[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]




 
                        THE ECONOMIC EFFECTS OF
                        THE RECENTLY INCREASED
                             MINIMUM WAGE

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

                        OVERSIGHT FIELD HEARING

                               before the

                    SUBCOMMITTEE ON INSULAR AFFAIRS

                                 of the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

              Friday, February 22, 2008, in American Samoa

                               __________

                           Serial No. 110-58

                               __________

       Printed for the use of the Committee on Natural Resources



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                     COMMITTEE ON NATURAL RESOURCES

              NICK J. RAHALL, II, West Virginia, Chairman
              DON YOUNG, Alaska, Ranking Republican Member

Dale E. Kildee, Michigan             Jim Saxton, New Jersey
Eni F.H. Faleomavaega, American      Elton Gallegly, California
    Samoa                            John J. Duncan, Jr., Tennessee
Neil Abercrombie, Hawaii             Wayne T. Gilchrest, Maryland
Solomon P. Ortiz, Texas              Chris Cannon, Utah
Frank Pallone, Jr., New Jersey       Thomas G. Tancredo, Colorado
Donna M. Christensen, Virgin         Jeff Flake, Arizona
    Islands                          Stevan Pearce, New Mexico
Grace F. Napolitano, California      Henry E. Brown, Jr., South 
Rush D. Holt, New Jersey                 Carolina
Raul M. Grijalva, Arizona            Luis G. Fortuno, Puerto Rico
Madeleine Z. Bordallo, Guam          Cathy McMorris Rodgers, Washington
Jim Costa, California                Bobby Jindal, Louisiana
Dan Boren, Oklahoma                  Louie Gohmert, Texas
John P. Sarbanes, Maryland           Tom Cole, Oklahoma
George Miller, California            Rob Bishop, Utah
Edward J. Markey, Massachusetts      Bill Shuster, Pennsylvania
Peter A. DeFazio, Oregon             Dean Heller, Nevada
Maurice D. Hinchey, New York         Bill Sali, Idaho
Patrick J. Kennedy, Rhode Island     Doug Lamborn, Colorado
Ron Kind, Wisconsin                  Mary Fallin, Oklahoma
Lois Capps, California               Kevin McCarthy, California
Jay Inslee, Washington
Mark Udall, Colorado
Joe Baca, California
Hilda L. Solis, California
Stephanie Herseth Sandlin, South 
    Dakota
Heath Shuler, North Carolina

                     James H. Zoia, Chief of Staff
                       Rick Healy, Chief Counsel
            Christopher N. Fluhr, Republican Staff Director
                 Lisa Pittman, Republican Chief Counsel
                                 ------                                

                    SUBCOMMITTEE ON INSULAR AFFAIRS

            DONNA M. CHRISTENSEN, Virgin Islands, Chairwoman
        LUIS G. FORTUNO, Puerto Rico, Ranking Republican Member

Eni F.H. Faleomavaega, American      Elton Gallegly, California
    Samoa                            Jeff Flake, Arizona
Raul M. Grijalva, Arizona            Don Young, Alaska, ex officio
Madeleine Z. Bordallo, Guam
Nick J. Rahall, II, West Virginia, 
    ex officio
                                 ------                                
                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on February 22, 2008................................     1

Statement of Members:
    Christensen, Hon. Donna M., a Delegate in Congress from the 
      Virgin Islands.............................................     1
        Prepared statement of....................................     2
    Faleomavaega, Hon. Eni F.H., a Delegate in Congress from 
      American Samoa.............................................     3
        Prepared statement of....................................     4

Statement of Witnesses:
    Butler, Brett, General Manager, StarKist Samoa, Del Monte 
      Foods......................................................    41
        Prepared statement of....................................    43
    Faleafine-Nomura, Lydia, American Samoa Field Representative, 
      Office of Insular Affairs, U.S. Department of the Interior.     7
    Galea'i, Alfonso ``Pete,'' Plant Human Resources Manager, 
      Chicken of the Sea Samoa Packing Company...................    44
        Prepared statement of....................................    46
    Moliga, Hon. Lolo M., President, American Samoa Senate.......    13
        Prepared statement of the Legislature of American Samoa..    15
    Paopao, Eliu, Director, American Samoa Department of Commerce    28
    Robinson, David, President, Chamber of Commerce..............    38
        Prepared statement of....................................    40
    Sunia, Hon. Ipulasi, Lt. Governor, American Samoa............    12

Additional materials supplied:
    Pula, Nikolao I., Acting Deputy Assistant Secretary of the 
      Interior for Insular Affairs, U.S. Department of the 
      Interior, Statement submitted for the record...............    72
    Tulafono, Hon. Togiola T.A., Governor of American Samoa, 
      Statement submitted for the record.........................    74
    List of documents retained in the Committee's official files.    77


   OVERSIGHT FIELD HEARING ON ``THE ECONOMIC EFFECTS OF THE RECENTLY 
                       INCREASED MINIMUM WAGE.''

                              ----------                              


                       Friday, February 22, 2008

                     U.S. House of Representatives

                    Subcommittee on Insular Affairs

                     Committee on Natural Resources

                             American Samoa

                              ----------                              

    The Subcommittee met, pursuant to call, at 1:00 p.m., in 
the Governor H. Rex Lee Auditorium, Pago Pago, American Samoa, 
Hon. Donna M. Christensen [Chairwoman of the Subcommittee] 
presiding.
    Present: Representatives Christensen and Faleomavaega.

   STATEMENT OF THE HON. DONNA M. CHRISTENSEN, A DELEGATE IN 
                CONGRESS FROM THE VIRGIN ISLANDS

    Mrs. Christensen. Oversight hearing on the increase in 
minimum wage is now called to order. I want to welcome our 
Lieutenant Governor and the President of the Senate, Speaker of 
the House, and all of the other members of the legislative 
bodies here, our chiefs that are here with us, and all of you 
who have taken the time to come and either be a panelist for us 
from the industry; from the community; and those who just came 
to be a part of what ends up being really a historic hearing. 
And I am sure my great colleague and distinguished colleague 
Eni Faleomavaega will point out that we've not had a hearing 
here in quite some time. As a matter of fact, we've not had a 
Subcommittee hearing on Insular Affairs for quite some time, 
but I am very pleased to be here in American Samoa to convene 
this oversight hearing on Subcommittee on Insular Affairs to 
look into the impact of the increase in minimum wage and the 
people and the economy of your islands.
    When we reconstituted at the beginning of the 110th 
Congress last year, we pledged to take a subcommittee to the 
people that it serves. As a result, we held hearings last year 
on the Island of Guam, Commonwealth of Northern Mariana 
Islands, as well as my own Virgin Islands. Today we are 
honoring our pledge to your Congressman Faleomavaega to travel 
to your beautiful islands to hold a hearing as well. And we are 
truly here because of his leadership and work he's done on 
behalf of this issue, and his insistence and urging that we 
come to American Samoa. We thank you, Eni, for your leadership, 
not only as the senior member of the Delegates from the 
territories and the Congress, but on your Subcommittee on Asia 
and the Pacific as well as your leadership, in general, on the 
territories and your leadership in the Congress as a whole.
    As you know, when Congress sought to raise the Federal 
minimum wage for the first time in many years, it was not our 
intention to also raise the American Samoa minimum wage to the 
same level. While it was true that there was a focus on raising 
the minimum wage in the Commonwealth of the Northern Mariana 
Islands and while we are able to reduce the initial increase in 
schedule, American Samoa, unfortunately, got caught up in 
Mainland politics which had nothing to do with any underlying 
factors which would have suggested that we need to increase the 
minimum wage here. So we are here today to assess the need for 
and the impact of the increase of the minimum wage of American 
Samoa which your leaders did not seek and which members of my 
Subcommittee join them in seeking to block. In the end, we are 
only able to come away with incremental increases of a smaller 
size and a requirement that the U.S. Department of Labor report 
to Congress on the findings of a study assessing and projecting 
the impacts of the increases in the minimum wage.
    The Department of Labor just recently issued their initial 
report that points out that the mandated minimum wage increase 
in American Samoa is unsustainable. One concern that I do have 
with that report, though, is that it does not address any time 
the standard of living or the quality of life needs of the 
people of American Samoa. These also need to be considered and 
balance needs to be sought on this. So we are here to listen to 
you, the leaders and the people of American Samoa, to hear from 
you how the well-intended attempt at increasing wages to better 
help American Nationals meet the increased cost of living is or 
is not working in American Samoa. While I generally support the 
opportunity for all workers to earn a larger wage, I am 
informed in this as my training as a physician to not do any 
harm in an attempt to do good.
    Once again I look forward to hearing the testimony of the 
witnesses here today which will inform us on whether the 
actions the Congress took in raising the American Samoa minimum 
wage is in fact doing more harm than good or vice versa. Those 
of us who represent the territories know well that when 
legislation is passed in Washington, it is far too often that 
little thought or any is given to the impact such legislation 
will have on the insular areas. It is for this reason that I am 
pleased to have the opportunity to serve as a Chair of the 
Subcommittee on Insular Affairs to call attention to potential 
negative impacts of well-meaning laws that are passed by our 
Congress. I want to thank everyone once again for being here 
and to again say welcome, and I look forward to hearing from 
our witnesses.
    At this time, I would like to recognize for his opening 
statement your own Congressman Eni Faleomavaega.
    [The prepared statement of Mrs. Christensen follows:]

           Statement of The Honorable Donna M. Christensen, 
              Chairwoman, Subcommittee on Insular Affairs

    I am pleased to be here in American Samoa to convene this Oversight 
hearing of the Subcommittee on Insular Affairs to look into the impact 
of the increase in the American Samoa minimum wage on the people and 
economy of your islands.
    When we reconstituted the Subcommittee at the start of the 110th 
Congress, we pledged to take the subcommittee to the people it serves. 
As a result, we held hearings last year, on the island of Guam, the 
Commonwealth of the Northern Mariana Islands as well as my own U.S. 
Virgin Islands. And today, we are honoring our pledge to your 
Congressman, The Honorable Eni Faleomavaega to travel to your beautiful 
islands to hold a hearing as well.
    As you know, when Congress sought to raise the federal minimum wage 
for the first time in many years, we were not looking to raise the 
American Samoa minimum wage. While it was true that there was focus on 
raising the minimum wage in the Commonwealth of the Northern Mariana 
Islands, American Samoa got caught in mainland politics having nothing 
to do with the underlying factors that would suggest the efficacy of 
increasing the minimum wage in American Samoa.
    And so here we are to access the impact of an increase in the 
minimum wage of American Samoa which we did not seek and actively 
sought to block. In the end we were only able to come away with 
incremental increases and a requirement that the U.S. Department of 
Labor report to Congress on the findings of a study assessing and 
projecting the impacts of the increases in the minimum wage; which in 
its initial reported, which was recently issued, points out that the 
mandated minimum wage increase in American Samoa is ``unsustainable''.
    So we are here to listen to you the leaders and representatives of 
the people of American Samoa on how our well intended attempt to 
increase the wages paid to American Samoa workers is working or not 
working if that's the case. While I support the opportunity for all 
workers to earn more, I am constrained as a physician, by the physician 
creed to not do any harm.
    And so I look forward to the testimony of the witnesses here today 
to educate us on whether the actions we took is indeed not doing any 
harm. It is often the case when legislation is passed in Washington to 
cover the fifty states, little thought if any is generally given to the 
impact that such legislation will have on the Insular Areas. That is 
why I am pleased to be here As the Chair of the Subcommittee on Insular 
Affairs to give thought to and assess the impact of this law on 
American Samoa.
    Thank you again for your warn welcome. I look forward to hearing 
from the witnesses.
                                 ______
                                 

  STATEMENT OF THE HON. ENI F.H. FALEOMAVAEGA, A DELEGATE IN 
                  CONGRESS FROM AMERICAN SAMOA

    Mr. Faleomavaega. Ia ee ia i ao sina le paia papapa o le 
Atunuu, le mamalu i le tapuaiga i le aiga Sa Levi, o loo fai 
tatalo i ao ma po e sii tapuaiga e fia i luma o le Atua aua 
lava le sailiga o faamanuiaga a le faigamalo a Tutuila ma 
Manua. Oute faatulou atu I le paia ia Sua ma le Vaifanua; Fofo 
ma Aitulagi; Ituau ma Alataua; Saole ma le Launiu Saelua ma 
Afioga I Maopu. O Paia ia te oe le Motu Sa; o le afio o le Laau 
na amo tasi ia Samoa. Afio I Faatui ma tootoo o le Faleula ma 
upu ia te oe le Manuatele. O le Paia o le faiga Malo a Tutuila 
ma Manua. Afio I lau Afioga I le Kovana ma le Sui Kovana ma 
lona kapineta, lau Afioga le Peresetene o le Maota Maualuga, le 
mamalu o Senatoa, lau Afioga le Fofoga Fetalai ma sui o le 
Maota o Sui o le tatou Fono. Lau Afioga le Faamasino Sili ma le 
vaega o Faamasinoga. Oute faapaI malu atu foI I le tapuaiga ma 
le seusilasila mai o le Malo tu toatasi o Samoa, Lau Afioga le 
ao mamalu o le Malo faapea le mamalu o le Fono suitofia; afio 
foI lau afioga le Palemia ma le kapineta, lau afioga I le 
Fofoga Fetalai ma sui mamalu o le Palemene, lau afioga le 
Faamasino Sili. O paia lava ia I Aiga ma latou tama, tama foi 
ma o latou aiga; Ituau ma Alataua; aiga I le tai ma le vaa o 
Fonoti, tulou, tulou lava. Ae paga lea o manatu le tonu ma 
faamoemoega o le agaga ina ia faaee le tai ma gau le vao, aua 
ni lelei mo le tapuaiga a Tutuila ma Manua. Ae ua lagona le 
vaivai ma le faatauvaa, sei tulou, ma ua oge upu o le gagana e 
sula ai faagalo Tutuila ma Manua. O lau teu faatupu ma lau 
tapuaiga faatamaaliI sa faafaigofie ai mea uma o le tatou 
galuega ona o le tatou tausoa faatasi. Aua o le talitonuga lava 
lea o le Samoa, e manuia faiva ona o tapuaiga. O a foi ni 
manatu ma taofi eseese I mataupu sa tatou iai I nisi o taimi, 
Tutuila e, ma Manua o feteenaiga lava I luga o mataupu I le 
agaga tau ati ae. Ae oute talitonu lava ma le faamaoni o fea 
lava e tau ai le sousou o le tai, e toe mapu la i le lava i 
toafiamalie. Aua e maua pea le toovae le tofa mamao ma le 
faautaga loloto a le Atunuu. Talu ai o le tulafono a le Malo 
Tele I le siiga o totogi a tatou tagata faigaluega uma lava o 
lea ua afio mai ai lana Afioga ia Donna Christensen, o le 
taitaI o le soa komiti o le Maota o Sui o le Fono o le Malo 
Tele ma fai malaga mai ina ia vaavaai uma I galuega o loo mautu 
iai le faiga Malo a Tutuila ma Manua aemaise lava le mataupu 
lea ma le mafuaga ua oo mai ai nei le faigamalaga o lona 
finagalo ina ia maua mai ai se manatu mai taitaI o le tatou 
Atunuu poo a nisi fuafuaga a le Fono a le Malo Tele I le 
mataupu lava lea o le siitaga o totogi o tatou tagata 
faigaluega.
    Madam Chair, it is my privilege and honor to again express 
the deepest appreciation for your leadership and your 
willingness to come all the way to American Samoa to conduct 
this oversight hearing. The last time I remember we had a 
Congressional hearing here in American Samoa was in the 1950s 
when Congressman Wayne Aspinall was Chairman of the Committee 
on Interior and Insular Affairs at the time. We had a report on 
that. So it is a real rarity that we have an occasion like this 
and have Members of Congress come and conduct Congressional 
hearings so that the people and the leaders of American Samoa 
can witness and also participate in the process--and see how 
American democracy operates and to witness the effort that we 
are trying to make to seek out the will and the wishes of the 
people and the leaders of American Samoa on this very important 
issue of the minimum wage.
    Madam Chair, I have a prepared statement that is about 100 
pages and I think, for the sake of time, I am just going to 
submit my statement for the record. I ask unanimous consent, 
Madam Chair, if this be done, and I also want to welcome Tony 
Babauta, our staff director; Brian Modeste, the distinguished 
senior counsel, and our good friend and Ranking Republican 
Member, Don Young, Mr. Richard Stanton. Also, Chairman George 
Miller, who handles the Education and Labor Committee, has 
assigned two senior members of his own staff on the Committee 
on Education and Labor to also join us this afternoon to hear 
and to listen to the concerns and the statements that will be 
presented in this hearing this afternoon. Again, Madam Chair, I 
want to thank you for this opportunity. As I said I think I 
pretty much made known to people here where I stand concerning 
the issue of minimum wage. But I do look forward to hearing 
from our witnesses this afternoon, and I think we might want to 
proceed in that regard. Again, Madam Chair, thank you for this 
opportunity.
    [The prepared statement of Mr. Faleomavaega follows:]

