective U.S. Government financing of
exports and overseas activities that utilize U.S. inputs.
Congress has already authorized preferential treatment for
garment imports from Haiti utilizing U.S. inputs through the
CBTPA.
Congress could further assist Haiti in fully recognizing
the benefits of this program by helping finance their working
capital through the guarantee of receivables of U.S. companies
selling there. Such a program in Haiti could serve as a pilot
program for similar initiatives in other Caribbean and Central
American nations and would be very beneficial in helping the
partnerships our industry has established there as we face
together the challenges of predatory Chinese market share
strategies in the years to come. In closing, Mr. Chairman, I do
believe that there are concrete steps that can be taken to help
Haiti, actions which will produce a win-win situation for
Haiti, U.S. textile companies, our workers, and our customers
in the apparel industry throughout other CBTPA nations. Thank
you.
[The prepared statement of Mr. Felker follows:]
Statement of Stephen Felker, President, Chairman, and Chief Executive
Officer, Avondale Mills, Inc., Monroe, Georgia, on behalf of National
Council of Textile Organizations
Chairman Crane, Congressman Levin, members of the Subcommittee.
Thank you for this opportunity to appear before you today.
My name is Stephen Felker. I am chairman, president and CEO of
Avondale Mills, Inc., a privately held, diversified textile
manufacturer with headquarters in Monroe, Georgia. We employ some 5,000
workers in facilities in North Carolina, South Carolina, Georgia and
Alabama, where we spin, weave, dye and finish textiles made primarily
from cotton raw materials. Our products are used in apparel, home
furnishings and industrial end manufacturing. I am also a member of the
board of directors of the National Council of Textile Organizations and
a vice president with the National Cotton Council.
Since the late 1990s, the United States textile industry has
experienced an unprecedented wave of plant closings and job losses. In
the last six years, we have lost some 220,000 textile jobs, fully 33
percent of our entire workforce. We lost 50,000 jobs in 2003 alone.
With this in mind, our industry is fearful that the Senate-passed S.
2261 would only lead to more job losses in our industry, and we are
pleased that the Committee is willing to consider alternative
approaches to providing economic assistance to Haiti.
Under the Caribbean Basin Trade Partnership Act (CBTPA), which
granted duty-free treatment to garments made in the region of U.S.
yarns and fabrics, the U.S. textile industry has developed mutually
beneficial trading partnerships with apparel makers in many Caribbean
countries. U.S. textile exports to the CBPTA countries soared by 220
percent in the three years beginning in 2000 when the law was enacted.
Haiti, as a CBTPA beneficiary country, has been part of this
success. In 2002, the value of U.S. textile exports to Haiti had risen
approximately 176 percent in the three years since 1999. In fact, 70
percent of Haiti's garment exports to the U.S. are made from U.S.
components.
We note, however, that total U.S. exports to all CBTPA countries
slowed in 2003 from the 220 percent growth rate over the previous three
years to only six percent growth, and CBTPA apparel exports to the U.S.
are down four percent so far this year. Moreover, U.S. textile exports
to Haiti actually fell by 12 percent in 2003, and Haitian apparel
imports to the U.S. are subsequently down by nearly 14 percent this
year. These figures we attribute in large part to increases in imports
of decontrolled Chinese apparel--imports that are frankly
representative of the damage being done around the world due to China's
enormously disruptive currency manipulation, its enormous subsidies,
illegal tax rebates and use of non-performing loans to gain competitive
advantage.
China has taken 72 percent of the U.S. market in products that had
their quotas removed two and a half years ago. It trounced all
competitors, including Haiti and Sub-Saharan Africa, which was already
receiving the benefits similar to those available in the Senate-passed
Haiti bill. I would note that imports from Haiti in those product
categories fell 53 percent, from 8.6 million square meters to 4.0
million square meters in 30 months time. Imports from China during the
same period of time increased 1 BILLION square meters. Thus, a solution
for Haiti--and apparel exporters throughout Mexico, the Caribbean and
the Andean region--must include the use of safeguards against China and
strong action on unfair trade practices.
But relevant to today's discussion is--How does the Congress
achieve a win-win solution that benefits textile manufacturers in the
U.S. and apparel makers in Haiti, which is consistent with the
fundamental basis of CBTPA? Well the one thing the Congress must not do
is enact the Senate-passed bill--this might help some apparel makers in
Haiti, but it will frankly benefit mostly Chinese and other Asian
producers of yarn and fabric. And the U.S. textile industry and our
workers will be the losers, as will apparel producers in other CBTPA
countries.
Make no mistake--the Senate-passed bill creates an enormous and
irresistible incentive for apparel makers to shut down their operations
elsewhere in the Caribbean and Central America, and move to Haiti,
where they can freely utilize Chinese fabrics made of Chinese yarn and
still get the same zero-duty access to the valuable U.S. market. All of
this, plus Haiti's already incredibly low labor costs, would give Haiti
an advantage that no country in the region can beat. Importers and
retailers will quickly shift their orders to Haiti, and the price will
be paid by U.S. textile producers and our workers and by apparel
workers in the other CBTPA countries. From a U.S. perspective, we will
thus not only lose our export market in Haiti, but much of our export
market in other Caribbean and Central American countries.
The second problem is that the bill encourages transshipment
through Haiti. Because Haiti clearly lacks an effective legal or
enforcement system, Chinese manufacturers would be able to easily
transship apparel directly through Haiti in order to take advantage of
zero duty benefits. It is much more difficult to catch transshipments
when U.S. yarns and fabrics are not required--in fact, Customs' ability
to do so was severely criticized in a GAO report last year. If this
bill is passed, a significant portion of the benefits will go to
unscrupulous Chinese manufacturers who manipulate the system and
utilize unfair trade practices to gain an enormous advantage.
Let me quantify this for the Committee--if enacted, this bill would
ultimately mean that nearly $2 BILLION in apparel exports will shift
from other Caribbean and Central American countries to Haiti. This is
twice the size of current exports from Costa Rica and forty percent
more than what Guatemala even produces. And over time, our industry
expects U.S. mills to lose almost $1 BILLION in export orders currently
going to the region, and tens of thousands of U.S. jobs will be lost to
China.
I also want to point out that the Senate bill provides for duty-
free benefits retroactive to October 1, 2003. In other words, millions
of dollars worth of tax rebates will be provided not to Haiti but to
importers for goods that have entered the country in the past 12
months. Haitian apparel makers and their workers will not benefit at
all from these rebates. Only the importers' bottom line will realize
the profits of this provision and at the expense of U.S. taxpayers who
are left footing the bill.
Rather than a single-minded approach that will benefit Chinese
textile producers at the expense of textile producers and workers in
the U.S. and other Caribbean countries, I want to suggest a more broad-
based approach. Recent studies by NCTO, by the International Trade
Commission and by the World Trade Organization, all conclude that China
will dominate global textile and apparel trade if quotas are permitted
to expire at the end of this year as currently scheduled. As such, it
makes no sense to put all the Haitian eggs in a textile and apparel
basket.
Instead, we would urge that Congress commit to providing the
support Haiti needs to diversify its economy. Because our expertise is
in the textile arena, we are not prepared to recommend specific steps
or economic interests to pursue, but rather would simply encourage you
to move in this direction. A one-shot approach to Haiti's economic
problems is far too risky to provide that nation with the assistance it
needs for a sustainable economic recovery.
At the same time, we would encourage Congress to provide Haiti with
such form of support as you might deem appropriate to help that country
become more stable. Clearly, the unrest in Haiti is a disincentive to
any business thinking about re-locating to that country, and we would
urge that a comprehensive Haitian approach include steps to help
promote political and social stability there as well. In the absence of
these fundamental tenets, an environment to support sustained economic
development will never materialize.
With regard to the textile and apparel sector, we urge Congress to
consider legislation that ensures the financial and operational
services from U.S. export credit and financing agencies are available
to U.S. textile and apparel companies that choose to do business in
Haiti. Traditionally, the Overseas Private Investment Corporation
(OPIC), the Export Import (ExIm) Bank, and the Trade Development Agency
(TDA) have avoided sensitive industries, including U.S. textile and
apparel firms and their suppliers. As a result, our industry has had
difficulty seeking U.S. Government financing of our exports and
overseas activities that utilize U.S. inputs. Since Congress has
already authorized preferential access for garment imports from Haiti
utilizing U.S. inputs through the CBTPA, Congress could further assist
Haiti in fully realizing the benefits of this program by supporting
U.S. export and investment financing for the U.S. inputs that go into
those imports.
Such a program in Haiti could serve as a pilot program for similar
initiatives in other Caribbean and Central American nations and would
be very beneficial in helping the partnerships our industry has
established there try to withstand the challenges they will certainly
face from Chinese imports in the years to come. Additionally, since
many other countries already provide favorable export financing in
support of their textile and apparel products, we maintain it would be
appropriate, and mutually beneficial to both the U.S. and Haiti, for
our government to provide similar tools in support of U.S. textile and
apparel industries and their workers, as well as workers in Haiti.
In closing, Mr. Chairman, I do believe there are concrete steps
that can be taken to help Haiti, actions which will produce a win-win
situation for Haiti, U.S. textile companies, our workers, and our
customers in the apparel industry throughout the other CBTPA countries.
Thank you.
Chairman CRANE. Thank you, Mr. Felker. Mr. Baker?
STATEMENT OF JEAN EDOUARD BAKER, PRESIDENT, VETEMENTS TEXTILES,
S.A., PORT-AU-PRINCE, HAITI
Mr. BAKER. Mr. Chairman, distinguished Members of the
Subcommittee, it is a privilege to be before your prestigious
Committee this afternoon. As a Haitian citizen and
manufacturer, I am conscious of the responsibility that is upon
me to present and defend an issue that could have tremendous
impact upon my country. I am here to support HERO, introduced
in the House by Congressman Clay Shaw. This version was
introduced in the Senate by your esteemed colleague, Senator
DeWine, and passed in June of this year. It is the best deal
for Haiti.
In the last two decades when Haiti was struggling to emerge
from dictatorship and political turmoil, there has been one
element that has never been addressed, the fundamental need for
long-term job creation as a part of the transition. Can a
country without a growing economy and vibrant middle class ever
become a democracy?
Let me take a moment to address some of Haiti's challenges.
First, chronic mismanagement by a series of governments.
Second, overpopulation. Haiti has 9 million inhabitants, with
the majority concentrated in the cities where jobs are scarce.
Estimates show that 70 percent of Haiti's working-age
population is unemployed or under-employed. Third, no
significant natural resources. Fourth, inadequate and decaying
infrastructure.
In the face of these issues, Haiti's once dynamic apparel
industry is no longer competitive. In the 1980s, Haiti's
industry supported 60,000 jobs. Now the sector employs only
20,000 workers. What Haiti needs and what we are hoping to gain
with the HERO bill as introduced by Representative Shaw are
AGOA-type incentives. The AGOA recognized that the least-
developed countries of Africa deserve special treatment. As the
only least-developed country in this hemisphere, I believe that
granting similar incentives to Haiti is the right thing to do.
I fully support the Congress's efforts to assist these African
countries and I take this opportunity to congratulate Chairman
Thomas and Congressman Rangel for the leadership that they have
shown on AGOA. Your lesser developed country neighbor deserves
these benefits, too.
In light of the quota elimination in January and stiff
competition in other suppliers, the only way Haitian companies
can compete is through a duty advantage that provides a simple
and flexible rule of origin with no tricks that anyone can
understand and apply. This bill would be a win-win situation
for the United States. It does not threaten U.S. jobs. In a
recent U.S. Agency for International Development study, the
executive summary of which I have submitted with my written
testimony, it says the following. ``There should be no adverse
impact on U.S. apparel manufacturers since the type of apparel
that could conceivably enter from Haiti under the new provision
of HERO have long since left the United States for offshore
operations.''
It should also be noted that by keeping production in
Haiti, statistics show that 15 to 20 percent of inputs are from
the United States, even if the main body fabric is from a third
country. When quotas in China expire at the end of the year, it
is expected that there will be a massive production shift to
China. China, unlike Haiti, produces its own inputs. Therefore,
there would be no increase in U.S. exports to China, but
instead the net loss as production moves away from countries
like Haiti.
I would like to make a few important points before
concluding. First, as we create jobs and bring stability to
Haiti, we alleviate the migration problems of Haitians going to
the Dominican Republic, the Bahamas, and, of course, Florida.
Second, every job created in the manufacturing sector in Haiti
has the potential to create one-and-a-half short- and long-term
jobs in related service sectors. Third, the average Haitian
worker supports seven dependents. Estimates show that
production growth could create 100,000 direct jobs over the
next 5 years. If we factor in the indirect employment, the
potential impact of this bill on Haiti's economy and society
would be staggering, giving access to proper nutrition, health
care, and education to millions. Access to these fundamental
human rights is a cornerstone of democracy.
Finally, I have included figures from the U.S. Census
Bureau and U.S. International Trade Commission showing recent
U.S. trade statistics with my testimony. The figures for Haiti
reflect normal trade patterns over the past decade. Haiti
imports about twice as much from the United States as it
exports to the United States. Other trading partners show a
negative balance with the United States. Estimates are that for
every dollar generated in Haiti, 60 percent is sent to the
United States. Therefore, a stronger Haitian economy implies
increased export of U.S. goods and services to Haiti. This is a
true win-win situation.
In closing, I want to thank you for allowing me to appear
before you today. You have the opportunity to do something
historic in passing HERO as introduced by Congressman Shaw. The
saying, ``trade, not aid,'' is perhaps not applicable to Haiti.
We need aid. By passing this bill, perhaps 10 years from now,
you will have changed the face of a nation to where aid is the
exception and opportunity is the norm. Thank you.
[The prepared statement of Mr. Baker follows:]
Statement of Jean Edouard Baker, President, Vetements Textiles, S.A.,
Port-Au-Prince, Haiti
Distinguished Members of the Sub-Committee:
It is a privilege to be before your prestigious Committee this
afternoon. As a Haitian citizen and a manufacturer I am conscious of
the responsibility that is upon me to present and defend an issue that
could have tremendous impact upon my country.
I am here to support the Haitian Economic Recovery Opportunity Act
of 2004 introduced in the House by Congressman Clay Shaw. This version
was introduced in the Senate by your esteemed colleague, Senator Mike
DeWine, and passed in June of this year. It is the best bill for Haiti.