           Statement of The Honorable Eni F.H. Faleomavaega, 
              the Delegate to Congress from American Samoa

    Madame Chair:
    I want to thank you for holding this hearing in response to 
legislation introduced by Chairman George Miller of the House Committee 
on Education and Labor to increase minimum wage in the U.S. and its 
territories. As a result of Chairman Miller's legislation which was 
passed by the House and Senate and became Public Law (P.L.) 110-28, 
minimum wage was increased by fifty cents per hour in American Samoa 
and the Commonwealth of the Northern Mariana Islands (CNMI) on July 24 
and July 25, 2007, respectively. P.L. 110-28 also automatically 
increases minimum wage by fifty cents per hour every year thereafter 
until 2014 for American Samoa, and 2015 for CNMI.
    At my request, Chairman Miller included language, which became law, 
requiring the U.S. Department of Labor (DOL) to undertake a study to 
determine the impact the imposed minimum wage increases might have on 
the economies of American Samoa and CNMI. The DOL released its findings 
on January 25, 2008. However, given that no hearings were held by the 
House or Senate prior to passage and enactment of these minimum wage 
increases, on June 6, 2007 I wrote and asked if you would be willing to 
hold a hearing in your capacity as Chair of the House Resources' 
Subcommittee on Insular Affairs which has broad jurisdiction for the 
welfare of the U.S. territories. You agreed to this request and I 
especially thank you for your leadership and concern regarding this 
important matter.
    For your information, my position regarding minimum wage is a 
matter of public record. For the past 18 years, I have fought to 
increase the wages of our tuna cannery workers because for too many 
years StarKist and Chicken of the Sea have purposely suppressed the 
wages of workers in American Samoa while increasing the wages of their 
corporate CEOs. For example, in 2004, it was reported that the CEO of 
Del Monte, the parent company of StarKist, was paid $1.7 million in 
salary, bonuses, and other compensations. With stock options included, 
he earned almost $2.65 million, or over 400 times more per year than 
the average cannery worker in American Samoa. The CEO of Heinz, once 
the parent company of StarKist, paid its top CEO more than $65 million 
in salaries, stocks, and options. Clearly, to any person of conscience, 
it is difficult to oppose minimum wage increases for the poor when 
companies are rich enough to pay their executives so much.
    I also believe that if StarKist and Chicken of the Sea had done the 
right thing and paid our workers fair wages, we would not be in the 
predicament we are in today with federal law now mandating automatic 
minimum wage increases. But let me briefly share with this committee a 
bit of our history with the tuna industry given that American Samoa is 
a single-industry economy and that more than 80% of our private sector 
economy is tied, either directly or indirectly, to StarKist and Chicken 
of the Sea.
    On May 8, 1956, Van Camp, which later became Chicken of the Sea, 
appeared before the U.S. Senate Committee on Labor and Public Welfare 
to urge consideration of legislation for the exemption of American 
Samoa from the wage and hour provisions of the Fair Labor Standards Act 
of 1938. William D. Moore, Overseas Operations manager for the Van Camp 
Sea Food Co., commenting on his company's desire to pay Samoan workers 
27 cents per hour as opposed to the prevailing minimum wage rate of $1 
per hour, said:
        ``A minimum wage of $1 per hour, as required under present 
        laws, is unrealistic, unwarranted, and unquestionably will have 
        a deleterious effect upon the economic and social structure of 
        the islands.''
    As further justification for suppressing wages in American Samoa, 
Mr. Moore said:
        ``The Samoans are Polynesians. They are not American 
        citizens.''
    Mr. Collins, legal counsel for Van Camp, said it this way:
        ``The company has found that it takes from 3 to 5 Samoan 
        workers to perform what 1 continental worker in the United 
        States will do. It is, therefore, felt that this justifies a 
        lower rate for Samoans.''
    If Mr. Collins were with us today, he would know that Samoan 
workers made Chicken of the Sea and StarKist the largest tuna canneries 
in the world, and the number one and two brands in America. In other 
words, at no time was either cannery justified in paying Samoan workers 
less than what they were worth. But the people of American Samoa had no 
real voice in these matters.
    In 1956, when Van Camp was lobbying Congress to suppress our wages, 
the islands of American Samoa were administered by the U.S. Department 
of the Interior. It was not until 1977 that American Samoa elected its 
first Territorial Governor and in 1980 we elected our first 
representative to the U.S. Congress. By that time, the tuna industry 
already had a 20 year jump-start on fixing wage rates in American 
Samoa.
    In fact, as early as 1956, Van Camp was successful in amending the 
Fair Labor Standards Act of 1938 to exempt the tuna industry from 
paying workers in American Samoa a minimum standard of decent living, 
and a special industry committee was assigned to substitute a sub-
minimum wage structure that was supposedly commensurate with insular 
economic conditions. The industry committee structure for American 
Samoa was intended to be an interim measure but it remained in effect 
until last year when it was abolished by the enactment of P.L. 110-28. 
I supported its abolishment because special industry committees were a 
sham and an insult to the intelligence of every hourly worker in 
American Samoa.
    Our history with the tuna industry has also been insulting. Not 
once in our 50 year history has StarKist or Chicken of the Sea offered 
profit-sharing incentives or stock options to our workers. Instead, our 
cannery workers are given a case of wahoo at Christmas and a turkey at 
Thanksgiving and we're told that our wages must remain below the 
federal minimum wage rate because workers in Thailand and the Andean 
countries are cleaning fish for $0.60 an hour, or because it takes 5 
Samoans to do the work of one white.
    With excuses like these, the tuna industry really has no 
credibility left when it comes to speaking on the subject of minimum 
wage. StarKist has opposed increasing minimum wage for Samoan cannery 
workers based on what it calls ``guiding economic principles.'' ``One 
basic idea guides the actions of all major businesses,'' Starkist says, 
``and that is a business has an economic, legal, and moral 
responsibility to maximize the return it gives to its investors or 
shareholders.'' I am of the belief that higher laws should guide our 
actions and that we have a moral responsibility to do unto others as we 
would have them do unto us.
    This is why, after ten years of StarKist and Chicken of the Sea 
refusing to increase Samoan wages by anything more than 3 cents an 
hour, I supported, in the newly enacted public law, a one-time increase 
of fifty cents per hour for American Samoa's cannery workers and 
lowest-paid government employees making less than $5.15 per hour. While 
both companies threatened to lay off workers due to the increase from 
$3.26 per hour to $3.76, the DOL report states ``that neither Chicken 
of the Sea nor StarKist has reduced output or working hours in 
immediate response to the first fifty-cent increase in the minimum 
wage.'' I am pleased by this outcome.
    On the other hand, I am concerned that further increases could be 
harmful to our economy. This is why I opposed automatic increases, or 
escalator clauses. Senators Inouye, Bingaman, and Akaka also opposed 
automatic increases but they, too, were unsuccessful in removing this 
language prior to it becoming law. Now that the DOL report confirms our 
position that automatic increases could be harmful to the economies of 
American Samoa and CNMI, I have introduced H.R. 5154 which would end 
automatic increases and would empower the DOL, in consultation with the 
Secretary of the Interior and the governments of American Samoa and 
CNMI, to conduct economic assessments every two years to determine when 
and if our economies can absorb future increases.
    I have made Chairman Miller aware of this legislation and I am 
hopeful that as a result of today's hearing, he will work with us to 
find a solution that is fair to our workers and good for our economies.
    Given that American Samoa's economy is not diversified, we cannot 
afford for our canneries to pack up and leave. This is why the 
Governor, my office, and the Fono have worked together to provide our 
canneries with the local and federal incentives they need to stay in 
American Samoa. However, despite our best efforts to support our 
canneries, the DOL reports that when asked how quickly a decision could 
be implemented to transfer production to tuna canning facilities 
elsewhere, one industry spokesman replied, `Minutes.''' In my opinion, 
a response like ``minutes''  shows a disregard for our people and 
Territory and suggests that when our canneries go, they will give no 
notice.
    According to the DOL, when our canneries go, their closure will 
have a ripple effect on our economy and could amount to a loss of 7,825 
jobs. This is unacceptable and this is why I believe it is important 
for us to give our tuna canneries every reason to stay until the time 
comes for them to move elsewhere. Simply put, we must slow down the 
departure of our canneries until our economy is diversified.
    Slowing down their departure means ending escalator clauses. Even 
though the DOL did not have the time it needed to fully assess the 
impact automatic increases would have on our economies in the years to 
come, the DOL report does show that the results would not be positive. 
The DOL report also states that raising the minimum wage in American 
Samoa to $7.25 an hour would be like raising the minimum wage in the 
States to $16.25 per hour. An increase like this is not sustainable, 
and I believe is an unintentional outcome of P.L. 110-28 which I hope 
will soon be corrected.
    Finally, in closing, I want to remind this subcommittee and our 
people that our canneries will go one day regardless of what we do. 
Both canneries reported to the DOL that the tuna market is now focused 
on sealed foil packages rather than traditional canned tuna. If this is 
the case, it stands to reason that if StarKist and Chicken of the Sea 
were committed to American Samoa, they would be shifting production in 
American Samoa from cans to pouches so that we could grow with the 
industry. But, to my knowledge, neither cannery has implemented a 
large-scale plan that would change our operations.
    The reason for this is simple. Pouched tuna is generally hand-
packed meaning it is a labor-intensive process. Labor rates in American 
Samoa are now $3.76 and more per hour. In Thailand and South America, 
which are American Samoa's competitors, labor rates are, as I stated 
earlier, sixty cents and less per hour. If StarKist and Chicken of the 
Sea have told DOL the truth, if the global tuna market is moving from 
cans to pouches, our canneries will go where labor is cheapest given 
that their guiding economic principle is to maximize the returns they 
give to their investors, not to their workers.
    While I wish StarKist and Chicken of the Sea would be better 
corporate partners and stay in American Samoa for the long-haul, 
especially since they have exported almost $10 billion dollars worth of 
tuna from our home and lived off our backs for more than 50 years, 
American Samoa cannot and must not remain dependent on a single-
industry. At some point, the American Samoa Government must be about 
the business of implementing the findings of the American Samoa 
Economic Commission.
    But as long as the tuna industry is with us, I will continue to do 
everything I can to encourage them to stay including pushing for 
extension of 30A tax credits, ending escalator clauses, and protecting 
their interests in any and all future trade agreements.
    Madame Chair, I thank you for holding this hearing and I look 
forward to working with you and Chairman Miller to find a legislative 
fix that will address the concerns I have raised.
    Given our time constraints, I would like to also ask if, in 
addition to my testimony today, if you would include, as a matter of 
record, my 2001, 2003, and 2005 statements before the U.S. Department 
of Labor's Special Industry Committees No. 24, 25, and 26, each of 
which provides an historical accounting of the relationship between 
minimum wage rates in American Samoa and the U.S. tuna industry, which 
was responsible for suppressing wages in the Territory beginning in 
1956.
    In closing, I would also like to express, on behalf of the people 
of American Samoa, our sincere appreciation for your interest in the 
welfare of our future.
                                 ______
                                 
    Mrs. Christensen. Thank you, Mr. Faleomavaega.
    We would like to begin with our first panel. We would now 
recognize Ms. Lydia Faleafine-Nomura, American Samoa Field 
Representative of the Office of Insular Affairs of the U.S. 
Department of the Interior. I thank you. I understand you are 
filling in for Acting Deputy Assistant Secretary Nikolao Pula, 
who could not be here, and we appreciate your coming to fill in 
for him.

   STATEMENT OF LYDIA FALEAFINE-NOMURA, AMERICAN SAMOA FIELD 
 REPRESENTATIVE, OFFICE OF INSULAR AFFAIRS, U.S. DEPARTMENT OF 
                            INTERIOR

    Ms. Faleafine-Nomura. Thank you, Congresswoman Christensen. 
Before I begin, may I just welcome you. I am sure you will hear 
many voices today from our people, and it is nice to see you 
and the staff here in our home and to my Congressman, nice to 
see you again. I hope to see you on the golf course soon.
    Mrs. Christensen. Let me also mention that the lights will 
indicate your time and the time is five minutes.
    Ms. Faleafine-Nomura. Madam Chair and members of the 
Subcommittee on Insular Affairs, I am Lydia Faleafine-Nomura, 
Field Representative for American Samoa in the Office of 
Insular Affairs. Mr. Nikolao Pula, Acting Deputy Assistant 
Secretary of the Interior for Insular Affairs planned to attend 
this meeting but at the last minute was unavailable to travel. 
Mr. Pula's full statement has been submitted for the record. 
With your permission, I will summarize it on the economic 
effects of the recently increased minimum wage in American 
Samoa and the Commonwealth of the Northern Marianas. Last May, 
Congress for the first time took direct action to increase the 
minimum wage for American Samoa and the CNMI by 50 cents per 
hour each year until those rates reach the Federal minimum wage 
rate. The new minimum wage law precipitated a report by the 
U.S. Department of Labor and proposals for amending the law by 
the Governor of American Samoa and the territories' 
Congressman. The DOL's report was published in January 2008. It 
raises concerns that future increases in the minimum wage rate 
in American Samoa and the CNMI will likely develop significant 
economic financial harm to the territories. These territories 
face unique challenges in attracting private sector businesses 
because of their geographic isolation location in a part of the 
world where most neighboring economies have much lower minimum 
wages and living standards.
    Regarding American Samoa, the DOL report says at the 
present time the tuna canneries continue in operation, but 
there is concern that they will be closed prior to the 
escalation of the minimum wage to $7.25 per hour in 2014. An 
input-output model analysis commissioned by the Government of 
American Samoa has estimated that closure of the tuna canneries 
will cause a total loss of 8,118 jobs--45.6 percent of the 
total employment in American Samoa.
    The canneries, which have shipped processed tuna to the 
United Stated for more than 50 years, have noted that in the 
future they may leave the territory and take their production 
to other countries where labor costs would be much lower, such 
as 60 to 70 cents per hour in Thailand and the Philippines. The 
canneries are not the only most critical component of the 
private sector. They also make up a significant part of the tax 
base supporting the American Samoa Government operations. 
Without the canneries as an anchor for the private sector tax 
base, cutbacks in local government operations and services 
would likely be necessary. The shuttering of industries in 
American Samoa and the CNMI could cause the respective 
economies to suffer prolonged and wrenching contractions.
    In light of the risk to the CNMI and American Samoa 
economies that are identified in this statement and in the DOL 
report, the Administration suggests that Congress give strong 
consideration to amending Public Law 110-28 in order to avoid 
increases in the minimum wage that may be determined to result 
in significant job loss and harm the economies of the two 
territories. We offer some suggestions regarding the factors 
that should be kept in mind in evaluating any potential 
legislative revision.
    First, regarding proposals for determination by the 
Secretary of Labor that would stop the implementation of an 
increase in the minimum wage, we would draw Congress's 
attention to the difficulty inherent in making any objective 
determination about the impacts of a proposed minimum wage 
increase before it goes into effect. Broad language that would 
postpone an increase in minimum wage based on a finding of any 
adverse impact on the respective economies of American Samoa or 
the CNMI might have the effect of preventing all progress 
toward a higher minimum wage. Narrower language requiring a 
determination that the increase will not substantially curtail 
employment allows more flexibility, but the difficulties for 
the Secretary of Labor of obtaining reliable information upon 
which to base any determination will be significant.
    Another model, excuse me, that Congress might consider is a 
special industry committee that sets the minimum wage rates 
biennially in certain areas of the United States and American 
Samoa for over 60 years. The advantage of the committee 
structure is that it ensures that the people who determine the 
minimum wage increases share first-hand knowledge of island 
economies while representing different stakeholders. When 
compared with proposals to vest the decision-making authority 
in the Secretary of Labor, this model offers the advantage of 
ensuring that local knowledge is fully incorporated and that 
stakeholders in the territorial economies are able to play 
roles.
    Madam Chair, thank you for the opportunity to present a 
brief testimony and for considering the Administration's view.
    Mrs. Christensen. Thank you for your testimony. I now 
recognize myself for 5 minutes of questions.
    But I know you just recently got called to come to testify, 
but I wanted to say you know that I am really pleased that the 
Administration recognizes certain risks to the American Samoa 
economy as identified in the Department of Labor report and 
suggest that Congress give strong consideration to amending the 
law that enacted the minimum wage increase in order to avoid 
increases that would result in significant job loss or harm the 
economy. But is the Administration prepared to go further, as 
far as you know, based on have you spoken to Mr. Pula or Nick 
back in Washington, or from your own knowledge, do you expect 
or can we expect that they will support legislation along these 
lines to suspend the minimum wage that will take place in May?
    Ms. Faleafine-Nomura. I have not been told that directly 
but I will refer your question to Mr. Pula and have them in 
writing for you.
    Mrs. Christensen. And we do have some other questions that 
we probably will submit in writing to the Office of Insular 
Affairs Acting Deputy Assistant Secretary. I will just ask you 
maybe one other question.
    Given the stagnation in the wages over the many years and 
the increase in cost of living just from your own perspective, 
have you seen any lowering of the standard of living, any 
deterioration in the quality of life given the fact that it is 
costing more to just pay for basic services and the minimum 
wages have not significantly increased?
    Ms. Faleafine-Nomura. Personally I think the quality of 
living has improved, and the standard. I have lived here over 
40 years, and that is my personal opinion.
    Mrs. Christensen. Thank you. I now recognize Faleomavaega 
for his questions.
    Mr. Faleomavaega. Thank you, Madam Chair.
    Ms. Nomura, I know this is a very uncomfortable position 
that you have taken given the fact that you were just told to 
do this on behalf of our Deputy Acting Assistant Secretary 
Nikolao Pula who represents Kempthorne. As you know, the 
Department of the Interior is the lead agency on behalf of 
American Samoa before the Congress and other agencies of the 
Federal government.
    Ms. Nomura, when Secretary Kempthorne was here, I believe 
the understanding that he was committed and wanted to do 
everything he could to assist American Samoa in looking very 
carefully at the issue of minimum wage. Is that--I believe you 
weren't here when Secretary Kempthorne was here as well?
    Ms. Faleafine-Nomura. Correct.
    Mr. Faleomavaega. I take it that the Department of the 
Interior is very supportive of what it can do to make sure that 
the economic situation here in American Samoa doesn't become 
drastic?
    Ms. Faleafine-Nomura. Yes.
    Mr. Faleomavaega. Years ago when the former Secretary of 
the Interior, Bruce Babbitt, in my consultations with him 
provided some $600,000 to establish the American Samoa Economic 
Study Commission, which is the first time ever in the years 
that the Department of the Interior--first time ever we've done 
this. This economic study took place about two years, and we 
have former Governor John Waihee from Hawaii as the Chairman. 
Do you know what is happening to that economic study 
commission's recommendations? Has the Department of the 
Interior taken any action on the status of this study 
commission report that was issued about four or five years ago?
    Ms. Faleafine-Nomura. That report, let me go back a little. 
As far as the status of that report, the Office of Insular 
Affairs has not received a formal recommendation from the 
Government of American Samoa excepting the recommendations in 
the commission's report. But I understand and perhaps future 
witness will correct me if I am wrong that the American Samoa 
Government has used that report to move forward in many areas 
such as agriculture, fisheries, the information technology. So 
they are using the report, but there was no formal acceptance 
and recognition.
    Mr. Faleomavaega. So to your knowledge there has never been 
any real formal policy, statement, or endorsement or something 
saying that our Legislature and the Governor are united. 
They're saying these are the economic priorities we want to 
recommend to the Department of the Interior and then you 
present it to the Congress in terms of how we can best resolve 
some of these economic needs of the territories. Has this ever 
taken place?
    Ms. Faleafine-Nomura. We have not received a formal 
statement from the American Samoa Government.
    Mr. Faleomavaega. Is it your understanding that this 
economic study commission's report--has there been any 
initiative taken by the Government of American Samoa as a 
government? My reason for saying this is that the Governor may 
have his own priorities; the Fono may have its own priorities; 
I might even have some of my own ideas; but has there ever been 
a uniform policy, decision, or endorsement, or resolution of 
any kind to indicate what the economic priorities of this 
territory are relative to this economic study commission that 
the Department of the Interior had expended $600,000 to come 
through with such a report? Has this ever been done?
    Ms. Faleafine-Nomura. Well, to the Governor's credit, I 
will say he recently established an economic council made up of 
private and public sector members. And I believe the Chamber 
President Mr. David Robinson is the co-chair, and he may be 
able to answer that question better for you whether there is a 
policy forthcoming and whether they've acted on the 
commission's report.
    Mr. Faleomavaega. One of the most salient issues that came 
along as a result of the Labor Economic Study Report in January 
was the lack of data and information in terms of them 
addressing seriously the issue of the minimum wage. Now it was 
in proper perspective, generally, they did express concern 
about the economic inability of our territory to take up 
another 50-cent increase in wages but when you go to the data 
and information, they seem to admit that we still need to get 
more raw data and information to make sure we know exactly what 
our economic situation is. Am I correct on this?
    Ms. Faleafine-Nomura. Yes, there is a definite lack of 
statistical information.
    Mr. Faleomavaega. I know my time is up, Madam Chair.
    Thank you, Lydia.
    Mrs. Christensen. I am going to just reclaim my time for 
just one other question.
    Because one of the recommendations from the Office of 
Insular Affairs is a model that considers using a Special 
Industry Committee. Again, and based on my reading and what I 
have heard that the minimum wage is set by the Special Industry 
Committee, the increases were rare and inconsistent. How did 
the Department of the Interior participate in the Special 
Industry Committee?
    Ms. Faleafine-Nomura. The department of the Interior does 
not participate in the Industry Committee other than to 
testify. I am sorry other than to testify before the committee.
    Mrs. Christensen. So in the testimony did they advocate for 
wage increases? Do you know?
    Ms. Faleafine-Nomura. They advocated for wage increases 
that did not affect jobs or substantially curtail employment in 
American Samoa.
    Mrs. Christensen. So they didn't recommend a specific level 
of increase?
    Ms. Faleafine-Nomura. No, they did not.
    Mrs. Christensen. Since it is being recommended, are there 
any modifications to the Industry Committee that you might want 
to recommend so that the increases, whether they come 
biennially or however often, could be more consistent and 
really provide some increase to meeting the cost of living?
    Ms. Faleafine-Nomura. The answer to that question would 
probably be more meaningful than I can afford, Madam Chair, at 
this time; so I would like to go back and get a more 
substantive answer for you.
    Mrs. Christensen. Thank you. And I will submit questions in 
writing. Thank you for coming this afternoon.
    Do you have any questions?
    Mr. Faleomavaega. I have 100 more questions.
    Mrs. Christensen. We will submit them in writing. Thank 
you, and you are dismissed from the panel. Thank you for your 
testimony Ms. Faleafine-Nomura.
    Mr. Faleomavaega. I wonder, Ms. Nomura, in case we might 
have some questions with the Department of the Interior--
    Ms. Faleafine-Nomura. I plan to stay. Thank you.
    Mrs. Christensen. The Chair now recognizes the second panel 
to testify. And that panel we would like to call up The 
Honorable Ipulasi Sunia, Lieutenant Governor of American Samoa; 
and The Honorable Lolo Moliga, President of the American Samoa 
Senate.
    Lieutenant Governor, when you are ready, you may begin.

 STATEMENT OF THE HONORABLE IPULASI SUNIA, LIEUTENANT GOVERNOR 
                       OF AMERICAN SAMOA

    Lt. Governor Sunia. Thank you, Madam Chairwoman. Again on 
behalf of the Governor and the People of American Samoa, I 
welcome you formally here in this hearing in the Territory of 
American Samoa. And I hope you'll find time besides your 
business matter here to enjoy our weather. Talofa and greetings 
Chairwoman Christensen and Honorable Members of the Committee. 
We greatly appreciate this opportunity to appear before the 
committee on the urgent need for remedial legislation 
addressing the minimum wage increases that Congress had 
mandated for American Samoa.
    I had submitted the written position of the Governor and 
the Executive Branch of the Government of American Samoa. So I 
would very briefly state that my remarks here this afternoon 
would be in addition to the written statement that we've 
submitted.
    Mrs. Christensen. Without objection, we'll accept your 
statement for the record.
    Lt. Governor Sunia. Thank you.
    Lt. Governor Sunia. I wish to just point out that--an 
observation on my part--something that saddened me in the news 
that we hear and we watch on television about the huge number 
of American jobs that have been lost to foreign countries as a 
direct result of the American free enterprise way of life. The 
shift of jobs overseas may involve a direct Congressional act; 
maybe indirectly as a result of foreign trade agreements. But 
if direct congressional act will be responsible when American 
Samoa's jobs join all those American jobs already lost to other 
countries? So you might ask, ``So American Samoa, what do you 
want us to do?'' My simple and brief answer is to enact 
legislation that is fair and just for the Territory of American 
Samoa.
    On my way over to the hearing, I try to make some sense out 
of all this in my mind as I again and again how the lower wages 
we are asking can be justified and be considered fair when 
compared to the higher minimum wages made in the United States 
and other territories. Then I thought of a scenario. Suppose we 
all woke up tomorrow and found that the U.S. Government and 
Congress had moved to American Samoa and now Congress wants the 
American Samoa minimum wage to be the standard of the wages 
and, accordingly, enacted the law to lower the wages in the 
United States and other territories to equal that of American 
Samoa? Madam Chairwoman, the Committee is duly sensitive to the 
economic situation in American Samoa and has been very 
supportive. In particular, you and the Delegates sought to 
modify the 2007 minimum wage legislation to reflect actual 
economic conditions in the territory. On behalf of the People 
of American Samoa, I wish to publicly express appreciation for 
your attempt to ward off this well-meaning but disastrous 
legislation mandate. Now that the Department of Labor has 
documented the dire impact of the 2007 legislative change on 
American Samoa, I urgently request this committee and Congress 
to enact timely remedial legislation. Committee support for the 
pursuit and enactment of tax and appropriations measures to 
correct the unintended but very real consequences of past 
actions--that is also needed and would be greatly appreciated.
    We in American Samoa are proud to be Americans, and we have 
served our country with valor and devotion. Remedial 
legislation will help us to develop our economy so that we can 
stand with the other territories and the 50 states as one 
nation. Thank you.
    Mrs. Christensen. Thank you. The Chair now recognizes 
Senate President Moliga for your testimony.