Many Committee members are long-time friends of Haiti, and like
many of its citizens you have posed the question: ``Will Haiti ever
move past its problems?'' I know, as you do, that if hope and good
intentions could change the course of history, this hearing would not
be necessary--Haiti would be the thriving, stable neighbor that we
aspire to being. But we all know that it takes more than this. The
international community has had to physically intervene too often. In
the last two decades however, when Haiti was struggling to emerge from
dictatorship and political turmoil, there has been one element that has
never been addressed: the fundamental need for long-term job creation
as a part of the transition. Can a country without a growing economy
and vibrant middle-class ever become a democracy?
Let me take a moment to address some of Haiti's challenges:
First: Chronic mismanagement by a series of governments.
Second: Overpopulation--Haiti has 9 million inhabitants with the
majority concentrated in the cities where jobs are scarce. Estimates
show that 70% of Haiti's working-age population is unemployed or under-
employed.
Third: no significant natural resources.
Fourth: Inadequate and decaying infrastructure.
In the face of these issues, Haiti's once dynamic apparel industry
is no longer competitive. In the 1980s, Haiti's industry supported
60,000 jobs. Now the sector employs only 20,000 workers.
One of the fundamental reasons for this drop was of course the
international embargo in the early 1990s. And while Haiti was under the
embargo, the rest of the world was changing. Globalization was
underway, with China and the rest of Asia emerging as aggressive
competitors. Countries of the Caribbean Basin had received significant
development funding to build modern infrastructure including ports and
airports, roads, electricity and telecommunications. When Haiti emerged
from the embargo, although the new era was greeted with hope, it
quickly became clear that the manufacturing sector was not getting the
support that it needed. And left to fend for itself, it struggled to
compete internationally.
What Haiti needs, and what we are hoping to gain with the HERO bill
as introduced by Representative Shaw, are AGOA-type incentives. The
African Growth and Opportunity Act, passed unanimously by Congress in
2000 and renewed this year, recognized that the Least Developed
Countries of Africa deserved special treatment. As the only Least
Developed Country in this hemisphere, I believe that granting similar
incentives to Haiti is the right thing to do. I fully support the
Congress' efforts to assist these African countries; but your LDC
neighbor deserves these benefits too. In light of the quota elimination
in January, and stiff competition with other suppliers, the only way
Haitian companies can compete is through a duty advantage that provides
a simple and flexible rule of origin, with no tricks, that anyone can
understand and apply.
This will provide critical security and lowered risk for investors
in Haiti's future--foreign investors and local investors like myself. I
have five factories in Haiti, and employ 800 people. All of these
factories were burned down to the ground during the recent looting--
looters even took the roofs off the buildings. My 800 workers had no
sewing machines to work on, no buildings to go to work to, but knowing
that they have no other support, I struggle to rebuild my factories.
Even now, I have only been able to start up one of the factories and
put 150 people back to work. But I have confidence that with hard work
and great financial difficulties for my company and my family, I can
get my factories back on line, but I need to know that there is
security in my investment, and that there will be the opportunity to
compete.
This bill would be a win-win situation for the United States. It
does not threaten U.S. jobs and a recent USAID study, the executive
summary of which I have submitted with my written testimony (Attachment
1), says the following:
``There should be no adverse impact on U.S. apparel
manufacturers since the type of apparel that could conceivably
enter from Haiti under the new provisions of HERO have long-
since left the United States for offshore operations.''
Furthermore, according to the study as regards to any
displacement of U.S. textile mill products: ``If there is any
diversion, it is most likely to come at the expense of imports
from the Far East made with no U.S. components. . . .''
It should also be noted that by keeping production in Haiti,
statistics show that 15-20% of inputs are from U.S.--even if the main
body fabric is from a third country. Just as an example, my company
uses a large number of American inputs, including American buttons,
American thread, American zippers, American labels, and American
packing materials and my goods are shipped on an American shipping
line. When quotas on China expire at the end of the year, it is
expected that there will be a massive production shift to China. China,
unlike Haiti, produces its own inputs, therefore there will be no
increase in U.S. exports to China, but instead, a net loss as
production moves away from countries like Haiti.
I would like to make a few important points before concluding:
First: As we create jobs and bring stability to Haiti, we alleviate
the migration problems of Haitians going to the Dominican Republic, the
Bahamas, and, of course, Florida.
Second: Every job created in the manufacturing sector in Haiti has
the potential to create one and a half short- and long-term jobs in
related service sectors including construction, food service, etc.
Third: The average Haitian worker supports seven dependents.
Estimates show that production growth could create 100,000 direct jobs
over the next five years. If we factor in the indirect employment, the
potential impact of this bill on Haiti's economy and society could be
staggering, giving access to proper nutrition, healthcare, and
education to millions. Access to these fundamental human rights is a
cornerstone of democracy.
Finally, I have included figures from the U.S. Census Bureau and
USITC showing recent U.S. trade statistics with my testimony
(Attachment 2). The figures for Haiti reflect normal trade patterns
over the past decade: Haiti imports about twice as much from the U.S.
as it exports to the U.S. Other trading partners show a negative
balance with the U.S. 80% of Haitian imports are from the United
States, and this will not change. Estimates are that for every dollar
generated in Haiti, 80% is sent back to the U.S. Therefore a stronger
Haitian economy implies increased export of U.S. goods and services to
us. This is a true win-win situation.
In closing, I want to thank you for allowing me to appear before
you today. You have the opportunity to do something historic in passing
HERO as introduced by Congressman Shaw. The saying ``trade, not aid''
is perhaps not applicable to Haiti--we need aid. But by passing this
bill, perhaps ten years from now you will have changed the face of a
nation to where aid is the exception, and opportunity is the norm.
Thank you.
Chairman CRANE. Merci beaucoup. Ms. Fox?
STATEMENT OF JANET E. FOX, VICE PRESIDENT FOR INTERNATIONAL
SOURCING AND INTERNATIONAL MERCHANDISING DIRECTOR, J.C. PENNEY
PURCHASING CORPORATION, PLANO, TEXAS
Ms. FOX. Good afternoon, Mr. Chairman, Members of the
Committee on Ways and Means. My name is Janet Fox and I am the
Vice President for International Sourcing for J.C. Penney
Purchasing Corporation, the global source and arm for J.C.
Penney stores. J.C. Penney is one of America's largest
retailers. We have over 1,000 stores and last year had $18
billion in retail sales. Within my capacity as Vice President
for International Sourcing, I am responsible for the
development of our strategic sourcing plans and managing the
assets to support our global merchandise sourcing. Last year
alone, J.C. Penney Purchasing international purchase of goods
were valued at over $7 billion at retail. Our extensive global
sourcing experience places J.C. Penney in a unique position to
understand and comment on the proposed Haiti trade legislation
and its potential impact on the sourcing decision of U.S.
purchasers.
I appreciate the opportunity to testify before you on the
very important issue of helping Haiti, a country which faces
tremendous obstacles, with its economy under severe pressure
and its private sector struggling to maintain the nation's
fragile but critical employment base. J.C. Penney currently
purchases about $10 million worth of apparel, primarily knit t-
shirts and underwear, from Haiti, or about 3 percent of Haiti's
current apparel exports to the United States. Frankly, however,
that is a very small part of our international sourcing, and as
we plan our business for 2005 and beyond, looking forward to
the removal of quotas, whether our suppliers in Haiti will
remain a part of our strategy will depend largely and directly
upon whether Haiti can overcome the substantial competitive
disadvantages it currently faces.
With the elimination of quotas, there will be unprecedented
consolidation in the industry, a process we expect will evolve
over the next 5 years. The quota system has bred inefficiency
and helped bring about an oversupply of manufacturers that
otherwise would have been noncompetitive. J.C. Penney, like all
retailers, is addressing how it must change its business in
response to quota elimination. To compete successfully in this
new quota-free environment, we will gradually reduce the number
of suppliers we do business with and grow our business with
fewer suppliers. In a quota-free environment, we will have no
choice to be very discriminating as to who our suppliers will
be, selecting only those who can provide real value to our
customer. Value does not mean the product with the cheapest
price. It means the supplier that is able to provide a quality
product and service, including speed to market and supply chain
efficiency and reliability.
Right now, Haiti's prospects once quota are eliminated are
not good. The uncertain political situation in Haiti and
potential for supply chain disruption has made some companies
reluctant to take the risk of even sourcing there. Another
disadvantage is that, currently, we feel only simple garments
can be produced in Haiti. More sophisticated products must be
produced elsewhere.
The CBTPA does not provide Haiti with a competitive
advantage. Given the current level of skills and productivity
for Haitian workers, the higher price point for U.S. yarns and
fabric makes Haitian-made CBTPA-compliant products
uncompetitive. To offset the lower skills and productivity in
Haiti, it makes more sense to use Asian fabric and pay full
duty. We believe doing business in Haiti is the right thing to
do, both to help the people of Haiti and in the interest of
U.S. security, J.C. Penney is closely following the actions of
the Congress to provide meaningful incentives to retailers and
suppliers to continue to source and produce goods in Haiti. We
have carefully considered each of the options noted in the
Committee's hearing notice, as well as the third-country fabric
option presented by the HERO Act approved by the Senate, and
the cumulation concept put forward by Mr. Shaw last year, and
we have even tried to come up with a few ideas of our own.
Duty-free access for apparel produced in Haiti for fabric
produced anywhere in the world would provide the greatest
incentive for J.C. Penney to continue to purchase from Haitian
suppliers and perhaps even expand that business. Only with
third-country fabric can Haitian manufacturers offset the
limitation of the skills and productivity of their workers.
However, in our opinion, Haiti would not require the same level
of benefits as provided to the 40-plus countries under the
AGOA.
We are doubtful that Haiti could produce enough garments to
account for more than 1.5 percent of total apparel imports into
the United States. Right now, about two-thirds of 1 percent of
the imported apparel entering the United States comes from
Haiti. Doubling that would be a significant increase,
especially in light of increased competitiveness of other
suppliers once quotas are eliminated. Allowing third-country
fabric but with a lower cap than AGOA would allow Haitian
suppliers to remain competitive while realistically reflecting
the production capabilities of the country.
We have reviewed a number of the proposed trade preference
options. Contained within the written testimony we submitted
are more extensive comments on each of these options and its
implications to my company. Whether it be preference-based on
imports, value-added rules, or single transformation, Haiti
must compete in the world market. Retailers and importers
operate with economic realities. Haiti's poor infrastructure,
low sewing efficiencies, will need offsets. With the
elimination of quota in 2005, the Committee now has a narrow
window of opportunity to act to create a system of incentives
for apparel producers to remain in Haiti and for U.S. retailers
to continue to purchase Haitian products. We believe that the
Senate bill, HERO, does provide enough incentive to accomplish
this goal. J.C. Penney very much wants to work with the
Committee to develop a viable and meaningful program of
benefits for Haiti. Thank you.
[The prepared statement of Ms. Fox follows:]
Statement of Janet E. Fox, International Merchandising Director and
Vice President, J.C. Penney Purchasing Corporation, Plano, Texas
Good afternoon, Mr. Chairman, members of the Ways and Means
Committee. My name is Janet Fox. I am the Vice President for
International Sourcing for J.C. Penney Purchasing Corporation
(``JCPPC''), the global procurement arm for merchandise for sale in
JCPenney stores, catalog and internet operations. JCPenney is one of
America's largest department store, catalog and e-commerce retailers
employing approximately 150,000 associates. As of May 1, 2004, JCPenney
operated 1,021 department stores throughout the United States and
Puerto Rico. JCPenney's fiscal 2003 sales were $18 billion.
I have 18 years experience in international sourcing. Within my
capacity as Vice President for International Sourcing of JCPPC, I am
responsible for the development of our strategic sourcing plans and
managing the assets to support our global merchandise procurement. We
currently purchase and import merchandise from 55 countries worldwide
and from all areas of the globe ranging from nearby Mexico to China and
Southeast Asia to the countries of the Sub-Saharan Africa. Last year
alone, JCPPC's international purchases of goods were valued at $7
billion retail. Our extensive global sourcing experience places
JCPenney in a unique position to understand and comment on the proposed
Haiti trade legislation and its potential impact on the sourcing
decisions of U.S. purchasers.
I appreciate the opportunity to testify before you on the very
important issue of helping Haiti, a country which faces tremendous
obstacles, with its economy under severe pressure and its private
sector struggling to maintain the nation's fragile, but critical,
employment base. JCPenney currently purchases about $10 million worth
of apparel, primarily knit underwear, from Haiti, or about three
percent of Haiti's current apparel exports to the U.S. Frankly,
however, that amount is a very small part of our international sourcing
and as we plan our business for 2005 and beyond, looking forward to the
watershed event of the removal of quotas, whether our suppliers in
Haiti will remain a part of our sourcing strategy will depend directly
upon whether Haiti can overcome the substantial competitive
disadvantages it currently faces.
With the elimination of quotas, there will be unprecedented
consolidation in the industry; a process we expect will evolve over the
next five years. The quota system has bred inefficiency, and helped
bring about an over supply of manufacturers that otherwise would not
have been competitive. JCPenney, like all retailers, is addressing how
it must change its business in response to quota elimination. To
compete successfully in this new quota free environment, we will
gradually reduce the number of suppliers we do business with and grow
our business with fewer suppliers. This will result in the reduction of
the number of countries and locations where apparel is produced.
Currently, we are in the process of narrowing our lists of suppliers in
each product category. In the new quota free environment, we will have
no choice but to be very discriminating about our suppliers, selecting
only those who can provide real value to our customers. Value does not
mean the product with the cheapest price. It means a supplier that is
able to provide a quality product and service, including speed to
market and supply chain efficiency and reliability.
Right now, Haiti's prospects once quotas are eliminated are not
good. The uncertain political situation in Haiti and potential for
supply chain disruption has made some companies reluctant to take the
risk of sourcing there. Another disadvantage is that currently only
simple garments can be produced in Haiti; more sophisticated products
must be produced elsewhere. The Caribbean Basin Trade Partnership Act
(``CBTPA''), providing duty-free access to a limited quantity of
apparel produced in the region from U.S. or regional fabrics produced
from U.S. yarns, does not provide Haiti with a competitive advantage.
It is not the cap that is the problem. Given the current level of
skills and productivity for Haitian workers, the higher price point for
the U.S. yarns and fabrics makes Haitian-made CBTPA compliant products
uncompetitive. To offset the lower skills and productivity in Haiti, it
makes more sense to use Asian fabric and pay full duty.