            STATEMENT OF THE HONORABLE LOLO MOLIGA, 
                PRESIDENT, AMERICAN SAMOA SENATE

    Mr. Moliga. Thank you very much, Madam Chair. Being a High 
Talking Chief from Manua, it is really hard for me to go on and 
speak a second language and it is very much inappropriate for 
me not to say something in Samoan because it is my duty as a 
High Talking Chief to properly address this gathering this 
morning. Therefore, I would like to take a minute or two to 
address that concern.
    O le paia o le tatou Atunuu ua mafai ona potopoto mai I 
lenei taeao, o le afio atu o le Afioga i le Lutena Kovana o le 
paia lava lena o le tatou faigamalo. O le paia o tupu ma ee ole 
Falesefulu ma le Manuatele aemaise o le mamalu o le malo, oute 
faatulou atu. Oute faatulou atu foi i le paia o le malaga mai i 
afioga i alii faipule mai Uosigitone, le tamaitai taitai komiti 
i mea tau atumotu aemaise le tatou sui aoao I Uosigitone, oute 
faatulou atu I o outou paia. Ia taalolo laia paia o lau 
faigamalo Tutuila ma Manua, mamalu o le Atunuu aemaise le 
maimoa tapuaI mai o tatou uso I Sisifo, ia oute faatulou atu I 
le paia ma le mamalu o lenei taeao. O le a taumafai sina 
molimau e fai ai au ma sui o le Fono faitulafono e avatu se 
molimau aua mataupu i totogi maualalo e pei ona Malaga mai ai 
le faigamalaga mai Uosigitone.
    At the outset, we wish to publicly acknowledge with much 
appreciation legislation introduced by our Congressman 
Faleomavaega calling for elimination of the escalator clause. 
This imposes a series of events leading to 50-cent hikes until 
the Federal minimum wage is reached. The concurrent resolution 
passed by the Legislature supporting this higher wage had been 
officially transmitted to the Honorable Chair this morning. 
Moreover, the joint position of the Legislature of American 
Samoa has been placed in your capable hands this morning with 
the same aspirations for the inclusion of this document as part 
of the record for this hearing. It is necessary to first 
correct the false impression that is being purposely spread by 
individuals with political aspirations or political advancement 
claiming that the current local leaders of American Samoa are 
dead against raising the minimum wage for the people of the 
territory. The primary concern of the local leaders is to 
ensure and to guarantee that the people will not lose their 
jobs in our attempt to raise the minimum wage in American 
Samoa.
    If the United States Department of Labor guarantees to us 
that no jobs will be lost when we raise the minimum wage, by 
all means we accept this increase in minimum wage. 
Unfortunately, we are certain that the U.S. Department of Labor 
cannot and will not make such declarations today. What the U.S. 
Department of Labor stated in his report that it has not seen 
any evidence that a substantial job loss is due to the 
imposition of the first 50 cents in American Samoa's minimum 
wage. We only wish that is simple. Blatantly, we hear 
differently. We are beginning to witness some severe 
contraction in our economic system. Based on this observation 
and insight, we are convinced that the substantial job 
curtailment will result if the next 50 cents is imposed to our 
minimum wage. As local leaders, we cannot and we must not allow 
political agendas to stop us from doing what is best for our 
people and to do so would be politically irresponsible and 
immoral. The prepared statement of the Legislature of American 
Samoa provides data supporting the impracticality of adding 
another 50 cents to our local minimum wage.
    It is greatly unfortunate that our present economic pace 
continues to be dominated by the one industry that competes 
with the global market and its survival is dependent upon this 
competitive advantage in the world market. It is important to 
note and to point out that the Federal government has 
contributed to the gradual loss of this competitive edge 
through engaging in bilateral agreement with tuna canneries 
offering direct competition to the two tuna canneries that do 
business in American Samoa in addition to forcing her to 
continue escalation in the American Samoa minimum wage without 
self-sustaining economic capacity. Economic activity has slowed 
dramatically since the imposition of the first 50 cents. 
Imports have declined substantially since 2006. Excess revenues 
have assumed a downward slide since 2005. The continuing upward 
spiral of fuel prices has worsened the situation. Events climb 
proportionally to population growth thus arising the need for 
more money not only to maintain the current level of service 
but also to address the additional needs for the people of 
American Samoa.
    The United States is struggling with its own economic 
development challenges that directly affect our local 
economies. This worry necessitates caution against adding the 
next 50 cents to our economic minimum wage. This will no doubt 
trigger an economic devastation for American Samoa. It is 
better to preserve the jobs that we have today instead of 
gambling for low employment curtailment after the imposition of 
the next 50 cents.
    In conclusion, we must recognize that the external solution 
sometimes cannot endure the challenges which are culturally and 
geographically placed. Our geographic investment and size 
provides limitation to our economic endeavors. It shrinks the 
scope of economic development potentials available for 
capitalization. It forces the fashioning of an effective 
economic incentive that will force the establishment. It 
compels our dependence on Federal government for physical 
support.
    American Samoa's economic system cannot be assumed to have 
the economic capacity similar to the economic system in the 
world. We must compete with our own island neighbors for 
investment. Incredibly, this test is made impossible because of 
the high cost of doing business in American Samoa. One major 
reason are the wages which are already five to seven times 
higher than that of our neighboring islands. Our current 
economic structure cannot absorb any external manipulation or 
contribution of economic factors without catastrophic results. 
We are working to reconfigure our economic structure so that 
minimum wage cannot be a controlling factor. Some economic 
transformations will need time. Therefore, we ask that you give 
us the ability to engage in this process and to ensure that the 
minimum economic pay is found.
    Thank you very much, Madam Chair, for the opportunity to 
testify and offer testimony on behalf of the Legislature of 
American Samoa. You have a nice trip back and thank you.
    [The prepared statement of Mr. Moliga follows:]

                    Legislature of American Samoa's

                             Joint Position

                          MINIMUM WAGE HEARING

_______________________________________________________________________

    Honorable Chairwoman Donna Christensen, Honorable Faleomavaega Eni 
Hunkin, and Members of the Committee, and staff; Allow us, on behalf of 
the Legislature of American Samoa, to add our warm welcome to those 
already extended by our Acting Governor, along with our deep sense of 
appreciation to the convening authorities, and to all of you who made 
this arduous trip to ascertain first hand testimonies from government, 
business, traditional leaders, and the general public on the minimum 
wage issue. Your physical presence in the Territory exudes a sense of 
reassurance that maybe we do have some say on this critical issue which 
affects the lives of Samoan Americans inhabiting the remotest piece of 
United States real estate south of the equator. We hope that you will 
have the chance to see and experience the very essence of our cultural 
values.
    Last year, when American Samoa's minimum wage issue gained 
Congressional attention because of bipartisan political maneuvering and 
the speed with which the minimum wage legislation was approved without 
granting American Samoa time to offer testimony, our Governor 
dispatched a passionate plea, urging the elimination of the automatic 
$0.50 annual increase to the Territory of American Samoa's minimum 
wage, until it reaches the prevailing Federal minimum wage rate. It was 
our collective belief that this legislation will, without a doubt, 
trigger an economic tsunami that will absolutely wipe out the Territory 
of American Samoa's economic system; thereby causing catastrophic 
social chaos, with sufficient effects, which will clearly be felt by 
the 50 states of the Union and the Congress of the United States. 
Legislative resolutions were sent, attempting to clearly state fierce 
concerns over the effort to legislate the minimum wage without 
analyzing the capacity of American Samoa's economic system to 
financially accommodate the annual rise in the Territory's minimum 
wage. The Legislature is again submitting a Concurrent Resolution 
opposing the automatic 50 cents addition to American Samoa's minimum 
wage until the federal minimum is reached.
    As leaders and residents of the territory, we want our people to 
earn more and to have the additional disposal income, to improve their 
quality of lives. While short time economic benefits will be realized, 
unfortunately, this short lived Utopian state will be followed by a 
period of drastic economic devastation. This is not a prognosis. It 
will be American Samoa's reality. The Governor and the leaders of the 
Legislature are fighting to ensure and to preserve our people's long-
term economic future. For a very long time, and now culminating with 
the introduction of this legislation, some have held and harbored 
beliefs that the two tuna fish canneries have done little to advance 
the Territory of American Samoa's economy. We contend that the two tuna 
fish canneries have been profitable, otherwise they would have left the 
Territory. This is the nature of business. No person or company enters 
business with the intention to lose money. The question that has been 
asked many times by us, who permanently live in American Samoa, is, if 
the canneries leave, what is going to happen to the people of American 
Samoa?
    If American Samoa's economic system was sufficiently diversified, 
the adverse economic impact will not be as destructive, if the 
canneries were to leave. Unfortunately, the two tuna fish canneries are 
the only economic game in town. The canneries departure will 
immediately curtail 29% or 5,000 jobs over night. Within six (6) 
months, 37% or 6,501 more jobs will be abridged. Within six (6) to 
twelve (12) months 2,875 or 16.5% of government jobs will be lost. 
Clearly, substantial amount of purchasing power will no longer be 
available in the Territory's economy. The economic and social 
destruction will be pervasive and unrelenting. Some have held the 
notion that the canneries will never leave American Samoa because there 
is so much money to be made. This is a very naive perception and it 
does not merit any discussion for the mere fact that the economics of 
the industry continually change, but more adversely against the two 
canneries located in American Samoa. Wages paid represent one of the 
major costs of production. The wage rates paid by the two canneries in 
American Samoa is about five (5) times higher than the other tuna fish 
processing countries of the world. By this measure alone, the local 
canneries are already competitively disadvantaged.
    The speculation that the canneries will relocate its facilities to 
other locations where their competitive advantages will improve has 
long been dreaded by the territory because its economic system is 
driven by these giant conglomerates. Perspectives on the degree of 
importance of the canneries on the economy of American Samoa varies 
depending on the source, however, the common response will always be 
``critically important''. While we all acknowledge the importance of 
the canneries to the territory's economy, very little financial data is 
available to quantify this perceived critical relationship with the two 
tuna fish canning companies.
    In recognizing the value of the canneries to the territory, the 
American Samoa Government has aggressively and vociferously expressed 
its position against any legislative action which may cause the 
canneries to relocate facilities elsewhere. The extension of IRS 
Section 936 for an additional ten (10) years sought last year did not 
yield any positive response. This federal incentive expired December 
31, 2007. The salient thought was the preservation of the canneries' 
competitive advantage to ensure their continued presence in the 
Territory. Additional efforts are being explored for the purpose of 
maintaining the canneries' competitive advantage. The $0.50 annual 
increase in the minimum wage for American Samoa contradicts the 
collective efforts of the American Samoa Leaders to preserve economic 
opportunities for American Samoa.
    One might wonder what the canneries are doing to support local 
efforts. There is no doubt that the canneries are doing everything in 
their powers to assure their stay in American Samoa. However, it can be 
safely assumed that astute business management dictates that the 
canneries have already formulated and implementing their alternative 
operating strategies the moment the first 50 cents was effective last 
year. This may appear callous but it is just good business. Del Monte 
and COS Samoa Packing did not gain conglomerate status by being 
negligent. Business existence is driven by profits and returns on 
investments. The current economic climate for the American Samoa 
canneries and for the industry as a whole is not very conducive. The 
mercury content proliferation threatens global sales of fish products. 
Spiraling fuel prices, wage rates, environmental regulations, OSHA 
regulations, emission control regulations, fishing grounds proximity, 
loss of federal incentives, and geographical location are some of the 
delimiting factors to the profitability of the local canneries. It 
would not be unreasonable to say that the approval of the next $0.50 to 
the minimum wage will represent the straw that will break the camel's 
back.
    What happens to the 66,500 residents of American Samoa when the 
minimum wage is increased? This is the question that the leaders are 
frantically trying to determine. It appears that the American Samoa 
Government is not prepared nor might fully understand the magnitude of 
the economic, social, and political devastation that will materialize 
if the minimum wage is increased by $0.50 increments. In the mid-
seventies to the early eighties, when American Samoa suffered an 
economic recession, a mass exodus of local residents to the United 
States was evident. This trend will certainly be repeated as soon as 
the operations of the canneries are downsized or completely closed. The 
dislocated American Samoan workers will become the social problems for 
the U.S. mainland cities and states targeted by the American Samoa 
immigrants.
    In the 1899 Washington Convention, the United States gained control 
of all the eastern islands of the Samoa archipelago from Germany and 
Great Britain. The United State's interests in American Samoa were 
compelled by its obvious desire to secure the Pago Pago harbor to 
accommodate its coaling station. Pago Harbor was also considered to 
have strategic value as a staging area for troops and to launch 
military offenses in the Pacific Region. Obviously, these interests 
have ceased but recently, questions have been raised over the extent of 
the United States obligations to the people of American Samoa. The 
United States sought to gain control over American Samoa because it 
needed the harbor and the leaders quietly acquiesced. Unlike other 
insular territories, American Samoa was never annexed by the United 
States, as a result of war or conquest. In the years 1900 and 1904 the 
traditional chiefs of the islands of Tutuila, Aunu'u, and Manu'a, by 
means of executing two separate treaties of cession, freely ceded their 
islands to the United States of America. The two treaties of cessions 
still stand as the foundation or basis upon which American Samoa can 
claim a political relationship with the United States.
    The economic, social, and political devastation that will result 
with the addition of the next 50 cents to the minimum wage levels 
points to the United States' failure to adequately prepare its 
protectorate to attain economic, social, and political self-sufficiency 
and self-reliance: the Federal Government's goal for American Samoa. An 
argument can be made in favor of the United States for the millions of 
dollars poured into the territory since 1900. Unfortunately, these 
millions of dollars came with strong strings attached, thus precluding 
the allocation of funds to activities that would build the territory's 
economic system. American Samoa's economic infrastructure system 
remains ineffective and incapable of supporting any sustained economic 
development strategy.
    The cost and reliability of the air and surface transportation 
systems undermine efforts to advance American Samoa's economic goals. 
The steady rise in the overall cost of doing business in the territory 
precipitated in part by the application of federal rules and 
regulations discourages investment and further erodes its competitive 
posture. Ironically, trade treaties executed by the United States to 
increase its influence with foreign countries represent the very 
instruments that are destroying the territory's economic development 
capacity. One thing that the United States Government has successfully 
accomplished is the transformation of American Samoa into a totally 
dependent country.
    The Legislature of American Samoa attempted to comprehensively 
quantify, to the maximum extent possible, the economic impact if the 
canneries were to leave the Territory. Much has been said about the 
economic, social, and political desolation that will be caused by the 
departure of the canneries however, quantification of these beliefs has 
not been thoroughly addressed. The following attempts to place in 
proper perspective the importance of the canneries to American Samoa 
and resulting consequences should their presence is abated.
Canneries' Direct Contributions to American Samoa's Economic System
    There are two tuna canneries operating in American Samoa, StarKist 
Samoa (owned by Del Monte Inc.) and Chicken of the Sea (COS) Samoa 
Packing Company. StarKist Samoa is the largest tuna cannery in the 
world, processing and canning about 650 tons of tuna per day and 
employing about 2,600 workers. Samoa Packing's production is about 450 
tons per day with about 2,400 employees. Both canneries export their 
products duty-free to the U.S. market under the U.S. Head note 3(a) 
tariff incentive scheme for U.S. Insular Areas. The canneries are still 
receiving preferential tax treatment over income and profits earned in 
American Samoa under the IRS Section 936 for a few more years.
    The two tuna fish canning operations (StarKist and Samoa Packing) 
represent the only primary industry in American Samoa. Every business 
in the territory, including the public sector, is dependent on the 
canneries for their livelihood. The direct financial contributions of 
these two companies are itemized in the schedule provided below. It is 
our belief that the figures are understated because they do not include 
the amount of funds spent to purchase raw fish for production. While 
current figures are not available, the existing numbers provide some 
insights to the impact of the canneries on the Territory of American 
Samoa.
[GRAPHIC] [TIFF OMITTED] T0916.001

    .epsThe canneries employ over 33% of the territory's workforce. 
Together with the American Samoa Government they provide 70% of total 
jobs and produce a predominantly service oriented private sector, which 
supplies employment for the remaining 30% of American Samoa's total 
employed workforce. The canneries individual income taxes contributions 
provide about $3 million to $5 million annually. Based on the figures 
itemized in the schedule above, the canneries directly generated 
economic stimulation valued at approximately $223.8 million in 2005. 
The extent of the canneries economic reach is very deep in American 
Samoa's society. The fisherman and the farmer depend on the canneries 
for their livelihood. Small entrepreneurs owe business existence to the 
canneries in some form or fashion. Small civic organizations benefit 
from donations provided by the canneries. The influence of the 
canneries over the territory's economic and social systems is pervasive 
and irrefutable. The departure of the canneries will wreak havoc in 
these two systems.
Canneries' Influence over the Territory's Future Economic Perspective
    Since assuming oversight responsibilities over the Territory of 
American Samoa by the Department of the Interior in 1950, the canneries 
have been the only two investment success stories. Watch manufacturing, 
clothing manufacturing, textile manufacturing, corned beef processing, 
and others have come and gone. The economics were never right for these 
ventures. The American Samoa Government is aggressively seeking outside 
investments. But these efforts are being hampered by logistical and 
operating impairments. Logistical impediments include the cost and 
frequency of surface transportation to markets for final products and 
ascertainment of raw materials. Operating hurdles include the high cost 
of labor, infrastructure, escalating fuel prices, and government red 
tape. These economic development stumbling blocks have been dwarfed by 
the existence of incentive schemes such as the IRS Section 936 and the 
Headnote 3(a). These federal incentive schemes are supplemented by the 
10 years of income tax moratorium offered by the American Samoa 
Government. Unfortunately, some of the federal incentive schemes, which 
raised American Samoa's competitive advantage, have been neutralized by 
other national trade agreements executed by the United States with 
foreign countries. The termination of IRC Section 936 severely 
undermines American Samoa's economic competitive advantage. The United 
States has entered into friendly relations agreements with many 
countries. Most of these countries, including our neighbor to the east, 
have far superior incentive packages than those offered by American 
Samoa. The net effect of American Samoa's efforts to entice investment 
would be zero.
    The presence of the canneries provides the stabilizing effect to 
prospective investors. It is a positive testament to American Samoa 
being the haven for investors. It supplies investment confidence to the 
investor from the perspective that high investment yields can be 
achieved and the investment is secured. It is also an authentication 
that the Territory of American Samoa has the best investment climate. 
The American Samoa Government cannot verbally try to instill these 
characteristics in any literature that it prepares to attract 
investment. The presence of the canneries in American Samoa for over 
fifty years is positive evidence and a most effective promotional tool 
to attract new investments. The departure of the canneries from 
American Samoa will send a very negative investment message to any 
prospective investor. Based on the multitude of economic barriers, 
coupled with lingering questions on the departure of the canneries, 
American Samoa's future economic perspectives are very bleak indeed.
    The American Samoa Government is aggressively launching its tourism 
development campaign. The famed Rainmaker Hotel has been gutted with 
one half of the facility being leased to Dateline Inc. The Tradewinds 
Hotel that provides 100 luxurious rooms is in place, buttressed by 
individual owned motels. These efforts will be exercises in futility if 
the canneries were to depart the territory.
    The proposed agricultural development thrust is on maximizing the 
production of agricultural products to contain imports and to create 
economic surplus through satisfying the needs of the fishing fleet and 
the community. The canneries' existence expands the market for 
vegetables and locally grown produce. Since the inception of the 
canneries, this market has never been fully satisfied because of the 
dwindling number of farmers or lack of technical knowledge to 
successfully raise vegetables on a commercial scale. One of the 
canneries' products is fishmeal. Much talk ensued in the past on the 
possible use of fishmeal to make livestock and poultry feed. No actual 
step was pursued to determine the feasibility of this economic 
alternative. Late last year a U.S. company engaged in talks with the 
canneries for the conversion of sludge into bio-diesel. Over the 
weekend another U.S. Company engaged in discussion with the canneries 
for the conversion of sludge to high priced protein supplements. These 
possibilities will no longer be available in the event the canneries 
depart.
    Since the establishment of the canneries, the American Samoa 
Government struggled to engage in the business of supplying raw fish to 
the canneries: a feat now achieved by Western Samoan fishermen. The 
goal of the endeavor is obvious; to capture the money paid by the 
canneries to foreign fishermen for raw fish. It appears that Samoans 
can be acclimated to the life of a fisherman as demonstrated by our 
neighbors to the east. Some of the local residents own fishing vessels 
facilitating redirection of funds to the local economy. As a parallel 
development, efforts were energized to seek maximum benefits from 
miscellaneous fish brought in by the fishing vessels. Some of these 
initiatives included the introduction of a miscellaneous fish tax. The 
other initiative that is still being pursued is vacuum packing fish 
fillets from the miscellaneous fish destined for the United States 
Market. One local company is in the process of completing its physical 
plant. The other local company is in the process of completing its 
physical plant. These potential economic alternatives will disappear 
with the departure of the canneries from American Samoa.
Canneries' Impact over Surface and Air Transportation Systems
    Surface and air transportation links to markets for final products 
and the obtainment of raw materials is the centerpiece for any economic 
development strategy. Its cost impacts the feasibility of any economic 
development project. Surface and air transportation links to the 
outside are considered to be inadequate: in frequency and freight 
rates. Despite these claims, American Samoa is fortunate to have the 
present surface and air transportation systems even with the presently 
identified deficiencies. This realization stems from the understanding 
that current economic conditions can only support the level of service 
being received. Surface and air services depend on economic need. 
Economic need is defined by profit yields that could be achieved. With 
the spiraling price of fuel the economic yields are reduced without a 
comparable rise in rates to reflect the changes in fuel prices. Maximum 
profit yield is attained when the ship or airplane carries maximum 
income generated load. Profit margin levels, determined by the break-
even point up to the maximum peak of market tolerance, determine the 
frequency and cost of freight rates. Without the back-haul of canned 
fish products and fertilizers, the current frequency of trips and the 
present freight rates to American Samoa, would not be sustained. It is 
entirely possible that the number of cargo vessel trips to American 
Samoa could easily be reduced in half with the freight rates soaring 
beyond economical levels.
    The above scenario would further destroy American Samoa's capacity 
to forge any level of economic development program. Importing raw 
materials for producing or fabrication in American Samoa would no 
longer be economically viable. American Samoa's competitive advantage 
will be annihilated.
    Products imported to sustain the resident's livelihood will become 
cost prohibited, thus causing more families to live in poverty. It has 
been estimated that over 95% of American Samoa's consumables are 
imported, thus causing absolute reliance on air and surface 
transportation. It is the lifeblood of American Samoa's economic 
system. Without it American Samoa will experience social and economic 
devastation. Transportation costs affect the financial ability of every 
resident and it will cause some to live in poverty. This state of 
affairs can exacerbate the already strained financial abilities of many 
residents to meet the rising cost of living.
Canneries' Impact over the Territory's Infrastructure System
    Air and surface transportation system, which is one of the vital 
components of the economic infrastructure system, is covered in the 
above discussion. It is stated therein that the impact of air and 
surface transportation link with the outside is pervasive because it 
affects every life on the island. The same scenario applies to the 
production of electricity, water, wastewater, solid waste, roads, 
ports, airports, education, health, public safety, and communication. 
The presence of the canneries on island has helped reduce the rates 
charged for the present infrastructure system. To illustrate the point, 
electricity will be discussed to highlight the impact of the canneries 
over the rates charged by the American Samoa Power Authority. The 
figures provided in the schedule show the distribution of electricity 
payers.