Because we believe doing business in Haiti is the right thing to
do, both to help the people in that country and in the interests of
U.S. security and the security of the Western Hemisphere, JCPenney is
closely following the actions of the Congress to provide meaningful
incentives to retailers and suppliers to continue to source and produce
goods in Haiti. We have carefully considered each of the options noted
in the Committee's hearing notice, as well as the third country fabric
option presented by the HERO Act approved by the Senate and the
cumulation concept put forward by Mr. Shaw last year, and even tried to
come up with a few ideas of our own. The remainder of my testimony will
address each of these options and ideas.
Obviously, duty-free access for apparel produced in Haiti from
fabric produced anywhere in the world would provide the greatest
incentive for JCPenney to continue to purchase from Haitian producers
and perhaps expand that business. Only with third country fabric can
Haitian manufacturers offset the limitations of the skills and
productivity of their workers. However, in our opinion, Haiti would not
require the same level of benefit as provided to the 40 countries under
the AGOA. We are doubtful that Haiti could produce enough garments to
account for more than 1.5 percent of total apparel imports into the
U.S. Right now, about two-thirds of one percent of the imported apparel
entering the U.S. comes from Haiti. Doubling that amount would be a
significant increase, especially in light of the increased
competitiveness of other suppliers once quotas are eliminated. Allowing
third country fabric but with a lower cap than AGOA would allow Haitian
suppliers to remain competitive while realistically reflecting the
production capability of the country.
A preference system based upon the use of inputs made in countries
with which the U.S. has free trade agreements or unilateral preference
arrangements might also provide a limited incentive for sourcing
apparel in Haiti. There are no textile mills in Haiti but there are a
few knit textile factories in Guatemala and Mexico that could be a
source for some fabrics. Unfortunately, Mexico's quality is weak in
knit fabrics. Colombia and Peru produce yarns and fabrics, but the
costs and logistics of moving those inputs to Haiti make little sense,
especially given the types of basic level garments Haitian
manufacturers are currently capable of sewing.
We have considered whether a value added rule for determining
eligibility for duty-free access would provide an incentive for placing
orders in Haiti. With fabric generally accounting for about 75 percent
of the cost of producing a garment, and labor accounting for only 25
percent, the minimum threshold for U.S. or regional content, including
labor, would probably have to be no more than 35 percent for JCPenney
suppliers to consider taking advantage of such a rule. You have to keep
in mind that the garments that can be made in Haiti today are very
simple ones, things like underwear and t-shirts. There is little more
than fabric, thread and elastics, as well as packing materials,
involved, so that provides limited options for fulfilling the 35
percent minimum local or regional content. A 50 percent minimum local
or regional content would not be feasible for the type of garments
Haiti is capable of producing.
We have also considered whether such a value added rule would be
more useful if it were based upon overall production over an annual
period, rather than on a shipment by shipment basis. An annual
accounting process similar to the one that applies today for brassieres
under the CBTPA would be extremely unattractive, creating an auditing
nightmare for any supplier that is not vertically integrated and cannot
readily obtain the necessary information. For a retailer like JCPenney,
a purchaser of finished products, we would be required to obtain all
the necessary cost information from our vendors and their
subcontractors. The accounting burden on JCPenney would be cost
prohibitive.
A single transformation rule of origin for duty-free access for
selected products also might provide a basis for JCPenney to continue
to purchase Haitian products after this year, if the right products are
covered. Obviously, a single transformation rule means third country
fabric could be used. So long as that were not burdened with additional
conditions, such as the use of thread sourced from particular locations
or limitations on the use of foreign origin findings and trimmings,
such a rule for the products that Haiti is capable of producing is
clearly worth considering. We would suggest that it must include at a
minimum all of the basic apparel items, including underwear, knit tops,
and basic wovens. In fact, we might suggest that if this were the
approach taken, a negative list might be more appropriate to avoid any
confusion, so that all products other than those expressly excluded are
eligible, and only tailored garments, such as suit-type jackets or
lined dress pants, which are highly unlikely to be produced in Haiti
anyway, would be excluded. We strongly urge the Committee not to
structure such a program on a product-specific basis with quantitative
limits on eligibility set by product. That level of control creates
increased costs and risks, undermining the value of the benefit.
The proposed distinction in treatment between knit and woven
garments is unlikely to provide an incentive to source in Haiti. While
we would welcome the opportunity to produce woven apparel in Haiti, the
distinction between knits and wovens created under the CBTPA is
unfortunate. An opportunity for the Caribbean and Central American
countries to invest in woven fabric mills was probably lost as a result
of this distinction and offering incentives for such mills now, with
quota elimination just a few months away, is likely too late.
Haiti must compete in a world market. Retailers and importers
operate with economic realities. Haiti's poor infrastructure, low
sewing efficiencies, will need offsets. With the elimination of quota
in 2005, the Committee now has a narrow window of opportunity to act to
create a system of incentives for apparel producers to remain in Haiti
and for U.S. retailers to continue to purchase Haitian products. We
believe that the Senate bill # S. 2261 as written does provide enough
incentives to accomplish this goal.
JCPenney very much wants to work with the Committee to develop a
viable and meaningful program of benefits for Haiti. We know that we
both want to do the right thing and that we all must be open-minded and
flexible. I sincerely hope that the thoughts JCPenney has provided to
the Committee today are the beginning of a fruitful and useful
discussion, one that we can complete in time to truly help Haiti. Thank
you.
Chairman CRANE. Thank you, Ms. Fox. Mr. Levinson?
STATEMENT OF MARK LEVINSON, CHIEF ECONOMIST, UNITE HERE
Mr. LEVINSON. Mr. Chairman, Members of the Committee, my
name is Mark Levinson. I am the Chief Economist at UNITE HERE,
a union of 450,000 apparel, textile, laundry, distribution,
hotel, and gaming workers. The apparel and textile industries
in the United States are in crisis. Hundreds of plants have
closed. Communities are devastated. Since January 2001, these
industries have lost over a-third-of-a-million jobs. Since what
our members call the so-called economic recovery began, these
industries have lost 196,000 jobs.
We recognize that Haiti is an extremely poor country. We do
not seek to deny jobs and economic advancement to Haiti's
workers. To the contrary, we believe U.S. policy can induce
positive change in Haiti and benefit U.S. workers. I want to
focus on two issues not adequately addressed by HERO, that is
the expiration of apparel and textile quotas and labor rights.
In 100 days, all apparel and textile quotas are scheduled
to expire. If quotas expire, all apparel and textile producing
countries around the world, with the exception of China, will
be devastated. Workers in Latin America, the Caribbean, Asia,
and Sub-Saharan Africa will be thrown into direct, unregulated
competition with China and millions will lose their jobs as a
result. It will also further decimate the U.S. industry.
To get a sense of what this means, in categories where
import quotas have already been phased out, offers a glimpse of
what is to come. In the last two-and-a-half years, for the
apparel products removed from quota in 2002, China has
increased its market share of these products from 10 percent to
72 percent. At the same time, Haiti's exports to the United
States in these same categories declined 53 percent, from 8.6
million square meters to 4.6 million square meters.
In response to this kind of problem, we need the kind of
comprehensive program that is called for in the Textiles and
Apparel China Safeguard Act (H.R. 5026). That act would ensure
that the China safeguard will be meaningful for the U.S.
textile and apparel industry. It will direct the President to
use the special China safeguard to negotiate a comprehensive
agreement by immediately entering into formal consultations
with China over textile and apparel imports that threaten to
disrupt the U.S. market. It will enforce aggressively U.S.
rights under the special China safeguard by imposing restraints
on imports if China does not agree on a mutually acceptable
solution.
A word about worker rights in Haiti. Haiti's labor laws
have been repeatedly criticized by the ILO, the State
Department, and the International Confederation of Free Trade
Unions for failing to meet basic international standards. The
Haitian labor code dates back to the Duvalier dictatorship and
falls far short of ILO standards in ways that I detail in my
submitted statement.
Even where protections for worker rights do exist in law,
they are only very rarely, if ever, enforced. The result is a
climate of outright impunity for employers and frightening
violence and insecurity for workers. Trade unionists are
threatened, beaten, arrested, and assassinated for their
activities, and those responsible for the violence go
unpunished. Workers are subject to verbal abuse, physical
threats, sexual harassment on the job, with no effective
protection from the courts or the labor ministry.
Increased trade and investment can benefit workers and
reduce poverty in Haiti, but workers' rights must be respected
in order for those benefits to materialize in the form of
better jobs and higher wages. The HERO Act that passed the
Senate recognizes the crucial link between increased trade
benefits and progress on worker rights by requiring Haiti to
establish or make continual progress toward establishing
internationally recognized worker rights in order to receive
additional trade preferences. The language is borrowed from
AGOA and it builds upon the worker rights conditions that
currently apply to Haiti under the Generalized System of
Preferences (GSP) and CBI programs.
Under current conditions, Haiti does not meet the worker
rights provisions of the GSP and CBI programs, much less the
proposed HERO Act. The Act would apply exclusively to Haiti, it
provides a golden opportunity to take a more tailored approach
by linking specific concrete benchmarks on worker rights with
phased-in market access initiatives. Most importantly, such a
system will not just set tailor-made labor rights benchmarks
for Haiti, it will actually enable Haiti to meet them. In my
testimony, I give two possible examples of how this could work
that I don't have time to summarize here, one based on the
Cambodian model, one based on a labor ombudsman model that is
used elsewhere in the Caribbean for human rights issues, and I
would urge the Committee to look at those seriously.
[The prepared statement of Mr. Levinson follows:]
Statement of Mark Levinson, Chief Economist, UNITE HERE
I am the Chief Economist at UNITE HERE a union of 450,000 apparel,
textile, laundry, distribution, hotel and gaming workers. The apparel
and textile industries in the United States are in crisis. Hundreds of
plants have closed. Communities are devastated. Since January 2001
these industries have lost over 357,000 jobs. And since the so-called
economic recovery began these industries have lost 196,000 jobs.
We recognize that Haiti is an extremely poor country. We do not
seek to deny jobs and economic advancement to Haiti's workers. To the
contrary. We believe U.S. policy can induce positive change in Haiti
and benefit U.S. workers. But we do not believe that the approach
embodied in the HERO Act (S. 2261), passed by unanimous consent in the
Senate, is the right approach. I want to focus on two issues not
adequately addressed by S. 2261: the expiration of apparel and textile
quotas and labor rights.
Haiti and the Expiration of the Quota System
The apparel industry in Haiti is the country's largest single
source of jobs and export earnings and it relies almost entirely on the
United States as a market for its output. The apparel share of total
Haitian exports in 2001 was 83 percent, or $245 million. The Haitian
apparel industry employed about 27,000 workers in 2002, up from 17,000
in 1997. The growth of Haiti's apparel industry is constrained by the
country's underdeveloped infrastructure, high utility, shipping and
warehousing costs and political instability. Haiti's apparel exports to
the U.S. consist almost entirely of cotton apparel and manmade-fiber
apparel--namely T-shirts, underwear, and other pants, shorts and
nightwear--for which major suppliers are highly constrained by quotas.
These basic garments are characterized by long and standardized
production runs, low labor content, and few styling changes.
This highlights a serious problem. In 100 days all apparel and
textile quotas are scheduled to expire. Simply granting more tariff
preferences to countries whose exports will soon be swamped by Chinese
production is not an effective policy.
If quotas expire almost all apparel and textile producing countries
around the world, with the exception of China, will be devastated.
Workers in Latin America, the Caribbean, Asia and sub-Saharan Africa
will be thrown into direct, unregulated, competition with China, and
millions will lose their jobs as a result. It will also further
decimate the industry in the U.S. 600,000 U.S. workers will lose their
jobs within several years of the expiration of quotas.
Categories where import quotas have already been phased out offer a
glimpse of what is to come. In the last two and one-half years, for the
apparel products removed from quota in 2002, China increased its market
share of these products from 10 percent to 72 percent. At the same
time, Haiti's exports to the U.S. in the same categories dropped 53
percent, from 8.6 million square meters to 4.6 million square meters.
If China captures 70 percent of the entire U.S apparel and textile
market that would result in a net shift of approximately $42 billion in
trade from other exporting countries to China. The projected export
losses (assuming losses proportionate to existing market share) for
countries are: CBI region $6.3 billion, Mexico $5.4 billion, Indonesia
$1.6 billion, Bangladesh $1 billion, Lesotho $289 million, Mauritius
$187 million.
The Senate passed bill would provide an incentive for importers and
retailers to close their operations in the Caribbean and Central
America and move to Haiti where they can use Chinese fabrics and yarn
and get duty free access to the U.S. market. The main beneficiary would
be Chinese and other Asian fabric producers. U.S. and Caribbean textile
workers and producers would be hurt.
We need the kind of comprehensive program that is called for in
H.R. 5026 the Textiles and Apparel China Safeguard Act. The Act would:
1. direct the President to make two changes to the overly
restrictive rules issued by the Bush Administration to implement the
China safeguard so that the safeguard will be meaningful for the U.S.
textiles and apparel industry;
2. direct the President to use the special China safeguard to
negotiate a comprehensive agreement by immediately entering into formal
consultations with China over textiles and apparel imports that
threaten to disrupt the American market; and
3. enforce aggressively U.S. rights under the special China
safeguard by imposing restraints on imports if China does not agree on
a mutually acceptable solution.
Producers from 52 countries have recently joined together to call
for an extension of the quota system until 2008. UNITE HERE, along with
other apparel and textile worker unions from around the world, under
the auspices of the International Textile Garment Leather Workers
Federation (ITGLWF), is demanding that the textile and apparel quotas
be extended, and that phase-out not occur until there are enforceable
protections for workers' rights in the global trading system. Only with
such guarantees in place will workers in the U.S. and around the world
be able to compete on a fair playing field.
Workers' Rights in Haiti
Haiti's labor laws have been repeatedly criticized by the
International Labor Organization (ILO), the U.S. State Department, and
the International Confederation of Free Trade Unions (ICFTU) for
failing to meet basic international standards. The Haitian labor code
dates back to the Duvalier dictatorship, and falls short of ILO
standards in a number of key respects.
There is no prohibition on anti-union discrimination in
hiring, allowing employers to bar known union activists from
employment.
Though the law does prohibit firing workers for union
activities, it does not provide reinstatement as a remedy for such
firings, as required by the ILO. Thus, even if the law were fully
enforced, employers could fire any workers with union sympathies and
simply pay the fines required as the cost of doing business and keeping
unions out.
The labor law fails to require good-faith bargaining by
employers with union representatives, and sets a prohibitively high
threshold for unions to meet in order to compel bargaining. As a
result, collective bargaining is virtually non-existent in Haiti.
There are numerous restrictions on the right to strike,
including compulsory arbitration provisions that have been criticized
by the ILO.