[GRAPHIC] [TIFF OMITTED] T0916.002

    .epsOf the total 9,052 customers, 75% or 6,752 pay less than $100 
of electricity on a monthly basis. Total revenue generation for the 
American Samoa Power Authority for the first two layers of customers 
would be $ 332,280 ($152,355 + $179,925) monthly or $3,987,360 yearly. 
The American Samoa Power Authority reported net sales for electricity 
of $34,203,204 for Fiscal Year 2004. Compared to the $3,987,360 of 
revenues generated from 75% of residential customers, it only 
represents 11.7% of ASPA's total revenues. The total cost of electrical 
production is 92.7% of sales. It is quite clear from this discussion 
that the people of American Samoa would have had to shoulder the burden 
of higher electricity rates if the canneries were not customers. The 
American Samoa Power Authority is able to attain an electrical 
production system with the proper built-in economies of scale because 
it has a more expansive clientele base that is supported by the two 
canneries.
    The departure of the canneries from the territory creates a 
consumption void, which will have to be met by increased rates, and 
reduced production. Both actions increase the cost of electricity. The 
same reasoning can be applied to the other elements of American Samoa's 
infrastructure system.
Canneries' Impact on Fuel Imports
    Fishing vessels offloading raw fish to support the canneries' 
operations purchase fuel in addition to the procurement of supplies for 
the next fishing trip. High volume of fuel consumption establishes an 
economic need for the local fuel suppliers to increase the frequency of 
tankers bringing in fuel. The fuel needs of the canneries, the fishing 
vessels, the government and the private sector have supported the 
present frequency and volume of fuel being imported in the Territory. 
The Government receives revenues estimated in the amount of $5,196,800 
annually through the application of an excise tax rate of $0.1792 per 
gallon of imported fuel. Like any other world commodity the price is 
influenced by the purchased volume. The fuel needs of the canneries, 
coupled with the support fishing fleet, help the territory with the 
price at which its fuel is purchased from Singapore. If the canneries' 
and fishing fleet's fuel consumption is factored out, the frequency of 
tankers bringing fuel to the territory will be noticeably reduced and 
the price will rise. The stability of American Samoa will be placed in 
a very delicate balance because electricity rates will rise, air fares 
will climb, gas prices will spiral out of control, the cost of riding 
the bus or a taxi ascends, and the general cost of living will rise to 
levels that would force more residents of American Samoa to live in 
poverty. Further, the economic development process for American Samoa 
will be severely stifled. The land transportation industry will be 
summarily contracted, as some bus and taxi owners will find the level 
of profit margin too confining to make the effort economically viable. 
The same could be said about the small local fresh fish industry. The 
cost of fuel may render their operations unprofitable because the cost 
of imported fish would be cheaper.
Canneries' Impact on the Private Sector
    The pervasive impact the canneries have on every facet of life in 
the Territory of American Samoa should now be more evident. The all-
encompassing influence of the canneries on air and surface 
transportation, basic infrastructure, and fuel imports, and direct 
financial infusion into the territory's economic system automatically 
affect every business that makes up the private sector. The private 
sector is supported by the $233,486,122 million (2005 estimate) that 
the canneries inject annually into the economy. The canneries 
indirectly support every mom and pop store in all the villages, thus 
discounting the effect on the cost of key economic elements and 
directly supported by cannery workers who buy goods from their stores.
    The Ronald Reagan Marine Railway ship repair yard predominantly 
depends on the fishing vessels supplying raw fish to the canneries for 
its survival. There is insufficient government or private work to 
sustain this facility. Consequently, if the canneries move, the fishing 
fleet will move with it and the demise of the Ronald Reagan Shipyard is 
abundantly evident. Closure of this facility will alter negatively the 
status of the government's revenue portfolio.
    Independent machine shops have been established strictly to address 
the needs of the fishing vessels and the canneries. Like the Ronald 
Reagan Repair Shipyard, without this market, their continued survival 
is curtailed. The government is also the looser as tax revenues will be 
lost when these operations are closed.
    The construction industry is sustained by the canneries through its 
capital improvement projects that are implemented annually. These 
projects do not include small and mid-size repair work that it executes 
intermittently. These construction projects trigger increased sales in 
the building material outlets. The potential for increased revenues for 
the government through higher taxes is enhanced.
    The wholesale and retail industry is directly supported by the 
canneries through the payment of $45.7 million (2005 estimate) in 
payroll. The 4,664 employees of the canneries spend their wages to 
purchase food, clothing, cleaning supplies, toiletries, and other basic 
necessities of life from the wholesale and retail industry. The 
canneries' payroll yields about $3 million to $5 million in individual 
income tax revenues to the American Samoa Government.
    The service industry exists because of opportunities created by the 
affluent sector of the population driven by the desire to purchase 
convenience, security, and social amenities. For example, people are 
more apt to dine out in restaurants than eating at home. The number of 
residents earning $50,000 and more is rising at the rate of 12.2% 
annually. The management workers of the canneries are among those who 
fall within this salary threshold. At the lower end of the scale, the 
cannery workers use their income to purchase traditional basic foods 
and fresh fish from the market or along the roadside.
    The impact of the canneries over the petroleum companies doing 
business in American Samoa is already documented in the earlier 
section. This influence is significant and very controlling. American 
Samoa has already experienced the impact of fuel shortages and its 
harmful consequences are instantly felt in the people's lives.
Canneries' Impact over the American Samoa Government
    Throughout this discussion the canneries' direct financial 
contributions to the American Samoa Government have been identified and 
documented. Through their respective payrolls approximately $3 to $5 
million worth of individual income taxes are paid to the American Samoa 
Government. Their existence allows the American Samoa Government to 
achieve proper economies of scales for its utility operations in 
addition to direct financial contribution ($7,250,400) through the 
payment of utility charges and fees. Fuel imports, transportation 
systems, economic stimulation, internal land transportation system, and 
others have been positively impacted by the presence of the canneries 
and certainly aiding the efforts of the government to forge a sustained 
economic development program.
    The moment the canneries depart, the American Samoa Government will 
face an unemployment rate of at least 70%. At an average salary of 
$15,935 for both the private and public sector, total amount of income 
taken out of the economy is approximately $156,000,000 or 9,800 jobs 
lost. The wholesale and retail outlets will be left with large unsold 
inventory, which will force business closure for many. Restaurants, 
fast food operations, service station owners, beauty salons, clothing 
outlets, bus owners, taxi owners, local airline owners, and other 
business activities will face bankruptcies. The local banks have 
revealed that the majority of American Samoa's population is in debt. 
Abrupt termination of employment opportunities precipitated by the 
closure of the canneries will severely impact the commercial banks loan 
portfolios. The federal government will have to bear the financial 
burden of losses incurred by the financial institutions. The American 
Samoa Government will have to bailout the American Samoa Development 
Bank for all defaulted home and business loans. With the loss of the 
canneries, the American Samoa Government will not have the financial 
capacity to reimburse the American Samoa Development Bank for its 
losses.
    The canneries' impact on the government's ability to advance its 
economic development goals has been addressed in the earlier section. 
The departure of the canneries is the net result of the shrinking 
impact of federal incentive schemes that were available to improve 
economic viability. For American Samoa, the departure of the canneries 
invariably destroys any government capacity to push its economic, 
social, and political goals.
Will the Canneries Leave if the Minimum Wage is Incrementally 
        Increased?
    The economic advantages supporting the existence of the canneries 
in American Samoa include duty-free entry of canned tuna into the U.S. 
market, soon to lapse IRC Section 936, local government ten (10) years 
of tax moratorium, proximity to fishing grounds, direct delivery of raw 
tuna from U.S. and foreign fishing fleets, relatively cheaper wage 
rates than other United States insular possessions, the absence of risk 
from being nationalized, and the threat from foreign currency 
fluctuations.
    The disadvantages to the canneries attributed to being located in 
American Samoa include but are not limited to the delimiting impact of 
federal regulations, vast distances to the markets for canned tuna 
products, high infrastructure cost, continued neutralization of the 
Headnote 3(a) tariff scheme benefits, and very stiff competition from 
the canned tuna processing operations located in South East Asia, 
Europe, South Africa, Andean countries, and Caribbean countries. The 
prevailing minimum wage rates in American Samoa far exceed those paid 
by the canneries' competitors.
    While the United States advances its national policy of seamless 
trade barriers, its insular possessions like American Samoa, are 
desperately fighting for their economic, social, and political 
survival, made possible only through the granting of special trade 
protection for the only industry that props its economic system. The 
U.S. tariffs for tuna imports from Mexico, Costa Rica and the Dominican 
Republic under the North American Free Trade Act (NAFTA) and the 
Caribbean Basin Trade Partnership Act are being phased down to zero by 
the end 2007. Similarly countries like Samoa under the Generalized 
System of Preferences, and Ghana, Mauritius, Seychelles, Namibia and 
South Africa under the African Growth and Opportunity Act presently 
enjoy duty-free status for canned tuna imports into in the U.S. market. 
Congress approved the Andean treaty providing preferential treatment of 
canned tuna processed nearby South American countries including 
Ecuador, Columbia, Bolivia and Peru. It is increasingly difficult for 
the canneries to remain competitive with low-cost foreign tuna 
processors. The advantages of duty-free entry of American Samoa 
canneries' tuna products into the U.S. is vitally important in helping 
offset the increasing competition from low-cost processors, i.e. 
Thailand, Indonesia, the Philippines, Mexico, Ecuador, etc. Despite the 
significant additional cost of U.S. duty, foreign imports of canned 
tuna and frozen loins have grown from less than 30% to over 53% of the 
total canned tuna sold in the U.S. in the last 12 years. Even greater 
competition and market penetration by foreign imports will likely 
result from new tariff concessions being granted by the U.S. to these 
and other countries with low-cost tuna processors.
    Duty-free status and tariff phase down for these countries will 
severely erode American Samoa canneries' competitiveness and improves 
the advantage of much lower cost structures aided by much lower wages. 
The savings to the canneries due to U.S. tariffs waiver were estimated 
to be $66.6 million dollars in 1999. Obviously, the American Samoa 
canneries will be severely hard pressed to recoup this huge loss of 
cost advantage and still be able to compete with now duty-free, low 
cost tuna processors. The $66.6 million lost in government revenues 
dwarfs the value of the canneries' contributions to the American Samoa 
economic system.
    Another comparative disadvantage for the American Samoa canneries, 
compared to the low cost foreign tuna processors, is the requirement 
that virtually all of supplies required for production must be shipped 
in from afar. Cartons, cans and ends, labels, vegetable oil, pallets, 
equipment and machinery, etc. must be logistically scheduled and 
shipped in at substantial additional cost. This is not the case in 
Thailand, Ecuador and other low cost foreign processor countries where 
most of the supplies are provided in-country or delivered from nearby, 
less costly sources. Being on major shipping routes, these countries 
also have the advantage of lower shipping costs to the U.S. and other 
markets.
    Such national trade agreements such as those listed earlier are 
examples of actions taken by the Federal Government without regard to 
reciprocal social and economic damages inflicted on American Samoa. 
These trade instruments erode the competitive advantage of American 
Samoa's canneries. The other forces continuing to be at place include 
the fishing grounds that are now closer to these other tuna fish 
canning locales; adding to the deteriorating competitive ability of the 
canneries.
    Every two years the United States Department of Labor convenes a 
Minimum Wage Industry Committee to review the minimum wages for 
American Samoa. It is the mandate of the Department of labor to raise 
American Samoa's minimum wage as expeditiously as possible to the U.S. 
minimum wage, which is exceeding $6 per hour. American Samoa imports 
its fuel from Singapore. The tuna canning operations located in South 
East Asia does not pay the same amount of freight rates for their fuel. 
Shipping to these areas is more frequent and more reliable based on the 
amount of cargo entering and leaving these canned tuna fish producing 
Asian countries. The canneries are subjected to any new environmental 
regulations, which at times have artificially raised operating costs to 
the installation of new equipment to reduce physical and airborne 
contaminants. These federal regulations are not enforceable in the 
independent countries with canned tuna fish productions facilities. The 
elasticity of demand for tuna fish products in the United States is 
very sensitive and the rising concern for mercury content in the fish 
threatens to global market for fish products and could shift 
consumption patterns to meat and fowl products.
    As summarized earlier, the canneries represent American Samoa's 
sole primary industry. The canneries and the American Samoa Government 
are the basic sectors of the Territory's economy. Although there is 
limited and underdeveloped potential for tourism, garment assembly and 
limited light industry, import-substituting agriculture and fisheries, 
the economic well being of American Samoa is intrinsically dependent on 
the canneries. The canneries generate a minimum of $100 million in 
personal income if the multiplier effect is 3. It is unlikely 
therefore, that the limited opportunities for economic diversification 
either singularly or collectively will have the capacity to replicate 
the canneries economic significance to the Territory in the foreseeable 
future.
    An area of immediate and significant prospect is the development of 
local albacore fisheries to supply the canneries and local demand. Due 
to limited worldwide supply, both canneries are increasingly relying on 
the increasing amount of albacore tuna that is being supplied mostly 
from (Western) Samoa. Samoa Packing alone purchased almost $7.0 million 
of albacore from American and (Western) Samoan fishing interests in 
2000 and look to purchase much more as can be supplied. Although both 
canneries frequently work with both local and Samoa fishermen to advise 
and train on maintaining acceptable fish handling, icing and quality 
standards, fishermen in (Western) Samoa deliver the great majority of 
albacore supply due largely to the (Western) Samoan Government's 
program to encourage and develop this important export industry. 
Similarly, ASG should target these fisheries for development by local 
fishermen including, the provision of soft-term financing and technical 
assistance.
    Businesses exist primarily to realize a predetermined rate of 
return on investment. Companies do have a social conscience but it is 
limited to the amount that exceeds the predetermined rate of return on 
investment. The canneries have demonstrated their community mindedness 
over the years and there is a genuine interest to remain in American 
Samoa in perpetuity.
    The question that is being asked is ``will the canneries leave the 
territory if the propose minimum wage hike is approved''?
    We contend that the canneries will, within five years from the 
imposition of the first $0.50 minimum wage hikes, have fully 
transplanted their operations in more economically conducive locales or 
fully convert local operations to loining. This is understandable as 
this represents a sound business decision. The rise in the minimum wage 
will significantly alter the rate of return on investment. An argument 
will be made, stating that the canneries cannot afford to close 
operation because of their existing investments. It is a logical 
argument however conglomerates such as the two canneries forecast and 
project income earnings far into the future. If the projected rate of 
return is not possible due to an uncontrollable factor, an economically 
feasible decision might be to cut loses by curtailing the present 
operation, irrespective of the amount of investment already made.
    This type of decision-making has already been demonstrated by one 
of the canneries. For example, an investment of approximately $10 to 
$15 million was implemented culminating with an operational can 
manufacturing plant. This can plant did not produce one can before it 
was closed down. Based on this demonstrated decision mode practiced by 
these huge companies, it supports firmly the contention that the 
canneries will not hesitate to close shop if the economics are no 
longer favorable, measured by the achievement of predetermined rate of 
return on investment.
    As much as American Samoa will do everything at its disposal to 
keep the canneries from relocating their facilities, externally imposed 
decisions as the legislated minimum wage increase for American Samoa, 
will transform the operations of the canneries in American Samoa. The 
resulting mutation will certainly not be in the favor of the people of 
American Samoa.
    Mass out migration will be observed as residents seek their future 
elsewhere in the United States. The United States will bear the 
consequences of its actions as the Samoan immigrants seeking enrollment 
on welfare programs. Samoans who cannot make the adjustment to life in 
the United States will end up in over populated correctional facilities 
straining limited financial resources of law enforcement system. 
Children leaving the territory for educational advancement will become 
major deterrents to the public education system of the state chosen to 
be their new home. American Samoans who have poor health will relocate 
to the States to facilitate ready access to healthcare services. These 
immigrants do not have insurance or the financial wherewithal to defray 
their healthcare costs. Most likely, these immigrants will be on 
welfare seeking qualification under the State's Medicaid programs. 
American Samoa's technically skilled human resources will be among the 
immigrants seeking new lives in the United States. While they may be 
welcomed overseas and may be able to transition seamlessly into the 
workforce, their departure leaves a great void in the human resource 
capacity of American Samoa to spearhead its recovery programs.
    Air and surface transportation will be scaled back to the 1960 era. 
Lack of income to purchase food and other necessities of life reduces 
the amount of inventory kept by businesses and thus reduce the 
frequency of cargo vessels calling into Pago Pago. With the absence of 
backhaul cargo, the fright rates charges will be much higher thus 
raising the cost of goods beyond the economic capacity of many of the 
remaining residents of American Samoa. Air transportation will also 
experience drastic cutback, because the residents lack the finances to 
pay the airfare to visit the United States. Conversely, lack of tourism 
development will negate the need to travel to American Samoa. 
Consequently, the airline will find it economically infeasible to make 
frequent trips to American Samoa.
    We were utterly demoralized and filled with questions over the 
equity of the decision to raise the minimum wage for American Samoa 
without being afforded the opportunity to submit testimony hoping to 
sway the execution of such a devastating decision on our economic 
system. We wondered why this same type of opportunity was not accorded 
when merits of raising the minimum wage were being deliberated on last 
year. We are afraid that it takes much more effort to undo something 
that is already in the books irrespective of the prevailing adverse 
impacts. This opportunity is acknowledged with much gratitude. At least 
it gives us a sense of control over our own destiny even though this is 
just a dream or an illusion.
    Let me say without equivocation that no one opposes the raising of 
the minimum wage if the prevailing economic system can support the 
increase. It should be made crystal clear that the government, 
canneries, and the private sector do provide wage and salary increases 
periodically to their employees based on the economic carrying capacity 
of their respective operations. It is also important to note that the 
United States' prevailing minimum wage is the refection of its economic 
capacity. It defies economic logic, therefore, to force the application 
of the Federal minimum wage level in American Samoa when the latter's 
economy is infinitesimally small compared to the most robust and 
biggest economic system in the world. Sufficient documented evidence 
exists to validate American Samoa's fear that huge employment 
curtailment will materialize when the federal minimum wage is imposed.
    In spite of our desperate attempt last year, and every two years 
the United States Department of Labor minimum wage hearings are 
conducted, to bring attention to the economic devastation that will 
result if the canneries leave or reduce its presence in American Samoa 
because of its reduced competitive advantage in the global market, 
Congress went ahead and approved the measure anyway. Instead of the 
regular two year review, we are once again frantically struggling to 
bring attention to the fact that what we have been saying all along is 
becoming our current realities. The U.S. Department of Labor Report 
will probably state that no evidence of employment curtailment is noted 
although we were not privy to a copy. We will presume that the McPhee 
Report, since the Legislature was not afforded a copy, will state the 
opposite view point and in support of the concerns vocalized and 
documented last year and every year the U.S. Department of Labor 
minimum wage hearings are held. Every Industry Committee, commissioned 
by the U.S. Department of Labor to review the minimum wage, 
incorporated in their recommendations the suggestion to grant American 
Samoa the authority to determine its own minimum wage based on the 
prevailing economy. Nothing eventuated.
    Madame Chairwoman Christensen, we are beginning to have grave 
doubts if this is not another exercise in futility because the same 
passionate pleas made last year did not change the outcome. Please know 
how appreciative we are, and we are sure, all of us present here today, 
that you made this arduous journey, demonstrating your genuine concern 
for our welfare. But we also knew that our fate was sealed last year 
because our minimum wage became a national issue that triggered 
bipartisan politics. Even the last minute intervention by our very 
influential patriarchs, Honorable Senator Dan Inouye, Senator Daniel 
Akaka and their Senate colleagues did not alter our fate. What dynamics 
have changed in our Nation's Capital to give us hope that our plea for 
suspension of the imposition of the next 50 cents hike to our minimum 
wage will be averted?
    The dynamics here in American Samoa have changed for the worst. The 
Chamber of Commerce will testify that business activities are on the 
decline. The Executive Agencies of the American Samoa Government will 
testify that employment curtailment will eventuate if the canneries 
relocate their facilities or alter the configuration of their 
operations, opting for mechanization to reduce the financial impact of 
continually increasing minimum wages on their profitability and 
expected return on investments. It is my hope that the canneries will 
testify to give you first hand information on their plans to cope with 
the imposition of legislated periodic escalating minimum wage levels 
until the federal minimum is reached. The canneries have been silent 
except for the encouraging announcement by Del Monte Star Kist Samoa 
that it will proceed with the production of tuna pouch. This welcome 
news is underscored by information to the effect that it is a scaled 
down version of its original plans. We have not received information on 
the canneries plans regarding operational conversion to fish loins. 
This operating configuration will drastically reduce the canneries' 
workforce. The imposition of the next 50 cents could very well confirm 
the conversion decision.
    The Legislature depends on the Executive Agencies of the American 
Samoa Government, the canneries, and the private sector to supply 
empirical data to support our claim for economic devastation 
perpetrated by the rise in our minimum wages. We can only provide 
anecdotal information based on statements received from the community 
by the Legislators decrying their current status. The common cry heard 
from the people who visited their Senators and Representatives is that 
daily living challenges are becoming difficult to accommodate. This 
disclosure is confirmed by the increased frequency with which financial 
assistance is being solicited from us Legislators. Moreover, we are 
witnessing the emergence of small privately owned loan businesses 
competing with the commercial banks for small short-term loans. We have 
observed the rise in the number of family based businesses selling food 
plates and other food items of traditional appeal to make ends meet. 
The number of individuals seen selling flower leis and other products 
is on the rise. Unfortunately, the continually spiraling energy prices 
has exacerbated the situation and forced the redistribution of disposal 
income away from the purchase of life sustaining goods.
    We firmly believe that the minimum wage is just one of the factors 
that triggered the economic downturn for American Samoa. Our failure to 
secure replacement incentives for the demised IRC Section 936 forced 
the canneries to reassess its continued presence in the Territory which 
reflected in the volume and value of its imports into American Samoa in 
2006. The minimum wage however, reaffirmed whatever strategies 
formulated by the canneries relative to its presence in American Samoa. 
Bilateral agreements entered into with other tuna producing countries 
reduced the inherent competitive advantage American Samoa used to have 
which gave economic reason to the canneries to remain on island.
    Let us provide for your information government revenues generated 
from the imposition of excise taxes on imports. In Fiscal Year 2004 
total revenue collections was $24,632,820; Fiscal Year 2005 total 
revenue collections was $23,740,032; Fiscal Year 2006 total revenue 
collections was $22,457,085; and finally in Fiscal Year 2007 total 
revenue collections was $20,738,343. Between Fiscal Years 2004 and 
2007, total revenue collections from excise taxes plummeted by 18.8% or 
4.7% annually. The above figures are from the reports prepared by our 
Department of Treasury. There has been a steady decline in the total 
revenues collected from excise taxes meaning that consumption, 
reflected by imports, has methodically declined over the period of four 
years. This information should provide proof that American Samoa's 
economy is worsening and it will not stand the adverse impact of adding 
an additional 50 cents to the Territory's minimum wage. It also 
supports the claim from the private sector that business activity is 
declining.
    You will hear testimonies from some of our people stating that the 
additional $50 cents will go far in making their lives more tolerable. 
We do hear their plea for help however we are more concerned about 
their long-term survival because if the additional 50 cents forces the 
mass curtailment of jobs, he or she might end up, without a job 
totally; then they will be worst off than their current predicament. 
Artificially raising the minimum wage without the economy to absorb its 
impact is morally irresponsible.
    We know what needs to be done to alter our current economic 
dilemma. However, it takes the support and commitment of the Congress 
to assist us put to work strategies to bolster economic growth. We need 
federal incentive schemes to entice investment into the territory. We 
need special treatment under the cabotage rule because of our 
remoteness and the associated cost to travel to American Samoa; factors 
which retard our ability to advance our tourism industry. We need 
federal agencies to amend their program policies creating impediments 
or preempting full application of their programs in American Samoa. We 
need a venture capital pool to be made available through loans to 
American Samoans so they can participate fully and become beneficiaries 
of their our country's economic development successes.
    The preponderance of the evidence against the imposition of the 
next 50 cents to the minimum wage is overwhelming. This sentiment is 
also reflected in the legislation being proposed by our Congressman 
Faleomavaega to abort the minimum wage escalation clause and to base 
future minimum wage adjustments on the capacity of our economic system. 
In conclusion, we want to extend once again my thanks to you and your 
committee for this opportunity to share with you our aspirations. We 
hope you will remember us with fond memories when you return back to 
our nation's capital. We also take this chance to thank our Congressman 
Faleomavaega for the introduction of legislation to abate this nemesis. 
May the good Lord keep you safe as you attend to the business of our 
people.