Even where protections for workers' rights do exist in the law,
they are only very rarely if ever enforced. The result is a climate of
outright impunity for employers, and frightening violence and
insecurity for workers. Trade unionists are threatened, beaten,
arrested and assassinated for their activities, and those responsible
for the violence go unpunished. Workers are subject to verbal abuse,
physical threats, and sexual harassment on the job, with no effective
protection from the courts or the Labor Ministry.
Given the economic and political situation in the country, there is
hardly a functioning Labor Ministry at all. The problems with
corruption and rule of law that plague Haiti are particularly acute for
workers, who have few if any means of resolving disputes with employers
and exercising their fundamental rights on the job. Only five percent
of the workforce in Haiti is unionized, and collective bargaining does
not exist in the private sector. The widespread abuse of workers'
rights makes it extremely difficult for workers in Haiti to organize
independent unions and bargain for a fair share of the wealth they
produce. Though some of the wealthiest clothing brands in the world
source from Haiti, the minimum wage in the country amounts to less than
twelve dollars a week.
For example, at Haitian American Textile Co. in Port-au-Prince,
which has supplied uniforms to the Cincinnati based uniform rental
giant Cintas, workers have reported being forced to work long hours to
meet high daily quotas in order to be paid their daily rate. That wage
was far below what they needed for basic survival--leading workers into
a cycle of debt to food vendors and to ``loan sharks.'' Workers at
Haitian American have reported being unable to address dangerous
conditions--like sweltering heat that has caused workers to pass out,
lint and dust-filled air, and machinery lacking safety guards that have
punctured workers' fingers--because of the constant fear of being
fired.
Another recent example of the Haitian workers' struggle to gain
respect for their basic workplace rights is a free trade zone, financed
by the World Bank, in Ounaminthe, Haiti. The employer in the zone, a
Dominican company called Grupo M, has fired workers for union
organizing, stationed heavily armed security at plant gates, and
refused to abide by Haitian labor law, much less internationally
recognized worker's rights. The World Bank, in recognition of the
likely inability of the Haitian government to adequately protect
workers' rights in the zone, included its own workers' rights
conditions in the loan agreements--requiring respect for freedom of
association and the right to organize and bargain collectively, and
mandating the creation of a compliance mechanism to monitor workers'
rights, improve internal management practices, and provide for a
workers' rights ombudsperson to receive complaints and resolve
disputes. Though the workers' rights conditions in the loan still need
to be fully complied with, they have provided important leverage to
help mediate disputes between workers and Grupo M and provide a basic
safeguard for workers' fundamental human rights in the zone.
Linking Labor Rights and Trade in Haiti
Just as the World Bank recognized that additional safeguards for
workers' rights and a program to help the parties monitor and enforce
those rights was necessary for apparel production in Haiti to succeed,
Congress must build a strong structure of support for workers' rights
in Haiti in order for additional market access to provide any real
benefits for Haitian workers. Increased trade and investment can
benefit workers and reduce poverty in Haiti, but workers' rights must
be respected in order for these benefits to materialize in the form of
better jobs and higher wages.
The HERO Act (S. 2261) that passed the Senate recognizes the
crucial link between increased trade benefits and progress on workers'
rights by requiring Haiti to establish, or make continual progress
towards establishing, internationally recognized workers' rights in
order to receive additional trade preferences. This language is
borrowed from AGOA, and it builds upon the workers' rights conditions
that currently apply to Haiti under the GSP and CBI programs.
But it is unlikely that this conditionality will have much success
in Haiti unless it is supported by a mechanism that specifically
addresses the severe obstacles to the exercise of workers' rights that
exist in the country. This Committee now has an important opportunity
to shape just such a mechanism that will help lift up Haiti so it can
meet international labor standards. Writing conditionality into a trade
preference program is necessary, but not sufficient, in the case of
Haiti. Haiti cannot meet these conditions on its own. The labor rights
conditions must be backed up by a strong, independent enforcement
mechanism that can monitor workers' rights on the ground, assist the
Haitian government in bringing its laws into compliance with
international standards, and help build the local institutional
capacity necessary to provide workers and investors with the confidence
that workers rights and rule of law will be respected in Haiti.
Haiti's labor laws fall well below international standards, and
those protections that do exist are rarely if ever enforced. Under
current conditions, Haiti does not meet the workers' rights provisions
of the GSP and CBI programs, much less the proposed HERO Act. Because
the Act would apply exclusively to Haiti, it provides a golden
opportunity to take a more tailored approach by linking specific,
concrete benchmarks on workers' rights with phased-in market access
incentives. Most importantly, such a system will not just set tailor-
made labor rights benchmarks for Haiti, it will actually enable Haiti
to meet them.
One model worth examining for the HERO Act is the bilateral textile
and apparel agreement with Cambodia. The Cambodia agreement requires
Cambodia to meet core labor standards, and factories must agree to ILO
monitoring of labor rights conditions in order to benefit from the
export quotas established by the accord. The ILO must certify
compliance with these conditions each year before the annual quota
increase of 18 percent is granted under the bilateral agreement. The
Cambodia agreement created concrete incentives for factory owners and
the government to improve workers' rights, and provided them with the
means to meet these goals by laying out specific goals on workers'
rights and creating and funding an independent monitoring program. The
ILO reports that the agreement has led to real improvements in workers'
rights in Cambodia.
Another model which is not linked directly to trade, but which has
helped to address the rule of law failures and corruption problems that
create impunity for human rights violators in Central America, is the
ombudsperson model. Central American governments have agreed to create
human rights ombudsmen that are independent of existing government
ministries, can receive and investigate complaints about individual
human rights cases, and can issue recommendations for structural
reforms needed to address more systematic abuses and bring the country
into compliance with international human rights norms. While the
political will to accept these recommendations is sometimes lacking,
the ombudsman mechanism has provided an independent party that can
bypass dysfunctional institutions, effectively investigate and verify
human rights abuses, and make authoritative recommendations for
systematic reforms.
Some combination of these two models could help improve workers'
rights in Haiti. The HERO Act should create and fund a mechanism that
contains the following elements:
Establish a workers' rights ombudsperson that is
independent of Haitian officials and political parties, who can receive
and investigate complaints of workers' rights abuses and verify whether
or not internationally recognized workers' rights have been violated in
individual cases.
Authorize the ombudsperson to recommend solutions in
individual cases of abuse, and require individual factories to
implement relevant recommendations in order to benefit from increased
market access under the Act (companies can sign up to participate at
the beginning of the program, and their exports will receive
preferences unless the ombudsperson reports that they are out of
compliance with recommendations).
Authorize the ombudsperson to recommend more
comprehensive reforms to address systematic workers' rights problems--
labor law reforms, judicial and administrative reforms, etc.--with
specific benchmarks for the implementation of the recommendations. U.S.
and international funding and technical assistance should be made
available to help the Haitian government implement the recommended
reforms.
Each year, the annual increase in imports under the Act
will only occur if the ombudsperson certifies that the government is
making sufficient progress in implementing the recommended reforms and
specific benchmarks have been met.
Members of UNITE HERE and the hundreds of thousands of apparel and
textile workers who have lost their jobs, many of them from the
Caribbean including Haiti, support a trade policy that would help the
impoverished--whether in Haiti, the Caribbean, China or the United
States--to improve their standard of living and generate new domestic
demand in a virtuous cycle of equitable development, while providing
new markets for overseas investors and workers, including those in the
United States.
Chairman CRANE. Thank you very much, Mr. Levinson. Now I
would like to ask our colleague, Thaddeus McCotter, to come
forward to introduce his constituent, Nigel Thompson.
Mr. MCCOTTER. Thank you, Mr. Chairman. I am here today to
introduce Mr. Nigel Thompson. As you know, Mr. Thompson is
Executive Vice President of Planning and Development with the
Yazaki Corporation. In this capacity, Mr. Thompson is
responsible for information technology, research and
development, marketing, and product planning.
Yazaki North America, which is based in Canton, Michigan,
employs roughly 1,500 people in my district and supplies our
automotive companies with electronics, instrumentation, and
wiring systems. As a tier-one automotive supplier and employer
in the Canton area, Yazaki is an integral component in
Southeastern Michigan commerce and I am pleased Mr. Thompson
could appear before you as an important representative of our
industry from my district. I am also very happy that he is here
because Yazaki embodies what the right trade policies can do to
bring jobs to our Nation and to districts like mine in the
manufacturing arena. Thank you, Mr. Chairman.
Chairman CRANE. Thank you, Thaddeus. Mr. Thompson?
STATEMENT OF NIGEL THOMPSON, EXECUTIVE VICE PRESIDENT OF
PLANNING AND DEVELOPMENT, YAZAKI NORTH AMERICA, CANTON,
MICHIGAN
Mr. THOMPSON. Mr. Chairman, Members of the Committee,
Congressman McCotter, thank you very much for that
introduction. Thank you very much for giving me the opportunity
to talk here about something other than textiles.
[Laughter.]
Yazaki Corporation, that I represent, is a major global
automotive supplier. We supply a range of products,
instrumentation, electronics, as was already said, and
particular wire harnesses to pretty much all of the vehicle
manufacturers in the world and we produce those products also
all over the world and in the Americas, particularly in Mexico,
Nicaragua, Haiti, Brazil, Colombia, and Argentina. The reason I
mentioned wire harnesses is because we would like to propose,
and my testimony is on this basis, to extend the scope of HERO
to include automotive products, and in particular wire
harnesses, a product that is not being produced in the United
States for several decades, principally due to the intense cost
reduction pressure within the auto industry.
To clarify this proposal, I guess I should probably first
explain a little bit about what a wire harness is. I think we
probably all know and have a picture in our minds about
textiles and t-shirts and so forth. The wire harness represents
perhaps the nervous system of a motor car. A modern motor car
has a great deal of electrical equipment. All this electrical
equipment is connected together by the vehicle wiring system.
It typically could have as many as 500 or 1,000 circuits on a
modern car. This is a complex assembly of wires, connectors,
terminals, fuse boxes, relays, electronics, for which the final
assembly process is both complex and employs large numbers of
people. To give you an example, for a high-volume production
vehicle, a typical U.S. market minivan or pickup truck produced
in, say, 400,000 or 500,000 units per year, there might be as
many as 5,000 people employed in producing the wire harnesses
for such a vehicle.
A Yazaki-affiliated production company has had a pilot
plant in Haiti for about the last 15 months, currently
employing around about 300 people, with very good experiences.
We believe Haiti has significant growth potential for this
product sector, and clearly, that potential would be
significantly assisted by being able to import into the United
States without duty. The existing trade arrangements require 35
percent local content, which, as many of my colleagues have
testified here, in a country really without industrial
infrastructure, such as Haiti, cannot be met. The majority of
the components and raw materials used in an automotive wire
harness actually come from the United States or Mexico. So,
allowing those components to count as local content would then
allow Haiti to compete with Mexico, or actually rather more
importantly to compete with Southeast Asia and particularly
China.
In the textile industry, as has been testified here, that
is clearly seen as a major impact or a major threat to Haitian
development. It is also true in the automotive industry. One of
our objectives is to develop a regional strategy for production
here, which allows production in this region to compete
effectively with Southeast Asia and particularly China, long-
term. Allowing HERO to expand its scope to include such
products would clearly support our objectives.
Haiti has certain advantages. It has a logistics advantage
because of its location in the region, a much shorter supply
pipeline than Southeast Asia or China. It has a disadvantage,
of course, in duty and in infrastructure, as has been
mentioned. If we can remove at least one of those obstacles,
then with further economic development, the infrastructure will
develop and we can expect Haiti to be able to grow as part of
this region.
In conclusion, I would say if HERO is intended to help the
Haitian economy and its people, and clearly from all of the
testimony we have heard this afternoon that has been a common
thread, then adding another product classification to broaden
the industrial base that provides good jobs linked to a major
U.S. manufacturing industry, the auto industry, with no impact
on U.S. jobs, with an opportunity for U.S. component suppliers
to supply into Haiti, that would seem entirely consistent with
the original aims of the Act. I have been to Haiti. Clearly,
many people here have been to Haiti. This is about the poorest
country in the Western Hemisphere and we have all seen the news
over the last few days. Anything we can do, not just in terms
of short-term aid but in long-term economic support and
development, must be the right thing to do and has to be worth
doing. Thank you for giving me the opportunity.
[The prepared statement of Mr. Thompson follows:]
Statement of Nigel Thompson, Executive Vice President of Planning and
Development, Yazaki North America, Canton, Michigan
Submitted by Yazaki North America, Inc. (YNA) on behalf of The
Yazaki Group in Support of the Haitian Economic Recovery and
Opportunity Act.
Background
Yazaki Corporation was founded in 1929 and incorporated in 1940,
and is a global, tier-one automotive supplier with operations in 37
countries. North American operations were established in 1966 and are
now conducted by Yazaki North America, Inc. (YNA), based in Canton,
Michigan, where we employ 1,500. Core commodities for YNA include
automotive electronics, instrumentation, components, and wiring
systems, the latter of which is a primary focus. An automotive wire
harness is the vehicle's electrical skeleton--an assembly of wires,
coverings, connectors, modules and other components which accomplishes
all of the electrical connectivity requirements in an automobile. The
nature of the product means that the assembly process is highly labor
intensive, and employs significant numbers of people.
As Yazaki has expanded around the globe, the company has sought
opportunities to locate facilities in lesser developed and developing
countries. This has been good for our business, but we also take very
seriously our responsibility to be a good corporate citizen. As a
result, we have been able to provide jobs and economic opportunity, and
contribute to improving the communities in which we do business.
Arnecom (a Yazaki affiliated company in Mexico) established a wire
harness pilot plant in Haiti about 18 months ago, recognizing at that
time the potential in the country and the needs of its people for
employment and economic opportunity. This pilot operation now employs
approximately 250 people.
We believe expanding the scope of products covered by HERO to
include labor-intensive automotive products like wire harnesses will
provide additional benefits to the Haitian people entirely consistent
with the original intentions of the Act, with no adverse impact on U.S.
employment.
HERO--Related Key Points
In order to keep pace with domestic car maker's cost targets for
wire harness products, manufacturing operations moved out of the United
States several decades ago. Consequently, there are no domestic
automotive suppliers who assemble wire harnesses in the U.S. Therefore,
expanding HERO to include wire harnesses poses no threat to the U.S.
automotive job market. Additionally, there are aspects of an expanded
HERO, which could contribute to job growth in the U.S.
Existing trade preference programs such as GSP and CBERA cap the
U.S. content allowed for meeting local content requirements. In a
country like Haiti, which has very little industrial infrastructure, it
is not realistic to expect that it could meet local content
requirements without imported materials. Therefore, allowing NAFTA or
U.S. content to be counted will benefit suppliers from both countries
and quite possibly provide new employment opportunities in each. Many
of the components used in wire harnesses, like wire, connectors,
terminals, plastic resins, and grommets are made in the U.S., including
for Yazaki plants in Michigan, Georgia and Texas.
In our case, if the Congress includes wire harness assemblies among
expanded trade preferences for Haiti, Yazaki expects to significantly
increase its investment in the Arnecom plant in Port au Prince. YNA
currently supplies U.S. automakers with wire harnesses produced in
China and SE Asia, as well as in Mexico, Haiti and Nicaragua. Haiti has
a much shorter supply route than do operations in Asia. The combination
of lower logistics costs and tariff relief would significantly improve
our cost competitiveness, and hence that of our U.S. customers, some of
whom we currently supply from Haiti.
This plan poses no threat to the competitive landscape relative to
NAFTA or other regions. Additionally, in keeping with the intent of
HERO, if Congress provides this incentive, we will be better poised to
expand our investment in Haiti, which may grow employment by as many as
five times the current level.
Further information on Yazaki may be found at www.yazaki-na.com.
Chairman CRANE. Thank you, Mr. Thompson. Now, Mr. Rangel
has an appointment at 3:30 but he has one question he would
like to put to the panel before he departs. Mr. Rangel?
Mr. RANGEL. Thank you, Mr. Chairman. I thank all of you for
showing that this interest in a country that embarrassingly is
in our hemisphere that we haven't done enough for, but
certainly each time there is another tragedy there we commit
ourselves to do better, and this gives us another opportunity
for Democrats and Republicans to come together.
As most all of you know, the reputation, and I say
reputation, in Haiti is that it has a violent anti-union
atmosphere and that it is very difficult for us who are not
Haitians to really know the degree in which people have some
type of human rights and assembly and organizing. The ILO has
taken the very basic non-controversial standards and saying,
give them a chance to do something, and it has been recommended
that one of the possible solutions might be to have an
ombudsman, a monitor, something with international prestige,
not to negotiate higher wages but to make certain that there is
an opportunity for people to be trained to move forward and
ultimately achieve what we were able to do in the United
States, a viable middle-class would certainly help society no
matter where it is.
Mr. Baker, since you are Haitian, and Mr. Woltz, since you
have done business there, could you share with me or give me
any sense as what is acceptable in terms of being included in
an international agreement with international responsibility,
not to be the equivalent of our American Federation of Labor-
Congress of Industrial Organizations, but what do you just
think is fair and what are you willing to accept so that we can
take this to other people who just don't like the term
``union'' because they have had bad experience, but it would be
called decency and the opportunity to organize, to assemble, to
negotiate. Mr. Baker, as a Haitian, what is the atmosphere for
that today?
Mr. BAKER. Thank you. I think there are three things that
are happening in Haiti that can help us along that issue. The
first thing is that, as you know, most retailers are requiring
today that the plant that is producing for them meets certain
internationally-recognized standards. Indeed, a lot of plants
today in Haiti are moving toward becoming members of Worldwide
Responsible Apparel Production (WRAP). This oversees the
conditions, the working conditions inside the plants and the
procedures that are used inside the plants. Most plants in
Haiti today are moving toward WRAP.
The second thing that I think could be very helpful is the
fact that within the law, this bill, it was adopted the same
conditions which was set into the AGOA bill, and we are hoping
that the same principle could apply also for Haiti. The third
and most important thing is what the Haitians are doing today
on this issue. The Ministry of Social Affairs have invited
private sector associations and labor union to meet and
organize a tripartite Committee to first look at the old labor
accord that indeed dates back to Duvalier, to see how we can
modernize it, how we can actualize it and adopt
internationally-recognized conditions, and we are all committed
to work toward that goal.
In this sense, I think the bill that is today, which gives
the U.S. Administration the right to come and oversee what we
are doing in terms of progress, is a way for you to supervise
what we are doing, because having good intention is one thing
but delivering is another thing. We are committed to try to
deliver. We are committed to try to reach standards that are
here today in the United States. It would be unrealistic to
think that we can change Haiti overnight, but we are all
committed to make a serious effort to move forward.
Mr. WOLTZ. One of the ways that Haiti does change, and not
overnight but very, very quickly, is the kinds of people that
are encouraged to make an investment in Haiti. We are a private
label manufacturer, which means that we don't have our own
brand. We sell to J.C. Penney, to Sears, to Dillard's, to
whoever. We are never going to put millions of dollars worth of
investment at risk by having one of our customers embarrassed
by something that happens in one of our facilities, and I think
you will find that is, by and large, what drives most people.
We want to do what is fair and right to attract the best
workers we can. We make money in the apparel business when we
operate efficiently. Trying to see how little you can pay
somebody is a totally self-defeating strategy. You want to set
up an operation where people are incentivized to make as much
as they can, that you attract the best workers that you can.
The best workers are not going to work somewhere where they are
not treated well. So, that is something that when these plants
go in, when people invest their own money in a plant, they will
themselves be policed by their customers, by the government,
but also by their commitment to protect their investment.
Mr. RANGEL. That is very encouraging. Your company, UNITE
used to be the International Labor Women, but they had
something called, ``look for the union label.'' The whole idea
was that these standards that Mr. Baker and you are talking
about, it meant that you don't have to go beyond that. If the
label is there, they are fair. They are equitable. They do
treat their workers right. Do you think there would be any
objection to the ombudsman concept where not the United States,
but some international person would be there where you can
stamp, ``approved by the ILO.'' I am not saying it could work,
but I gather from what you are saying is that you would be
proud to be a part of something that was fair and equitable for
the workers. Would you accept an ombudsman under the
suggestions that some people have made from the ILO?
Mr. WOLTZ. We would be, frankly, leery of an ombudsman
because of the mechanism of who you select and some history
that ombudsmen have had a political agenda that goes sometimes
beyond the workers in a particular plant. If there is some kind
of vetting process where everybody gets involved in who you
pick--I think your point of how you get somebody, a statute
that somebody can say, okay, this person is above the fray.
They don't necessarily have a political bent to this job. I
think----
Mr. RANGEL. I think we could work that out, because I would
be just as concerned as to what kind of politics they would
have anyway. Thank you so much. Thank you, Mr. Chairman. Thank
you, Committee Members, for allowing me this courtesy.
Chairman CRANE. Happy to do it. Now, I would like to put a
question, or more than one question, to the entire panel. The
first, one bill that has been introduced to give additional
trade preferences to Haiti would allow Haiti to source fabric
from any U.S. Free Trade Agreement (FTA) partner as well as
countries participating in the African, Caribbean Basin, and
Andean preference programs. I would like you to comment on what
kinds of fabric are and are not commercially available in these
countries. Does anyone wish to respond?
Ms. FOX. I will respond to that.
Chairman CRANE. Ms. Fox?
Ms. FOX. J.C. Penney, as you know, we source all over the
world, and in regards to your question, we have actually tried
doing CBTPA-sourced fabrics, and unfortunately, it has become
evident to us that it is quite uncompetitive, and it is not
just the price. It is not the price that is the sole issue. It
is that price combined with the inefficiencies of the
production capabilities of the worker in Haiti make it
uncompetitive.
In regards to other countries in the region, Mexico,
Guatemala, as I said, we produce primarily knit underwear and
very basic t-shirts, so I am primarily addressing knits, and
that is really the strength of Haiti in the apparel industry.
In looking at Mexico, Guatemala, the quality and consistency
out of those countries for that type of fabric is not where it
needs to be now. Maybe in the future, it will get up to that
standard. Looking at Peru, Colombia, and other places, the
logistics of moving it make it become uncompetitive in regards
to the pricing and things like that. So, we have taken a look
at that and we have tried to figure out if it is economically
feasible, and our industry is so hyper-competitive that every
nickel affects our retail cost, and so far, we have been unable
to feel that we are competitive enough using those options.
Chairman CRANE. Is Mexican fabric available and
competitive?
Ms. FOX. Mexican fabric is available, but the quality is
not to what we are looking for. The pricing is okay, but it is
more the quality that we are concerned about.
Mr. WOLTZ. I don't think that there is anywhere near the
capacity to supply the needs available in this hemisphere, just
pure capacity.
Chairman CRANE. Mr. Felker?
Mr. FELKER. Yes, Mr. Chairman. My segment of the industry
would be very supportive of an effective short supply
availability system, whereby if the fabrics are not available
from the U.S. origin, then there would be an efficient and
commercially viable means and system for allowing those fabrics
to come in from other sources.
Chairman CRANE. Yes, Mr. Baker?
Mr. BAKER. Mr. Chairman, you mentioned the original bill
and why did we come up with a second bill, and really the
shortcomings of the first bill were really two-fold. First, the
countries that already have a FTA with the United States, most
of them do not have fabric or do not have the quality that the
buyers are looking for. Second and most important, I think the
first bill was studied in looking at Haiti as a part of the
CBI. Frankly, when you look at it, when you try to compare
Haiti, you cannot compare Haiti with Honduras and Guatemala.
You more have to compare Haiti with Lesotho and Mozambique and
we feel that what was really fair for Mozambique and Lesotho is
what really Haiti needs today.
Chairman CRANE. Thank you. Now for the entire panel again,
several of you suggested that if Haiti isn't given the ability
to buy fabric from anywhere in the world, the country cannot be
competitive. There are a variety of options that differ from
the HERO bill but could provide equally meaningful benefits and
I would like you to comment on several ideas that have been
raised.
First, those of you who produce in Haiti mentioned that you
tend to purchase many American imports, such as thread,
packaging, trim, buttons, labels, and some fabric. If you
combine the value of these items with the value added in Haiti
and the possible flexibility of cumulating fabric sourced from
any U.S. FTA partner or a preference beneficiary country, what
would be an acceptable percentage level for a value-added rule
of origin for apparel? Secondly, would providing increased
flexibility to fulfill this test through annual aggregation
versus a per-garment test be workable? Third, would a single
transformation rule for some specific apparel items be useful?
Finally, would a trade preference level for specific types of
fabrics be meaningful?
Mr. WOLTZ. I would like to take the first shot at answering
that if I could, Congressman Crane.
Chairman CRANE. Absolutely.
Mr. WOLTZ. Any time that you specify, you wall off, you
limit, you block, you keep people from building flexible
manufacturing plants, you limit the amount of investment. Right
now, a content agreement that might have been worked out
several years ago, we are going to start making next week in
Central America a poncho, a knit poncho that has very little
labor or input in it, something that I don't think anybody in
the fashion industry even foresaw 2 or 3 years ago. We don't
know right now what we are going to be sewing as a fashion item
2 or 3 years from now. We don't know whether we are going to be
making long skirts out of synthetics or short skirts out of
denim. We don't know what the fashion apparel market is going
to be.
If we set up rules and we set up tests that we are going to
have to go through, short-supply mechanisms, all of those
things have been tried in the past and they have all resulted,
all resulted in a steady exodus of jobs from places that have
those restrictions to places that don't have those
restrictions. If there are a lot of restrictions put on Haiti,
people that are going to do anything but make a very narrow
commodity are not going to want to invest their money in Haiti.
Chairman CRANE. Mr. Felker?
Mr. FELKER. Yes, Mr. Chairman. I think we have to look at
the dynamics of world trade as it is today. The prices--cost
and prices are confused. The prices coming out of Asia will
undercut U.S. fabric prices if our labor costs were zero. These
are predatory pricing tactics where the industry, specifically
in China, is out to take market share and to destroy an
industry, and once it destroys the industry, then it will be
free to utilize different pricing strategies if it wishes to.
So, I think to allow a short-term disruptive mechanism that
is being practiced in global trade to wipe out an industry that
will never be rebuilt is short-sighted. So, we need to take
these precautions to keep this market share grab from
undermining permanently an industry in the United States.
Chairman CRANE. Ms. Fox?
Ms. FOX. Addressing the value-added concept, I think that,
again, the kind of products that we are having produced in
Haiti are very basic and anything more than 35 percent would be
prohibitive for us. We are making t-shirts. It is little more
than fabric. I think one of the other points you made was about
the annual counting concept in there and cumulation. For a
retailer, that would be very difficult in that the accounting
of it is something we don't do. We are not a manufacturer. So,
being able to keep the accounting would be a nightmare for
retailers.
I think we talked about single transformation, which would
basically mean third-country fabric would be allowed, but it
would be okay as long as we didn't put additional limitations
on things, for instance, that it had to be thread made in the
United States or it had to be any other kind of trims made
somewhere else. I think without those limitations, that would
work for us. Inputs, as we talked before, from other countries
for us is limited incentives because, as Mr. Woltz commented,
the capacity to produce a lot of the things for fabrics is not
there. The quality, as I mentioned, is not there. So, those are
issues that we are facing.
I think that the one thing that we need to be fully aware
of is that there is really a need to keep it simple. With the
elimination of quota, the marketplace is wide open and any type
of bill or act that makes it difficult for us to source makes
it hard for us to understand, because some of these things are
very difficult for the average sourcing person to understand.
We won't go there. I think that that is one thing that I would
plead with everybody, is to try and keep this as simple as
possible in order to give the greatest potential benefits to
Haiti.
Chairman CRANE. Thank you. Another panel question. Would
improved access for Haitian apparel provide more opportunities
for certain U.S. industries, such as cotton yarn, bindings, and
trimmings, to sell into Haiti, particularly if the program is
designed to give preferential treatment to regional inputs over
other third-country inputs, and how could we design such a
program? Yes, Mr. Felker?
Mr. FELKER. Mr. Chairman, I think if preferential treatment
for Haiti exists to a significant degree with the CBTPA, but
yes, if there are--if we can overcome some of the difficulties
of conducting business in Haiti, and I mentioned the primary
one is the lack of working capital and the difficulty of
understanding how you can collect the receivable from Haiti,
but yes, I think there is tremendous opportunity for expanded
trade with U.S. manufacturers of yarn and fabrics and other
inputs in Haiti if we can build an infrastructure there and a
legal system and if we can get through the initial stages of
understanding how the money will flow and if it will flow.
Chairman CRANE. My final question is for you, Mr. Thompson.
In your testimony, you suggest that if the local content
requirements were more flexible for auto parts to allow Haiti
to source more inputs from the United States or North American
Free Trade Agreement (NAFTA) (P.L. 103-182) countries, then you
expect Yazaki to increase its investment and employment level
in Haiti. This is exactly the goal we are trying to achieve for
Haiti. So, would you please elaborate on Yazaki's potential
plans for Haiti, and do you envision the increased sales from
Haiti coming at the expense of other producers in the region or
from other producers in Asia?