                ,--                                   ,

Lolo M. Moliga                       Savali Talavou Ale
President of the Senate              Speaker of the House of
                                      Representatives


                                 ______
                                 
    Mrs. Christensen. Thank you, Lolo.
    I understand Mr. Eliu Paopao, Director of the Department of 
Commerce, is here, and we would like to invite him to sit at 
this panel to answer any questions that may arise or that the 
Lieutenant Governor might want him to answer.
    As I said earlier, I am recognizing myself for my 5 minutes 
of questions, and I just wanted to say what I said this morning 
when I met with the Senators and the House Members that your 
situation here reminds me in many ways of what I face in the 
Virgin Islands and what we faced over the years. Anytime we 
propose any new increased fees or rates, we meet with 
resistance. And I can give one with the cruise ship industry--
they threaten not to come if you raise the passenger fee. Or 
our oil refinery threatened to move when we were also 
renegotiating their contract with the Virgin Islands and 
increase fees. So I came out of a similar experience, and I 
said that at the time--the oil refinery and the cruise ships, 
you know, maybe we increased it--one case cruise ships--but 
sometimes these are just ways of pressuring communities. And so 
I don't take I understand your concern and major concerns that 
you would have because you cannot afford to lose the jobs of 
the community. But I think it is really important that we make 
decisions based on data and facts and not just the word of 
industry sometimes. But trust me, I understand the pressure 
that the community is under and the need for you and a fragile 
economy like this to ensure that jobs stay here.
    And I heard very clearly the concerns from the Members of 
the House and Senate this morning. I would ask both the 
Lieutenant Governor and the Senate President, you heard the 
testimony on behalf of the Department of the Interior. Are you 
encouraged that the current Administration recommended that 
Congress give strong consideration to limiting the increase in 
the minimum wage? Does that give you some encouragement?
    Mr. Moliga. It is very encouraging. The next time we went 
to Washington and asked the Department of the Interior about 
the approach that they are taking. It seemed like they were not 
in any position to support this effort. And then we understood 
why--because the Administration's global views on this issue 
are why they didn't issue an opinion at the time. But I would 
like to make one thing clear. The fact you know we are putting 
out statements in regards to the minimum wage. As leaders of 
this island, we are not opposing the raise in minimum wage. 
What we are asking is that any raise should be based on our own 
economic conditions here in American Samoa instead of forcing 
us to follow the $7.25 that the Federal government is 
requiring. That is why we tend to support the previous approach 
where the Department of Labor sends out an Industry Committee 
to review which field is more realistic and honest in terms of 
what the increase should be instead of us riding along with the 
Federal government which we cannot afford.
    But, by all means, if the Federal government will give us 
the money, we'll accept any raise of any kind. But it is nice 
to hear that the wages are recommending to be increased but the 
problem we don't have the resources to do that. And that is 
with the Governor to add to the President at this time. It is 
different.
    Mrs. Christensen. It is my time. You are free to answer.
    Lt. Governor Sunia. I sense there is also concern in the 
Department of the Interior that they may end up at the end of 
the day being the one to ask if we are responsible to make up 
you know any deficiencies that are caused by this law, and it 
is not in their budget and they are going to have to look to 
Congress to give them the money to give to us to make this up. 
I guess the same thing the President is saying. I don't--from 
talking to some of the officials up there--the message, I 
gather, that it is all nice but then resources we can help the 
territory accommodate your desire in Congress.
    Mrs. Christensen. Well, there are times when the Office of 
Insular Affairs and the Department of Labor does not take that 
position. At least in this case, they've taken a position based 
on the labor report that would go against having that increase 
in May. We just need to ascertain that they are also going to 
support us when we move forward with the legislation that your 
Congressman introduced. We'll go back, and we'll be meeting 
with them on Tuesday, as a matter of fact, so we'll ascertain 
that. But I think that should be some encouragement that they 
take.
    I now recognize Mr. Faleomavaega.
    Mr. Faleomavaega. Madam Chair, if I may, I would also like 
to ask Director of the Department of Commerce to make a comment 
or maybe has a statement he may want to submit to make part of 
the record?
    Mrs. Christensen. Any objection?