Mr. THOMPSON. Thank you for the question, Mr. Chairman. To
take your last point first, do we see expansion in Haiti coming
at the expense of other producers in this region, the answer is
basically no. As I mentioned in my testimony, our objective is
to keep our production in this region comparative with Asia and
particularly China. If were to expand in Haiti, those jobs
would otherwise almost certainly end up in China or Southeast
Asia.
The first part of your question relates to using increased
component input from the United States and Mexico. Certainly,
we can see that looking at our existing production, if we were
able to expand that in an environment that didn't have the duty
associated with it, using our existing sourcing from suppliers
of components such as wire, connectors, terminals, and so
forth, some of which we make in the United States, some of
which other suppliers make in the United States and Mexico, we
could meet the local content requirements currently as
specified--if we allowed the full value of imported components
from the NAFTA region.
Chairman CRANE. Thank you. Mr. Levin?
Mr. LEVIN. The last answer is straightforward and is less
complex than the rest of what we have discussed here today. It
has been an interesting panel, because I think it shows how
these are not simple issues and any attempt to try to simplify
them, for example, talking win-win, is misguided because it
impacts. So, let me just follow that up. Mr. Woltz, you have
some facilities in Central America, don't you?
Mr. WOLTZ. Yes, sir. We have an extensive facility in El
Salvador.
Mr. LEVIN. That is what I thought. What is the name of the
facility?
Mr. WOLTZ. Primo.
Mr. LEVIN. Exactly. This isn't the time to talk about
Primo, Mr. Woltz. I think you and I have----
Mr. WOLTZ. You and I have met on Primo----
Mr. LEVIN. We surely have.
Mr. WOLTZ. I think that you have been very pleased with how
that whole situation has resolved itself.
Mr. LEVIN. I don't think so.
Mr. WOLTZ. Okay.
Mr. LEVIN. I am not sure. I surely wasn't--it surely
demonstrated earlier the problems that exist when there is an
effort of workers to exercise their rights, and maybe I will
have to remember exactly where the situation is now. Let me
just ask you if third-country fabric were allowed without
limit, just give us a reasonable estimate over the next 5 years
what percentage you think of your fabric would come from third-
country sources.
Mr. WOLTZ. Last year, Perry Manufacturing bought roughly 30
percent of its fabric from the United States and the CBI
region. It bought 54 percent of its fabric from China. We would
see probably the same kind of mix going forward as different
products, as different mills are started in Central America and
as the fabric prices in China, we feel like will probably
continue to go up. As quotas come off in China, the demand for
Chinese fabric is going to expand and we are going to have to
compete more with Chinese manufacturers for that fabric. So, I
think there is an opportunity for that mix to kind of stay just
about the same, near term.
Again, one of the big things that gives a chance for growth
in Haiti is right now, nobody sews synthetics in Central
America because of the 33-percent duty rate. If duty comes off
of synthetics, there is a whole other category of fabrics that
may be sourced in the region. As you said, it is not a very
simple thing. Every time you take one peel of the onion, there
is a whole other question.
Mr. LEVIN. So, let me be clear, because in your testimony
you say, without the ability to use fabric from anywhere in the
world, Haiti will not be part of that supply chain.
Mr. WOLTZ. Right.
Mr. LEVIN. I thought I heard you say that you didn't think
there would be any basic change in where you source----
Mr. WOLTZ. Without being able to get about half of our
fabric, like I said, 54 percent, we would not be able to run
those factories.
Mr. LEVIN. You are now getting that fabric from China?
Mr. WOLTZ. Last year, we bought 54 percent of fabric we
consumed from China, 30----
Mr. LEVIN. So, you are doing that now. So, why do you
need----
Mr. WOLTZ. When quotas come off, in order to be competitive
with garments manufactured in China, India, Pakistan----
Mr. LEVIN. Okay.
Mr. WOLTZ. Other places, our prices are going to have to be
lower. China is a threat, but it is also in some categories not
the threat that Pakistan and India are. In order for us to
compete in this region, we are going to have to have a low-
cost, duty-free base. In order to maintain our other
manufacturing in other Central American countries----
Mr. LEVIN. Then if I understand what you are saying, it
would seem to me you are saying that you would have to source
more fabric from outside of the United States to be
competitive.
Mr. WOLTZ. Right now----
Mr. LEVIN. No, but in the future, to compete with China,
you would have to then source more fabric from outside of the
United States.
Mr. WOLTZ. As we grow our business--if we stay the same
next year, I said we would probably consume the same
percentages of fabrics. Again, I don't know next year what my
customers are going to want to buy. I don't know whether they
are going to want to buy thin skirts made out of synthetic. I
don't know whether they are going to want to buy short skirts
made out of denim. Those are decisions that are not made by me,
that are made by, heck, Ralph Lauren and the fashion designers
that are going to set the trends. In order for me to service
those customers, I have got to be free to satisfy their needs
at the quality they require and the price, and I don't know
where I am going to buy that fabric. If I could buy it all in
the United States, it would be better----
Mr. LEVIN. Yes, and I am not being critical----
Mr. WOLTZ. Last year, I couldn't.
Mr. LEVIN. I am just trying to understand. I am not being
critical.
Mr. WOLTZ. Okay.
Mr. LEVIN. It seems to me you are saying that you need to
increase the amount of fabric that you buy other than from the
United States. In simple terms, it seems to me when you say,
without the ability to use fabric from anywhere in the world,
Haiti will not be a part of the supply chain----
Mr. WOLTZ. That is true.
Mr. LEVIN. So, you must be saying that there is going to be
a shift of your purchases over time from the United States to
someplace else.
Mr. WOLTZ. There very well may be.
Mr. LEVIN. Okay.
Mr. WOLTZ. As I said, we bought 13 percent of our fabric in
the United States, 17 percent in the region. So, it is already
down to 13 percent.
Mr. LEVIN. What was the 34 percent that you mentioned?
Mr. WOLTZ. Excuse me, 34 percent from the region. Basically
17 and 17.
Mr. LEVIN. Seventeen in the United States and 17 in the----
Mr. WOLTZ. In the region, Honduras----
Mr. LEVIN. In this region. Okay.
Mr. WOLTZ. El Salvador.
Mr. LEVIN. All I suggest is that we try to be----
Mr. WOLTZ. The balance is some rayon prints from Korea,
because that is the only place that they make rayon prints.
Mr. LEVIN. I think in order for us to address this, and I
am in favor of doing so, we need to be clear with each other
what the potential impact is and not try to assume that there
won't be. Mr. Felker is urging there will be an impact, and
when I press you, I think you are essentially acknowledging
that over time, there is likely to be an impact in terms of the
fabric that you buy made in the United States, and then we will
go on from there. We will have an intelligent discussion about
it. Mr. Baker--by the way, I think there is some inconsistency.
We are not clear. Ms. Fox, you say you buy simple garments from
Haiti. Mr. Woltz, you talk about specialty. You are in the
specialty line, right?
Mr. WOLTZ. Yes.
Mr. LEVIN. So, you are involved with different products,
right?
Mr. WOLTZ. I think the definition of simple, we make a
variety of styling that is not tailored clothing, it is not
curtain waistband slacks, it is not those kinds of things----
Mr. LEVIN. Not underwear and t-shirts.
Mr. WOLTZ. We are not in the underwear business. We make
placket shirts like golf shirts, jogging suits, turtlenecks,
mock turtles, styled tops, that kind of thing, which I think
Janet would classify as more simple sewing.
Ms. FOX. That is what we would call basic, as opposed to
fashion. That region is really not capable of making fashion at
this time. That business is in China, and----
Mr. LEVIN. Mr. Woltz makes them.
Ms. FOX. His products aren't really--we would consider that
more of a basic item as opposed to a fashion item with a lot of
detailing and tailoring taken into it, things with linings and
what not. Those are not the kind of things that Perry
Manufacturing makes. They are more of a conservative, more
basic producing supplier. We would not go to them for high
fashion.
Mr. WOLTZ. The difference is ``high.''
[Laughter.]
The difference is high. We make what we consider fashion
because it changes every season.
Ms. FOX. Yes.
Mr. LEVIN. Okay. I have some questions, but the time is up.
Mr. Baker, I would like to ask you some questions. I will
submit them to you----
Chairman CRANE. In writing?
Mr. LEVIN. In writing.
[The information was not received at the time of printing.]
Chairman CRANE. Very good. All right. Mr. Shaw?
Mr. SHAW. Thank you, Mr. Chairman. Coming into this
hearing, and after listening to the Senate panel, it seemed
like a very simple solution, which you people have shot down.
We do not want to make an agreement or file a law that would
make Haiti simply a platform for China, and we certainly don't
want to impact upon the other trade agreements that we have
with other countries. Mr. Felker, you hit on that. If we give
Haiti the only, the country that has the advantage of being
able to export without duty items made from fabrics from China,
we certainly would in the long run be doing that, even though
with our FTA with Africa, there is a certain amount of that in
the short term, but that phases out in the long term. However,
we want to be sure that there is quality material available so
that we can have a quality product coming out of Haiti.
Does anyone on the panel have information as to exactly
where we are with the technology? How far down the line do we
have the Mexicos or the Caribbean countries or Central American
countries or possibly even down into South America, where we
are negotiating FTAs now, how far down the line would they be
in being able to manufacture quality textiles that would be
able to make it where you would invest in Haiti and produce the
employment that we are after? Does anybody want to take that?
Mr. Felker?
Mr. FELKER. Yes. I have been in many textile plants
throughout the region that you have described and the
technology is largely there. The application of the technology
varies from location to location. Certainly in the United
States, many mills, the surviving mills, I should say, are
state of the art and have the ability to produce very, very
high quality.
Now, quality can be measured in terms of flaw level and
also in terms of intrinsic values. There are certain products
that are not produced in the United States that would qualify
as very high-quality products, and I think there does need to
be a system that does allow these--a short-supply system that
works, is commercially viable, that allows access to these
products that are not available in the United States. As far as
the ability to produce world competitive, flawless-type fabrics
and yarns, the technology is there. I hope that helps your
question.
Mr. SHAW. The technology is there here in the United
States.
Mr. FELKER. It is here in the United States, and the
technology is available and in place to a very significant
degree in the Andean region and in Mexico----
Mr. SHAW. How long would it take for the capital investment
in order for them to gear up to be able to manufacture the--it
is one thing to say the technology is there, but we also need
the capital resources.
Mr. FELKER. To gear up for the infrastructure, the
infrastructure is largely there, not so much in the Caribbean,
but in Mexico and in the Andean nations. The economics of
manufacturing in the Caribbean are--for the yarns and fabrics,
for wovens, is somewhat questionable.
Mr. SHAW. Are you saying that the countries that we have
FTAs with can compete quality-wise with China right now?
Mr. FELKER. Yes, not across the board with all companies,
but yes.
Mr. SHAW. Does anybody have a contrary view? Ms. Fox? What
does J.C. Penney say?
Mr. FELKER. Well, I disagree with that. I think that if you
look at the types of yarns that are spun here, and we are
talking about knits because that is what the conversation is,
because really wovens is not really something that is strong in
this region, if you look at the type of yarns that are spun in
the United States and also spun in Mexico, it is not the same
quality, tightness. The finishing is different. So, that is why
J.C. Penney primarily sources most of its fabric, not from
China, China, Korea, India, Pakistan, and I think to Mr.
Woltz's comment, Pakistan actually has a much greater threat to
the knit industry than will China. The products that we are
talking about for Haiti are really not the type products that
were produced in China.
Mr. SHAW. I think what is facing this dilemma, and I will
wrap it up now because my time is almost up and it has been a
long afternoon, but I think the dilemma facing us right now is
that we want to pass a bill that we will be able to conference
with the Senate, but we have to be very careful on how that is
going to impact on other manufacturers in other countries that
we have FTAs with, so we have got our work cut out for us and
we are going to have to move forward.
I was hoping that we could get a bill passed before we
adjourn. I still hope we can, but this issue has certainly
complicated the road to the passage of a bill. Also, the
question still remains and will always remain when you're
dealing with our friends over in the Senate is that if we
change anything, can we ever get it back on the Senate floor
and get it off, and that is a problem. We don't want to be very
reckless just in order to expedite the process. Thank you all,
and I yield back.
Chairman CRANE. Mr. Thompson, did you have a question?
Mr. THOMPSON. Thank you very much, Mr. Chairman. If I might
just make a small contribution from the viewpoint of the auto
industry, Congressman Shaw's question was about how fast you
can implement technology in Haiti. From the automotive industry
viewpoint and looking at wire harnesses, we would confidently
expect that wire harness production in Haiti would deploy
exactly the same technology and the same processes that produce
extremely high-quality product in all of the other countries in
the world in which we operate and we could do that within the
period of 1 to 2 years.
Chairman CRANE. Thank you very much. I want to express
appreciation to all of you for your participation, giving of
your time so generously. Your contributions play a very
important role in our decisionmaking here and you folks are all
on the frontlines and we can't thank you enough for your
involvement. As I have told folks many times, keep the faith,
fight the fight, but remember the war is eternal. Thank you.
The hearing stands adjourned.
[Whereupon, at 4:07 p.m., the hearing was adjourned.]
[Submissions for the record follow:]
Statement of U.S. Association of Importers of Textiles and Apparel
The U.S. Association of Importers of Textiles and Apparel, USA-ITA,
strongly supports legislation to provide enhanced trade preferences to
apparel manufactured in Haiti, as a means of ensuring that orders are
placed in Haiti after 2004. Given the extraordinary disadvantages Haiti
currently faces, it is unlikely that U.S. importers and retailers will
include Haiti in their future business plans, unless significant
additional incentives are provided. Apparel importers and retailers
will need a strong and compelling reason to be in Haiti after this
year; the Haiti Economic Recovery Opportunity Act approved by the
Senate and under consideration in the House would give them that
reason.
The poorest country in the Western Hemisphere, Haiti is also among
the most destitute nations in the world. With an average life
expectancy of 53 and literacy rates at only about 50%, over 80% of
Haiti's population lives in extreme poverty and, according to official
statistics, which could be understated, more than 16% of the population
is unemployed. The Haitian economy continues to stagnate after a period
of political upheaval, and its economy grew at an anemic 0.7% in 2003,
which resulted in a net per capita loss when one factors in population
growth. However, as a report by the U.S. Agency for International
Development recently stated, ``one bright spot is exports (mainly
apparel and textile),'' with the United States serving as Haiti's
largest trading partner. Without immediate and meaningful help from the
U.S. Congress, that one bright spot is likely to disappear in 2005.
A program that will effectively entice American importers and
retailers to do business in Haiti next year absolutely must be
commercially sound, with rules that do not add prohibitive costs and
risks. Simplicity is key. Rules that are too complicated and too
confusing will destroy any incentive for business to go to Haiti.
Simply put, business should not need a Ph.D. to establish a compliant
duty-free program; while companies may have tolerated added compliance
burdens while quotas were in place, once those quotas are gone and
unlimited options around the world are finally available, that patience
will be gone.
Regrettably, the Caribbean Basin Trade Partnership Act has not
served to bring significant new orders to Haiti; instead, the presence
of quotas on other suppliers is probably the primary reason Haiti is
producing any apparel for the U.S. market today, with CBTPA providing
some incentive as well. Over half of what Haiti ships to the U.S.
market today is knit shirts--35 percent of the apparel exports are
cotton knit shirts and 18 percent are man-made fiber knit shirts.
Approximately 68 percent of the Haitian-made apparel entering the U.S.
qualifies for duty-free access under CBTPA. Another 20 percent enters
the U.S. under other provisions reserved for goods containing some U.S.
content (the so-called ``807'' provision), thereby qualifying for a
small duty reduction. While U.S. importers therefore have used the
CBTPA to produce garments in Haiti, their willingness and reason for
continuing to do so after December 31, 2004, is extremely limited. Once
quota costs are eliminated for other suppliers, producing CBTPA
compliant garments in Haiti simply will not be justified in terms of
cost, especially given the simple garments produced there.
Recognizing this reality, the Senate-approved Haiti Economic
Recovery Opportunity Act, S. 2261, and its House counterpart, H.R.
4889, would establish a trade preference program similar to the one
established for the least developed countries of sub-Saharan Africa
under the African Growth and Opportunity Act. The parallel is clearly
appropriate. Haiti is as poor as these sub-Saharan nations and the
obstacles to its future success in apparel production are painfully
similar. While Haiti has the advantage of a closer location to the
United States and therefore can meet the important speed to market
demanded by retailers today, it shares the lower productivity levels
and more limited skills, as well as the lack of adequate and
competitive supplies of essential inputs, including yarns and fabrics.
Only with the ability to obtain duty-free treatment for apparel
produced from third country fabrics will Haiti be able to produce
garments that are competitive with garments produced elsewhere in the
region or in Asia.
USA-ITA appreciates the Committee's desire to identify whether
there are alternative origin rules that would encourage apparel
manufacturing orders to be maintained or added in Haiti. However, our
members' review of the suggested alternatives concludes that it is
highly unlikely that anything less than a single transformation rule--
allowing the use of third country yarns and fabrics--would result in
serious consideration of Haiti as a source for apparel after 2004.
Efforts to ``tweak'' existing programs, such as CBTPA, will not be
sufficient. With that in mind as well as with a strong understanding of
the ways in which companies are restructuring in response to the
elimination of quotas, USA-ITA has two recommendations beyond the
Senate-passed bill.
First, it is worth considering the idea of a single transformation
rule for ``certain apparel.'' However, USA-ITA urges the Committee, if
it proceeds with the idea of a single transformation rule for ``certain
apparel,'' it must not burden such a rule with separate product-by-
product caps or with additional paperwork burdens. Such complications
will only destroy any incentive for U.S. importers to explore that
option. The program must include those products Haiti is capable of
producing and any cap on duty-free access must be based upon commercial
reality and viability; a level that is too low creates a risk that
companies will not participate at all.
Second, although clearly not as attractive to U.S. apparel
importers and retailers as a more straight-forward third country fabric
provision, application of the Generalized System of Preferences program
to apparel would be a possibility. The idea is not new or unique; the
European Union includes apparel within its GSP program. USA-ITA members
advise that a value-added rule based upon the GSP program, namely 35
percent value added plus substantial transformation plus direct
shipment to the U.S. market, with other countries in the region and
U.S. inputs allowed to help make up that 35 percent threshold, might
provide a small incentive to place some orders in Haiti. Expressly
placing Haiti apparel under the GSP program also carries with it the
conditions and standards that are part and parcel of the U.S. GSP
program, including affording internationally recognized worker rights.
USA-ITA also urges the Committee not to perpetuate an inappropriate
distinction between apparel made of knit and woven fabric. As a
practical matter, only knit fabrics are produced in the Caribbean and
Central American region; wovens are virtually non-existent. The more
limited benefits for woven apparel under CBTPA, requiring that the
fabrics be formed in the U.S. from U.S. yarns (while knit apparel can
use fabric woven in the region from U.S. yarns), has effectively
undermined any incentive for investment in such mills in the region.
Continuing that distinction would only serve to eliminate the ability
of Haiti to shift into other products. Creating an incentive for
investment in woven fabric production now, by providing benefits for
apparel made from fabrics woven in the region, while noble, is truly
too late, particularly in light of the amount of production capacity
already in place in the world.
Adjustments in the caps on benefits under CBTPA would be largely
tantamount to rearranging the deck chairs on the Titanic. While Haiti
might benefit from its own non-underwear t-shirt cap, if it were set at
a commercially viable level, it is not the caps that will prevent Haiti
from maintaining the interest of U.S. importers or winning more orders
from U.S. buyers next year. With Haiti accounting for only 0.67 percent
of the apparel imported into the United States in one year period
ending July 2004, and the overall CBTPA cap never filling, it is
apparent that other issues are behind the trends. Only the non-
underwear t-shirt cap fills early. Ultimately, the issue is how to make
apparel, including more types of apparel, produced in Haiti
competitive. The way to do that is to allow it to reduce costs
sufficiently to offset its lower productivity levels.
USA-ITA does commend the concept behind H.R. 1031, which would
encourage U.S. free trade agreement partners and unilateral preference
partners to use inputs produced in any of these countries and regions.
While our members do not yet view this as a viable option for Haiti,
because too few of the U.S. partners produce sufficient quantities of
cost competitive yarns and fabrics or have the logistics in place to
allow timely movement of inputs from one location to another, the goal
of integrating productive capabilities among our preferential trade
partners is clearly the right direction. At some point in the future,
when our preference regions include more yarn and fabric producers, the
inclusion of such cumulation benefits could be a winning business plan.
USA-ITA respectfully urges the Committee to quickly approve
legislation that will give U.S. importers a real reason to do business
in Haiti. With very little time left for legislative action, we ask the
Committee to pass meaningful and substantive legislation. Time is of
the essence. Haiti is already losing business as the end of the decades
of quotas nears. The most recent trade data shows that the month-to-
month and quarter-to-quarter data are falling much faster than the
year-ending data. That signals that orders are moving, primarily to
other Central American countries, and portends the difficulties Haiti
will face unless the Congress acts now to provide substantial benefits
to justify the placement of business in Haiti.
[BY PERMISSION OF THE CHAIRMAN:]
Statement of Camara Nacional de la Industria Textil, Ciudad, Mexico
Camara Nacional de la Industria Textil (CANAINTEX) appreciates this
opportunity to submit for inclusion in the record our views on
legislation according certain U.S. trade preferences to Haiti.
Canaintex is the national association representing more than 400
manufacturers of textiles (yarns, fabrics and non wovens) in Mexico.
The fiber, textile, and apparel sector accounts for 7.5% of Mexico's
manufacturing GDP and employs more than 800,000 Mexicans.
Canaintex firmly believes that the future of the textile industry
in the hemisphere--in the U.S. as well as in Mexico and the Caribbean--
depends on the extent to which countries in the region eliminate trade
barriers and create an integrated, efficient regional textile market.
Market based, regional integration will allow suppliers in the
hemisphere to deliver a ``total package'' regional product to our
apparel customers in the United States at competitive prices, delivery
times and quality standards. We believe this is ultimately the only
basis on which Western Hemisphere textile producers will be able to
successfully compete with Asian suppliers.
In line with this approach, member companies of Canaintex have made
substantial investments in capital equipment and technology to position
Mexican companies as price competitive, reliable suppliers of high
quality inputs to regional apparel producers.
At the same time, the Government of Mexico has worked to negotiate
Free Trade Agreements to open up regional markets to Mexican textile
products and, equally important, to expose Mexican textile companies to
market disciplines and ensure we remain competitive.
We believe the results speak for themselves. In the highly
competitive U.S. market, the Mexican textile industry was able to
establish itself as the number one foreign supplier in a broad range of
products. At the same time, Mexico grew to become the number one export
market for U.S. textile manufacturers and U.S. cotton growers.
Moreover, in the past year, we have worked with U.S. trade
negotiators and our colleagues in the region to introduce the concept
of textile cumulation into trade agreements with Central America and
the Dominican Republic, and we are seeking wider cumulation in on-going
negotiations with the Andean countries. Cumulation is a powerful tool
for rationalization of the hemispheric textile market, and an important
building block in constructing a Free Trade Area of the Americas
(FTAA).
In this context, Canaintex believes that the original HERO
concept--to provide Haiti with the opportunity to incorporate inputs
from countries with which the United States has Free Trade Agreements--
is the most effective means of achieving the twin goals of promoting
apparel production in Haiti and strengthening the regional textile and
apparel industry. There is a real possibility that expanding the range
of qualifying sources to include Asian suppliers--including China--
could create incentives to dislocate existing production in the
hemisphere, widen the threat to U.S. and regional textile producers
from unfairly traded product, and increase the opportunities for
illegal transhipments of Chinese textiles. These effects would
exacerbate the employment and other economic effects associated with
the ending of textile quotas in January 2005 which have been documented
by the International Trade Commission.
Canaintex believes that quality inputs required to support
expanding Haitian apparel production are available from FTA supplier
countries in the volumes needed, at highly competitive prices and with
short delivery times, making the expansion of preferences to non-FTA
suppliers unnecessary. This would be particularly true if the U.S.
Congress were to take early action to approve the trade agreement with
Central America and the Dominican Republic.
In the case of Mexico, the fact that Mexican producers currently
supply more than $88 million worth of knit fabric to the United States
market stands as clear evidence that we have the available capacity to
supply Haiti with high quality knit fabric in the quantities required.
Canaintex would welcome an opportunity to work with the Committee
to ensure that the needs of Haiti's apparel industry can be met within
this hemisphere.
[BY PERMISSION OF THE CHAIRMAN:]
Statement of Marie-Claude Bayard, Haitian Manufacturers Association,
Delmas, Haiti
My name is Marie-Claude Bayard. I am President of the Haitian
Manufacturers Association (ADIH) and it is an honor to present my
personal perspective and that of our Association to your prestigious
Committee.
My professional activities in the textile sector began in 1975 and
we employed over 1,400 people at peak times in 3 factories. Today, we
operate only 1 plant employing approximately 600 people working for
Wal-Mart and JCPenney via SaraLee and Perry Manufacturing. The
downsizing resulted mostly from the migration of our children's wear
suppliers towards cheaper production lines in the Far East with which
we could not compete.
ADIH
The Manufacturers Association represents a very large group of
industrial enterprises and related businesses with one-third of its
members operating in the textile sector.
Quite concerned by the new threats and challenges posed by the
prospects of a world shaped by globalization, ADIH began to search for
ways to assist its members in their adjustment programs and to help
propel Haiti on the path of substantial increase from its low level of
production. The results of our search were conclusive: our best and
only choice for a fairly quick response to the dire needs of the
country in investments and job creation was, and still is, the textile
assembly industry with its huge potential for massive employment of
unskilled labor and its demands for reasonable financial investments.
We applauded Congress when it passed the AGOA bill with special
provisions given to the least developed countries in Africa. It was a
fair gesture and it confirmed our belief that we could also expect the
same fairness towards Haiti, the least developed country of the
Americas and one of the United States closest neighbors.
We are very grateful to the U.S. Congress for taking the time to
look for ways to assist Haiti and support the Haitian garment industry
and its workers. We are also grateful to all the U.S. firms like Perry
Manufacturing, JCPenney, Wal-Mart, Tropical Manufacturing, A&E Threads,
the American Apparel and Footwear Association, the U.S. Chamber of
Commerce, the American Chamber of Commerce in the Dominican Republic,
the Associacion de Zonas Francas de la Republica Dominicana, and so
many others who put their faith in our small and troubled country and
sided with our efforts.
HAITI NEEDS HELP
While we gather here to discuss issues related to the HERO bill,
our country is at a crossroad that brings both serious concerns and
great hopes. Concerns, because institutions are still weak and the
extreme poverty and level of unemployment render the task of nation
building more difficult and troublesome. At the very moment that we
should be paying respect to the memory of our ancestors who achieved a
remarkably successful revolution, we are faced with Haiti's disastrous
position in two important classifications: ranking 80th in the Global
Competitiveness Report, and 145th in the Human Development Index. It is
a worrisome story: the income per is less than $400 a year and will
remain low unless the course is radically altered. The common citizen
is wrestling between electricity shortages, lack of potable water, of
minimum healthcare, of schools and daily meals for all children.
Unemployment or underemployment among those of working age is far in
excess of 70%. It is therefore evident that building democratic
institutions is extremely problematic under such conditions.
HERO
Only by enhancing Haiti's attractiveness can we hope for
substantial business investments. CBTPA did not fulfill the
expectations because of its limitation to U.S. fabrics, more expensive
than most of the world, or because of knit regional fabric not readily
available or delivered on time, also for not allowing the use of
regional woven fabric. This is what HERO, as passed by the Senate,
would in fact correct. By allowing production from third country
fabric, HERO would create the opportunity for all manufacturers to
compete with the low production costs of Asia and set the base for
Haiti to become a garment production center for the region.
Quoting the USAID report of 2003: ``HERO will stimulate production
in Haiti of apparel from both U.S. and third country fabrics. If there
is any diversion, it is most likely to come at the expense of imports
from the Far East made with no U.S. components or imports from U.S.
preferential trading partners who will see their textile mill products
incorporated into apparel in Haiti as opposed to within their own
countries.''
We are very grateful to the U.S. Congress for taking the time to
look for ways to assist Haiti and its workers. ``There are some very
impressive well-managed companies, consciously striving for the
American model, run by young men with a strong U.S. background, with
full computerization of production planning and accounts, and in some
cases also, marketing plus product development.''
The type of assembly carried out in Haiti would have minimal or no
impact on employment in the United States. Again as quoted in the USAID
report, ``there should be no adverse impact on U.S. apparel
manufacturers since the type of apparel that could conceivably enter
from Haiti under the new provisions of HERO have long-since left the
United States for offshore operations.'' In fact, it would encourage
the emigration of jobs away from the Far East and back to our own
hemisphere.
It would also create new jobs in the United States since unlike in
the Far East, most of Haitian foreign exchange earnings are utilized to
purchase American products and, furthermore, many components included
in garments would be purchased in the United States.
Growth in Haiti will also benefit the whole state of Florida. Haiti
has a high propensity to import products and services originating in
Florida and increased export earnings will augment this propensity.
SOCIAL IMPACT
We have all witnessed the human misery represented by disadvantaged
Haitians risking their lives in perilous sea voyages to reach the shore
of Florida where they literally have to swim to shore with absolutely
nothing. It is only by creating employment opportunities in Haiti, as
will happen through HERO, that we can reduce this flight. And on the
basis that one formal job in Haiti feeds 6 mouths, such employment
could conceivably support over 15% of the entire population.
The private sector of Haiti has become increasingly conscious that
the new rules and norms in our global environment also require a
complete new approach to the business of growth. The Haitian
Manufacturers Association has, for some time now, endorsed the World
Responsible Apparel Production or WRAP standard. A new social
conscience has matured not only to create the most favorable investment
climate through the promotion of proper public policy framework but
also and foremost by ensuring the best working environment and social
conditions for our workforce conducive to personal growth.
Again quoting the USAID report: ``This `social conscience' of some
employers is distinct from the ruthless drive for productivities and
cost reductions in textile companies around the world, especially in
Asia and the former Soviet satellite countries of Eastern Europe. . . .
A strong element of compassion and care is very apparent in some of the
larger and more successful Haitian-owned companies.''
It must also be noted that 75% of employees in the Haitian sector
are female.
With great pride, we have seen some of our workers become quality
managers, line supervisors, production managers and head mechanics and
their children graduate from high school and go to college to become
doctors, nurses and engineers. Many of the workers have gone from using
the services of loan sharks to enjoying the facilities of the formal
banking system for their personal savings or private loans to build
their homes or start their personal businesses. Haiti's manufacturers
strive to serve the best interests of both their workers and their
consumers' Social Responsibility.
CONCLUSION
If things proceed the way the United States wishes, the Free Trade
Agreement of the Americas will be a reality in the near future. We are
convinced that there is no way for a small country like Haiti to
prevail by itself. We realize that our whole Caribbean region is
particularly vulnerable. Integration, if conducted properly, represents
the appropriate method by which we can benefit to the maximum from the
winds of globalization and set sail towards the future model of
competitive development. However, the participation of small economies
is imperative for the success of the FTAA. We are ready to move towards
strategic alliances with partners of the region and foremost with our
next door neighbors.
Sadly enough, there is no quick fix to the problems of poverty and
underdevelopment. The purpose of HERO is to help improve the economic
and political situation in Haiti through trade and thereby allow Haiti
to better be able to confront its serious economic and social problems.
For once, our LDC status can be considered a strategic advantage,
presenting enormous opportunities for Haiti and for business people
willing to seize them. The HERO bill approved by the Senate, the new
Investment Code and the new Law on Free Zones offer great advantages to
investors willing to export from the Haitian platform. New industrial
parks are being built under specs that are fully congruent with the
most stringent international environmental norms.
Haiti needs HERO. As business people, we need HERO to enhance our
contribution to the welfare of the Haitian society, by creating much
needed stable jobs to jump start the economy. In the new world of the
Americas, the walls of prejudice, poverty, and protectionism can be
toppled by extending a helping hand to a small country like Haiti and
connecting through the bonds of freedom and prosperity. The U.S. free
trade agenda can help a fragile democracy in the Americas, just as U.S.
trade policy after World War II helped secure democracy and hope in
Western Europe and Japan.
There is, as yet, no fabric or yarn manufacturing facility in
Haiti. With China, the fourth largest trading nation in the world, now
in the WTO, if left unattended, Haiti will face devastating global
competition. This must not be allowed to happen. A solid legislation
like the HERO bill is a valuable instrument for energizing key actors
to attain socio-economic and political progress and help nurture
economic development initiatives. Expectations that HERO would find its
way through Congress unopposed has itself reinforced the current
momentum in the sector in Haiti. We are therefore convinced that
employment and exports could increase by approximately 30% in the short
to medium term.
Haiti is only two hours' travel time away from the U.S. as opposed
to the long hours needed to reach the Far East or China: businesses
will respond favorably to the opportunity of HERO to avail themselves
of the best possible insulation for the future, within the national
constraints.
With growth, finally Haiti will be empowered to draw on its art,
its traditions and culture to reinvent itself through the open-
mindedness, hard work and perseverance of its people. Our citizens
dream of a life free of despair and this extraordinary city of
Washington can play a leadership role to hearten our citizens through
an adequate legislation that will unlock the country's potential. The
challenges are genuine. We should not minimize their significance. But
we can learn from one another while also perceiving special needs and
circumstances in a bond of mutually beneficial exchange.
[BY PERMISSION OF THE CHAIRMAN:]
Statement of Patrick Moynihan, Haitian Project, Inc., Port-au-Prince,
Haiti
My name is Patrick Moynihan, and I am grateful for this opportunity
to submit this statement to the Subcommittee in support of legislation
for trade preferences for Haiti. I am the President of the Haitian
Project, Inc. and Director of Louverture Cleary School, an independent
Catholic secondary school for economically underprivileged,
academically gifted students in Port au Prince, Haiti.
Given that I am an educator rather than a textile or trade expert,
it may not be readily apparent why I would request to speak on behalf
of the HERO Act. Since 1996, I have directed Louverture Cleary School,
The Haitian Project's free secondary school for academically gifted
children from the poorest regions of Haiti. The objective of the school
is to form our young, talented students into civic-minded, productive
leaders for Haiti--a country that has suffered far too long from the
instability created by an economically divided society easily exploited
by mercurial and divisive leaders who find little challenge in
manipulating the country through threats of revolution and oppression
simultaneously. Therefore, as an educator, my interest in the HERO Act
is very pragmatic. Haiti needs a stronger, larger middle class to buoy
its nascent democracy. Therefore, its people need jobs. Specifically,
our graduates need jobs if they are going to make a difference.
Simply put, our mission of educating economically disadvantaged
students to become the future leaders in their country cannot be
realized unless there are opportunities for gainful employment at the
end of their education. It is critical for our students to have job
opportunities such as those offered by the apparel industry in Haiti.
In order for those jobs to be created and available to our students,
Haiti must be provided trade preferences such as those in the HERO Act.
Part of my responsibilities as the president of Louverture Cleary
and The Haitian Project is to work with the business community of Haiti
to find meaningful employment for our graduates as they pursue their
university education. This activity has provided me with the
opportunity to visit, on numerous occasions, factories in Haiti
involved in production ranging from textiles to electronics. While many
of our students are employed in retail companies and others are
studying medicine at the top universities in Haiti, a significant
portion work in industrial settings as quality control managers,
accountants and inventory managers.
I must say that my visits, which are frequent and unannounced, have
never left me with the impressions that I hear stated by some of your
colleagues in the name of protecting the Haitian worker. This leads me
to wonder if the negative descriptions, which have at times been very
personal condemnations, used to describe the working conditions in
Haiti are motivated more by politics than a true interest in helping
the Haitian worker. I suppose I would believe the sentiments of those
who oppose Haiti being assisted in finding work for its people through
trade acts such as this one, if those same politicians would propose
opening our borders to allow all the unemployed Haitians, over 60% of
the country, to move here and compete for jobs. At the very least, I
can say that their words have little basis in reality given my
experience in Haiti.
Certainly, salaries in Haiti are very low--too low for the
missionary-minded like myself. However, how will wages ever increase
without competition? We are not counting on altruism in this country to
improve laborer's pay--we should not expect to find it doing so in
other countries. With increased employment comes training and increases
in productivity. Increases in productivity provide laborers with the
chance to organize into unions and demand more of the profits their
work produces. Increased employment also creates stability and funds
infrastructure advancements both of which reduce the risk for investors
backing companies looking for new locations for their factories. This,
in turn, increases the number of companies willing to compete for
Haitian labor--the last natural resource Haiti has to bring to the
global market. We can continue to pour money into Haiti through USAID
and other non-self-sustainable programs, or we can provide ways for
Haiti to develop an economy.
We also know that this trade initiative comes with significant
requirements that must be fulfilled in order to ``merit'' the
advantage. These requirements will encourage improvements in the
treatment of labor in Haiti as well as positively motivate the
government of Haiti to improve itself. It is easier to invite a horse
to water than push him there. The HERO Act invites social and political
responsibility by offering a tangible reward for doing the hard work of
maturing a country from revolution into statehood.
I also believe extending the HERO Act to Haiti will benefit the
United States. It is in our best interest to work cooperatively with
all our brothers and sisters in the Americas to create a more stable
and economically healthy region. No offense to Mr. Frost, Trade Acts,
not walls, will make better neighbors and neighborhoods in the end.
As a final point, each day I am approached by at least five people
who are looking for work in Haiti. Depending on their circumstances and
education, their plea ranges from desperation caused by hunger to anger
caused by frustration. It is not easy to watch a country undergo the
industrial revolution starting at its most basic, manual and rigorous
level. Yet, it is more painful to think that people will always starve
in Haiti and go without education with only the hope of getting out to
console them. I ask that you pass this trade act. Let's give Haitians
of all economic levels a working chance by giving them a chance to
work.
Statement of National Retail Federation
The National Retail Federation (NRF) submits this statement to the
Ways and Means Trade Subcommittee to express the U.S. retail industry's
strong support for a trade preference program for Haiti. NRF is the
world's largest retail trade association, with membership that
comprises all retail formats and channels of distribution including
department, specialty, discount, catalog, Internet and independent
stores as well as the industry's key trading partners of retail goods
and services. NRF represents an industry with more than 1.5 million
U.S. retail establishments, more than 23 million employees--about one
in five American workers--and 2003 sales of $3.8 trillion. As the
industry umbrella group, NRF also represents more than 100 state,
national and international retail associations.
NRF welcomed the passage of S. 2261--the Haiti Economic Recovery
Opportunity Act of 2004 (``HERO'')--in the Senate. We also applaud
quick action by the Ways and Means Committee to help ensure House
consideration of the initiative before the end of the 108th Congress.
In order to assist the economic recovery and development of Haiti, the
most impoverished country in the Western Hemisphere, the HERO bill
focuses on incentives necessary to build a viable apparel industry,
using the African Growth and Opportunity Act as a model. Like AGOA, the
HERO bill employs a flexible rule of origin that provides duty free
treatment to clothing made in Haiti from third-country yarns and
fabrics.
This flexibility to use third-country inputs in apparel production
is absolutely essential to the success of any trade initiative for
Haiti, due to two trends that are creating a paradigm shift in the
competitive landscape for textile and apparel production and sourcing.
The first is the end of the global system of textile and apparel quotas
on January 1, 2005. Once textile and apparel quotas end, the cost of
quota will no longer be a factor in production and sourcing decisions.
The chief beneficiaries from this change will be the most competitive
Asian producers, who have, heretofore, been the most severely
restrained by quota restrictions.
The second event is a fundamental change over the past decade in
the way apparel is manufactured, from the old ``cut-and-sew'' model to
so-called ``full package'' production. While labor costs remain a
competitive factor under this system, it is, at best, secondary, and is
certainly not as important a consideration as in the past. Indeed, in
full package production, apparel producers who are the most competitive
share a certain number of characteristics. In general, they are able to
provide their customers a range of services, including the ability to
work closely with designers, adaptability in the face of rapidly
changing demand, and the ability to maximize speed to market. But
perhaps the most important trait they share is access to the widest
range of yarns and fabrics.
Again, this situation favors manufacturers in Asia over those in
the Caribbean Basin region, like Haiti, who have found themselves bound
to the cut-and-sew model and over-reliant on high-priced U.S. yarn and
fabric as a result of the inflexible rules of origin under the
Caribbean Basin Initiative and the Caribbean Basin Trade Partnership
Act. The compliance costs created by these programs often negate the
duty preference and have made it more difficult for Haitian and other
regional producers to compete effectively against the most efficient
Asian manufacturers. The end of the quota will only exacerbate this
competitive handicap.
In addition, the political and economic instability in Haiti has
created yet another significant competitive obstacle for that country.
In sum, without strong incentives to encourage apparel retailers,
importers, and manufacturers to do business in Haiti, the prospects for
the apparel sector there are bleak. Conversely, a strong package of
incentives that will enhance the advantage of proximity to market that
Haiti does have, as well as provide apparel retailers and manufacturers
a commercially-viable environment in which to do business will
encourage trade, development, and the creation of desperately-needed
jobs in the country.
The HERO bill is commercially viable in the sense that it includes
the necessary incentives to overcome the risks for apparel retailers,
importers, and manufacturers to do business in Haiti, and to achieve
its ultimate objective of promoting trade, investment and job creation
in Haiti. Given the short time left to this Congress and the imminent
end to the quota system, it certainly makes sense for the House to
consider passage of the Senate bill as quickly as possible. If the Ways
and Means Committee and the House conclude that a different approach is
warranted, it should still be guided by the considerations discussed
above to craft a commercially viable bill with simple and flexible
rules of origin. Simplicity and flexibility are key. Retailers simply
will not use any program that handcuffs them with rigid, complex rules.
Other approaches that meet the simplicity/flexibility test have
been proposed in other pieces of legislation. For example, the Middle
East Trade and Engagement Act, which has been introduced with
bipartisan support in both the House and Senate, adopts for apparel the
simple, straightforward rule of origin under the Generalized System of
Preferences. The GSP system provides preferential treatment to articles
that undergo at least 35 percent value added production in the
beneficiary country.
Finally, in debate on the Haiti initiative, some have suggested
that limiting imports from China is necessary to ensure that countries
like Haiti can continue to export to the United States in the post-
quota world. This argument is a red herring. The simple fact is that
there is no guarantee that any trade diversion created by limiting
imports from China will benefit countries like Haiti. Rather, it is
more likely to shift to other Asian producers that are not subject to
any quantitative restrictions. Secondly, limiting imports from China
does nothing to build the competitiveness of Haiti or any other
producer. Conversely, however, providing the right package of trade
incentives and crafting an initiative for Haiti that meets the
``commercial viability'' test will help build a more competitive
apparel sector in that country. This in turn will help spur trade,
investment, and job creation, and ultimately better political stability
in Haiti, an outcome that is clearly in the interests of the United
States.