              STATEMENT OF ELIU PAOPAO, DIRECTOR, 
             AMERICAN SAMOA DEPARTMENT OF COMMERCE

    Mr. Paopao. Thank you very much, Congressman Faleomavaega, 
and good afternoon Honorable Madam Chair Christensen and the 
Honorable Members of the Committee on Natural Resources and 
Insular Affairs. I have submitted the entire full text on my 
testimony to the committee, and I am also prepared to summarize 
that testimony for the benefit of time. And then I will submit 
a copy of it after the hearing this afternoon. And at this time 
I would like on behalf of the Government of American Samoa, I 
would like to say thank you very much for giving me the 
opportunity to offer this statement and highlight some of the 
essential points regarding the anticipated effects of Public 
Law 110-28 on American Samoa's economy.
    The recent new Department of Labor study incorporated and 
estimates economic effect of cannery closure from a final 
report of our own which is due to be released at the end of 
this month. While the Department of Labor report made no 
recommendation, it did describe in quite shocking terms what 
the continuation of the minimum wage increase would lead to in 
American Samoa. I suggest the following summary of the 
Department of Labor findings the long and short of which are 
that continuation escalation of minimum wage in American Samoa 
could eventually lead to economic disaster for American Samoa. 
First the canneries are the largest private sectors in American 
Samoa, and today majority of the cannery workers earn the 
minimum wage.
    Second, the loss of the canneries would mean the loss of 
one half of American Samoa's total job force. Third, the 
American Samoa Government will suffer greatly which means that 
paying the minimum wage increases may force American Samoa 
Government to make difficult choices between reducing 
government payrolls, reduce available hours of paid work week, 
raising taxes, or cutting non-wage expenditures.
    Fourth, the rest of the American Samoa private sector based 
on our research will not be able to absorb the full minimum 
wage increases. Raising the average hourly wage by merely $2.00 
per hour for the 10,000 covered workers would result in a wage 
field increase of $40 million per year across all American 
Samoa interest sectors. Fifth, minimum wage increases would 
lead to the closing of both canneries in American Samoa, and 
this will allow them to move away from American Samoa to other 
areas where labor costs is low.
    Madam Chair and Members of the Committee, these are 
staggering findings but they are numbers. The human impact over 
several periods could be devastated and let me try to visualize 
for you what this could mean in human terms. First, we could be 
faced with a long period of economic and social dislocation. It 
is not easy to behold the loss of one half of a community's 
jobs. There is a strong possibility that the economy's distress 
could remain very high in American Samoa for many years in the 
form of very high rate of unemployment, business closures, or 
cutbacks, or declines in local ASG revenues. This condition 
could have a variety of adverse effects to the community: (a) 
increased family and social distress which sometimes translate 
into criminal behavior including domestic violence; b) 
declining economic opportunities for those entering the 
workforce; c) declining local revenue for health, education, 
and general public welfare as well as investments in capital 
projects and maintenance; d) raising economic dependency on the 
Federal government; e) fuel resources to preserve Samoa culture 
and the physical environment.
    Second, American Samoa is still in the early stages of the 
development compared with the United States. Our income is per 
capita only one-fifth of the United States average. The average 
American Samoan makes $1 for every $5 made by the average U.S. 
citizen. In fact, American Samoa has the lowest per capita 
income in the entire United States system.
    Third, we must also consider how conditions came to this 
and made to do the work the economic impact allows us, which we 
share with the Department of Labor. This study will deal with 
other economic recovery matters which can be recommended if 
canneries depart.
    The last one is we will recommend that a formal Federal low 
territory economic development be established. This is 
essential in view of the massive influence of the Federal 
government of American Samoa economic development. This has 
been recommended over the years by the United States General 
Accountability Office, the American Samoa Economic Advisory 
Commission and others. As it now stands, we have been fighting 
for our economic lives to head off future automatic minimum 
wage increases that might have been avoided with a form of 
territory cooperation we recommended. Furthermore, in my 
testimony to the Committee, which has the report, I have 
provided three sets of tables which will assist the Committee 
in your deliberations on the impact of the continued escalation 
clause of the minimum wage increase that will eventually lead 
to economic disaster in American Samoa.
    Thank you again for the opportunity to speak before you 
this afternoon.
    Mr. Faleomavaega. I want to thank you, Director Paopao, for 
his informative statement, and I do want to thank you 
Lieutenant Governor and Senate President for substantial 
testimonies. I do have a couple of questions, Madam Chair.
    Would all three of you gentlemen agree that one of the 
biggest problems of trying to figure out exactly what is the 
economic status of our territory is the fact that we don't have 
sufficient data and information to make such proper 
conclusions. In terms of exactly what our economic status is, 
that seems to be the result of the report of the Department of 
Labor? Even they were not able to obtain or get proper data and 
information to even make a more specific assessment on the 
minimum wage issue. Although, in a very broad sense, they say 
it will have a negative impact on our economy, but I just 
wanted to ask you gentlemen if you agree that we really are 
lacking real hard nose facts and information to do this.
    Lieutenant Governor?
    Lt. Governor Sunia. With all due respect, I think that is a 
copout. They started out knowing--with all those smart people 
that were selected, they should have known the status of the 
type of data and information that we have. They alluded to two 
main things why they couldn't do the study. One, they didn't 
have enough time; and second, there was no data. Well, they 
started out knowing that they are not going to have the data to 
arrive at some scientific solution. But there is data. There is 
data all around. All they needed to do was come down here and 
ask the right people and ask the right questions and have their 
data. Why is that a big deal?
    Mr. Faleomavaega. I was going to reserve this question for 
our management at the canneries but maybe I will ask it. Were 
there ever any layoffs at the canneries since we implemented 
this first 50-cent increase on the wages? Maybe Mr. Director of 
Commerce?
    Mr. Paopao. Thank you Congressman. I don't think there was 
any layoff on the first 50-cent raise, but we do agree on the 
data that we would like submitted with our report on the second 
50 cents. That is, we can see problems there and on the tables 
that were submitted based on data available--like what the 
Lieutenant Governor has alluded to or said about the 
availability of data--the Legislature of American Samoa passed 
the ANIVA Act, which is national income part and the Department 
of Manpower Resources are putting together all the data in 
regard to American Samoa. And we know for sure that those data 
are available with us and that is how we develop some of the 
tables that we have in our report and my testimony that are 
available for the Committee to look into it.
    Mr. Faleomavaega. I am going to wait for the second round, 
Madam Chair. Thank you, Mr. Paopao.
    Mr. Moliga. On the issue of the economic study commission, 
that was the understanding that we have. This was a DOI 
initiative. That is why they put up $600,000 to conduct this.
    Mr. Faleomavaega. $600,000?
    Mr. Moliga. Right and it was our understanding looking for 
the report that the commission should submit an official report 
to the Department of the Interior, whereas the Interior would 
direct American Samoa on the utilization of this report as a 
basis for our economic plan. But as far as we know, there was 
no official report submitted to DOI as well as to the American 
Samoa Government. A couple of years ago, we were looking for 
the report and for the Legislature to review it, and that was 
our finding. There was no official report. They have bits and 
pieces of the report everywhere but as far as any official 
report to the Department of the Interior, which forks out the 
$600,000, we have never seen that report as far as I know.
    Mr. Faleomavaega. Madam Chair, may I just follow up with 
the statement that the president made?
    Is it your understanding that the Department of the 
Interior or the Secretary of the Interior should then direct 
the Government of American Samoa to review the contents of this 
commission report and then come back? Is that your 
understanding of the procedure?
    Mr. Moliga. The procedure this is what I am talking about. 
It was their initiative. It was DOI, and it was our 
understanding that the report would go right back to the 
Department of the Interior not the Government of American Samoa 
and from there DOI will submit that report to the government 
and Legislature for our review and recommendation.
    Mr. Faleomavaega. So you would suggest that it should go 
back to Mr. Nikolao Pula working through the channels of the 
Department of the Interior and eventually have the Secretary of 
the Interior follow up with this economic study commission and
    Mr. Moliga. That is our understanding and then the Governor 
of American Samoa and the Legislature can use that to form an 
economic policy for the government as you wish.
    Mrs. Christensen. Thank you. I do have just a few more 
questions.
    The Department of Labor report has been referred to a 
number of times, and it is the basis for the Department of the 
Interior's position it seems. Did the Department of Labor 
consult with either you Lieutenant Governor or you President 
Lolo? Did they consult? Did they interview you as part of the 
preparation for issuing this report?
    Lt. Governor Sunia. Madam Chair, are you referring to the 
committee appointed in the bill?
    Mrs. Christensen. The U.S. Department of Labor report in 
January on the impact of the minimum wage and the proposed 
potential impact. Did someone from the Department of Labor 
interview you Lieutenant Governor or the President of the 
Senate?
    Lt. Governor Sunia. No, madam. They didn't talk to me and I 
don't know.
    Mrs. Christensen. Are you aware of their speaking to anyone 
in American Samoa in preparation for their report?
    Lt. Governor Sunia. Not only am I not aware if they talked 
to anyone in American Samoa, I am not even aware if they even 
came to American Samoa.
    Mrs. Christensen. Thank you. We've talked a lot about the 
impact of the increase of the minimum wage on the cannery 
industry. What about the impact on--I am asking this question 
to Lieutenant Governor Sunia--government. Has there been a 
noticeable impact on the government with the 50-cent increase 
that has gone into effect?
    Lt. Governor Sunia. Financially, Chair, you can follow up. 
It is in our statement. The money impact--the encumbrance--is 
that the impact you are--the impact on the government 
financially?
    Mrs. Christensen. What has transpired with the 50 cents 
that has already been enacted, if you have seen any adverse 
impact, on the operations of the government? Have you had to 
lay off anyone?
    Lt. Governor Sunia. Not to that extent. Not to the extent 
that we have to deal with the workforce or lower hours or 
reduce the workforce. But we did have to absorb a bit of the 
payroll by taking a little bit from other categories.
    Mrs. Christensen. So you did have to do some cutting in 
some other areas to be able to meet the cost of salaries of the 
employees?
    Lt. Governor Sunia. That is correct, Madam Chair.
    Mrs. Christensen. Legislature have any noticeable impact?
    Mr. Moliga. No that I know. We are OK.
    Lt. Governor Sunia. They have a larger budget than we have.
    Mrs. Christensen. The other area that has been referred to 
a number of times has been relied on in the past for the 
increase of wages in setting increases in the minimum wage and 
which has been recommended as a possible way to address it in 
the future, this Special Industry Committee. Given the fact 
that wages have been stagnant under--while we've been utilizing 
the Special Industry Committees, do you still believe that 
there is an effective way of balancing needs of providing 
workers with higher wages and the fragile nature of the 
American Samoa economy? Do you believe that process can still 
work and whether you do or do not, are there some 
recommendations that either of you would have? And I will start 
with the Lieutenant Governor. Do you have any recommendations 
that could improve upon the Special Industry process of 
determining whether and how much of an increase in the minimum 
wage this should be?
    Lt. Governor Sunia. Well, I believe that the matter is 
relative, Madam Chair. Since the passing of recent legislation, 
now we have something to compare the old system with; and I 
will tell you that the old system is much better. Inconsistency 
is the very soul of that. It is not a bad thing. They have to 
be inconsistent because as the facts of the economy determine 
the right and wrong is what wages are concerned, the outcome 
cannot be consistent. They can go up and down, and it is driven 
by the economic factors that are involved. So I don't see why 
the inconsistency is portrayed as an evil. It is not I suppose. 
But whether or not that committee has always arrived at the 
right level at the right wage, it is an issue that needs to be 
addressed with the commission. But the mechanism itself I think 
is much better than just us getting rolled up with CNMI and 
just sorry it is Washington politics that we don't take it very 
considerate. In fact, I think it is insulting to tell us that 
``Sorry, this is politics in Washington, and you just got 
caught up and we are going to try to fix it.'' It is viewing it 
from American Samoa where we live under a very unique and 
traditional culture. We don't take that as a very respectful 
way to handle our matters.
    Mrs. Christensen. Anyone else would like to respond?
    Mr. Moliga. To the issue of balancing cost of living versus 
what we earn, I would sure like to see that rest with DOI and 
Government of American Samoa. There is no question as to the 
gradual increase in cost of living, and much of that is to be 
counted toward the high cost of government services in American 
Samoa. You take services that he is providing to the people 
versus what people are making, there is no question it is too 
high for such a level of income to absorb. But we are not 
saying that we should be pushing that burden to the people. 
What we are saying is that is where DOI and the government 
should be working--for instance, the high cost of electricity, 
the high cost of hospital fees, the high cost of servicing the 
people here in American Samoa. Much of that can be reduced by 
negotiations through DOI and our local government instead of us 
pushing for minimum wage to be increased without any 
foundation.
    My recommendation is for DOI and our local government to 
sit down and consider ways, provide subsidy for the high cost 
of fuel, and you know it is outrageous the way we are living 
now. And that is exactly one of the reasons why people are 
coming out in support of this minimum wage, but that can be 
balanced out if DOI and local government can sit down and 
devise a mechanism where that can be absorbed without adding on 
to the peoples. The old saying that we have in Samoan that one 
in your hand is better than two in the bush. Economic 
development and economic pace stays more jobs. There is no 
question to that. The more jobs we have, the more solid our 
foundation is going to be. And a series of activities that the 
government is now pursuing to make sure that we have an option 
to our economic development, DOI set aside $3 million for the 
fiber optic. Both the Governor and the Fono concur. We feel 
there must be an option. In the event the canneries leave, then 
we have something else. That is why we allow for the call 
center to come in, and we are hoping such legislation that the 
Fono will be passed and approved and signed by the Governor and 
that will provide an option for new business to come in the 
territory. Otherwise we don't have anything.
    The cost of fuel and the cost of government services is 
outrageous, and there is no way we can support that with the 
earnings that people are making.
    Mrs. Christensen. You answered one of my questions--what 
other avenues were being explored for economic development--
call centers and fiber optic? I just want to ask you one other 
question. In your experience with the Special Industry 
Committee, what factor or factors carries the most weight in 
their deliberations and their determination of 1 cent or 2 
cents or no increase in the minimum wage? What was the most 
weighted factor? What was the factor that carried the weight in 
that decision?
    Lt. Governor Sunia. I have never had the opportunity to be 
a member of those committees, but I understand from the 
findings that it is very high in their consideration--the cost 
of living, the purchasing power of the workers.
    Mrs. Christensen. To what extent? The canneries have 
testified on a number of occasions that they could not sustain 
an increase in the wage. I think 2003 and 2005, we have 
testimony to that effect. To what extent do you think the 
canneries again saying that they could not sustain the wage, 
play the role in the Special Industry Committee's decision?
    Lt. Governor Sunia. As much as our champion Congressman 
tries to have the canneries reveal to us how much money they 
make here, I think they never will. So your question, Madam 
Chairwoman, I truly cannot answer that.
    Mrs. Christensen. I accept that. I don't know if anyone 
else has anymore knowledge in the workings of the Industry 
Committee? Anyone at the panel? No one at the panel has insight 
on one of the committees?
    Did you have any other questions?
    Mr. Faleomavaega. Yes, I do.
    Mrs. Christensen. We are going to wrap this up shortly, but 
I give my colleague an opportunity to ask another question or 
two.
    Mr. Faleomavaega. Madam Chair, we are discussing the 
ability of the Special Industry Committee that was created 
since 1989 I believe, but I think we also need to understand 
how this whole thing came about. How we ended up to the current 
minimum wage system that we end up with. And our office did a 
little research that in the mid-1950s at that time in America, 
the minimum wage was $1 an hour. Then the executive officers of 
the canneries, at that time in Van Camp, appeared before a 
Congressional hearing before the Senate as well as in the 
House. It was their opinion that Samoans were incapable of 
doing the work that they would be sent out to do if they were 
to establish their canneries here in the territory. True 
stories. They said it would take five Samoans to do the work of 
one person in the United States. So, therefore, we need to 
lower the minimum wage for this territory because our people 
were incapable of doing the work. At that time it started off 
with 27 cents an hour. 27 cents an hour! And then the Congress 
in its wisdom established this Special Industry Commission to 
meet this consideration of the differences of economic 
standing, if you will, but it was supposed to be for a 
temporary basis. Because since 1989, all the other territories 
have now come under the national minimum wage with the 
exception of American Samoa. So I think this is something that 
I would like to say to our dear friends of the panel that I 
have attended a couple of these Special Industry Committee 
hearings here in the territory, and I might say that I have 
some very strong feelings about the proceedings and the 
situation where one year it was the recommendation of 2 cents 
an hour increase in wages for our workers. Another year it was 
3 cents an hour increase in wages.
    Madam Chair, can you tell me how a person making 24 cents a 
day with the kind of minimum wages that were being done by 
Special Industry Committees--I accept it and support the 
concept. But in my humble opinion, the Industry Committee is 
not really getting a real substantive on-line issue as to where 
exactly is the economic standing of this territory for all the 
years. And I would like to ask our Director from the Department 
of Commerce if this 50-cent increase has been the best increase 
ever in the last 50 years since this territory came under this 
system in terms of determining the kind of minimum wage that 
should be given to our workers?
    Mr. Paopao. Congressman----
    Mr. Faleomavaega. And a word of caution, also, because this 
territory is the only territory that has 18 different minimum 
wages, depending on the kind of job that was being described. 
Unbelievable! The minimum wage in Alaska is just one minimum 
wage. It is not a different minimum wage for carpentry, for 
cannery workers, for lawyers. This is the way we have this 
system.
    I'm sorry. I did not mean to--please, Mr. Paopao.
    Mr. Paopao. I agree with you on the 50-cent increase for 
the canneries and probably the canneries most probably will 
respond to that, but as far as we know based on the statistics 
that we have, the wages that we provided it was not no impact 
with the canneries and even American Samoa Government on the 
first 50 cents. But however on the second 50 cents then we'll 
experience some impact on the curtailment of workers and that 
type of thing on the second 50 cents and will continue on until 
total effect on the entire government and the entire economy.
    Mr. Faleomavaega. You indicated earlier, Paopao, that we 
have some 10,000 workers. Would you agree that we have actually 
two levels of working people in our territory? Those who work 
for the government and those who work in the private sector?
    Mr. Paopao. I agree with that.
    Mr. Faleomavaega. May I ask what is the minimum wage of our 
government workers? How much are they paid if they start 
tomorrow? What is the minimum wage for our government workers 
to start tomorrow?
    Mr. Paopao. Currently, in the government work starts at 
about $3.40 an hour right now.
    Mr. Faleomavaega. How many government employees are under 
that pay scale right now may I ask?
    Mr. Paopao. As far as I can tell based on information and 
the data available, no one is working below $3.41 an hour.
    Mr. Faleomavaega. May I hear you again? Among those who 
work in the Government of American Samoa, no one was being paid 
below $3.40 an hour?
    Mr. Paopao. Right.
    Mr. Faleomavaega. What is the general realm of how much 
wages our government workers are getting currently? Is it--what 
percentage of government workers get paid $6 an hour right now?
    Mr. Paopao. I do not have that information available but we 
do have that data available with the Department of Commerce in 
terms of how many are paid $3.50 to $4.00 and so forth and up 
to $30.00 an hour. We have that data available with the 
Department of Commerce.
    Mr. Faleomavaega. Would you agree that actually maybe a 
good majority of government workers are being paid $6 an hour 
and above?
    Mr. Paopao. I will say yes.
    Mr. Faleomavaega. So in effect they are not affected by the 
minimum wage issue that we are discussing here?
    Mr. Paopao. We are beginning to get effect on the second 
year. So many of them will be curtailed on the second year and 
then the third year and by the fourth year, the government 
cannot afford from the second year beginning to affect the 
government budget financially on a second year escalation of 
minimum wage increase. And it will be worst on the third year.
    Mr. Faleomavaega. You indicated that American Samoa makes 
the lowest per capita income. What is the lowest per capita 
income of our workers here in American Samoa?
    Mr. Paopao. I think it is about $4,000-plus--about $4,817.
    Mr. Faleomavaega. What is the average per capita income in 
the United States? I am just curious. I am just trying to get 
my own motors.
    Mr. Paopao. But it is a lot more than that. I think it is 
about $9.
    Mr. Faleomavaega. So is this same per capita income is the 
same with those that work for the government as opposed to work 
in the private sector such as the canneries? I am just curious 
because obviously the scale of our work in the government is 
much higher than those who work for the canneries and in the 
private sector it seems to me. Am I correct on this?
    Mr. Paopao. Yes, you are.
    Mr. Faleomavaega. So which means that government workers' 
per capita income is higher than the poor cannery workers and 
those who work in the private companies?
    Mr. Paopao. No. It is reviewed the same, and we came up 
with that per capita income for all the territory.
    Mr. Faleomavaega. The average.
    Mr. Paopao. The average is about $4,817 per annum.
    Mr. Faleomavaega. I just want to say that I think the whole 
issue of minimum wage--please, I welcome your comments. The 
worth of the labor is higher in terms of that person working 
for whatever profession, and how we then can measure what 
should be the minimum wage given the standard of our economy. I 
could not agree with you more, Mr. President. We want the 
minimum wage to increase for our workers, but it has to be 
commensurate with the ability of our economy to also sustain 
that income increase. Am I correct?
    I think all of you agree with that concept. You don't mind 
increases in wages but it has to be in conformity or the 
ability of our economy to sustain that increase.
    Lt. Governor Sunia. Congressman, you know for the same 
reason that I don't make the kind of money you make because 
your job is much more important than mine.
    Mr. Faleomavaega. Please, please.
    Lt. Governor Sunia. So, you know, to compare, like I said, 
it is relative. You have to try to. You are saying that what we 
are doing here is raise the canneries up to imperative with the 
government. I don't know if that is the issue we are facing 
here, but to me it is relative and then perhaps when the 
cannery people come here, they will address that. But just to 
demonstrate that, the industry committee that was there before. 
The bill was correct. Because when the first 50 cents came into 
effect, our minimum wages of the government was not really 
affected. Now to me that demonstrates the committee's work was 
right on there--give or take. Now I am speaking for the 
government employees' minimum wage, but I don't know about the 
canneries because we indicated earlier we never know we are not 
driven in our wages. Our wages are driven by different 
interests all together. You know that I don't have to say that. 
Our interest is plain just service provider but the canneries 
can tell you their interest in how their wages are driven.
    I suppose I am trying to save my director here by saying 
the wrong thing or contrary to what I am saying. I am advising 
him try to not talk too much but he kept answering your 
question.
    Mrs. Christensen. Thank you. I just needed some 
clarification so when the minimum wage went up, it was 
increased 50 cents, the government workers saw an increase?
    Lt. Governor Sunia. The effect--what we have to do to 
comply with the first 50 cents--wasn't really much. So that is 
why I said what I said--therefore, where we are at and maybe it 
was correct after all.
    Mrs. Christensen. OK. And then the second clarification, I 
guess Mr. Paopao you said that there wasn't much impact. I 
wanted to also clarify was there any impact on tax revenue 
collected with the increase in the minimum wage, or has that 
not shown up yet?
    Mr. Paopao. No.
    Mrs. Christensen. No you have not seen any recent
    Mr. Paopao. Yes.
    Mr. Moliga. If I can add to that. The recent data and 
information gathering show a downward trend in terms of 
revenues with ASG. It has been down since 2005, 2006 in terms 
of you know the revenues from taxation and other areas. And we 
feel like you said there is no real data. That is the concern I 
have right now--the availability of the actual data for that 
commission to be based on. The question is do you have 
sufficient data to provide a more reasonable decision for 
American Samoa? I think the most honest and the most practical 
data we have is the everyday life of people that we experience 
on this island. We've been talking to the business community; 
we've been talking to store owners; and it shows in our 
business with us. We have problems with how much money people 
are spending and the more jobs that we lose, the more downward 
spiral our economy will take.
    Mrs. Christensen. Well, thank you. I would like to thank 
both the Lieutenant Governor Sunia and President Lolo as well 
as Mr. Paopao for their testimony and their answers to the 
questions. We may have--the Subcommittee may have additional 
questions for you which we would submit to you in writing. We 
appreciate your taking the time to be here and to be so patient 
with us as we ask. We went over the time quite a bit, and 
without objection, I would like to enter into the legislative 
record the Senate Concurrent Resolution No. 30-20 as well as 
the American Samoa Legislature's Joint testimony on the minimum 
wage. So thank you, and you are excused. Thank you again for 
your patience.
    Mr. Faleomavaega. Madam Chair, I would like to really thank 
you Lieutenant Governor, Senate President, and Director of 
Commerce. I would just like to let you know that next week the 
Senate Committee on Energy and Resources is also going to be 
holding a hearing on the minimum wage issue, especially our 
good Senator from the State of Hawaii, Senator Daniel Akaka 
will be leading that hearing. That will be held in the Senate 
on the issue of minimum wages for both American Samoa and the 
CNMI, so we are not sitting still on this issue. And I believe 
and hopefully the Governor will be passionate to travel, and we 
hopefully expect that he will testify in that hearing as well 
next week.
    Lt. Governor Sunia. Thank you Mr. Congressman and on behalf 
of the President of the Senate and Director Paopao, thank you 
for the opportunity to come here before you, and I would like 
to apologize if we have spoken out of turn or raise our voices. 
That is the way we want you to know it is our strong desire to 
make sure you understand where we are coming from and hope you 
enjoy the rest of the stay here. By the way, Congressman, this 
being the second hearing after more than half a century, you 
should have planned a real big hearing, two weeks you know, 
half a day and then you are going to go for another half a 
century. Anyway, good afternoon, Ma'am. Thank you very much.
    Mrs. Christensen. Thank you. Thank you, Lieutenant 
Governor.
    So we would like to call up what would be the last panel of 
the day. The Chair now recognizes the next panel to testify: 
Mr. David Robinson, President of the Chamber of Commerce; Mr. 
Brett Butler, General Manager of StarKist Samoa; and Alfonso 
``Pete'' Galea'i, Plant Human Resources Manager of the Chicken 
of the Sea Samoa Packing Company.
    Mr. Robinson, you may begin your testimony whenever you are 
ready.

            STATEMENT OF DAVID ROBINSON, PRESIDENT, 
                      CHAMBER OF COMMERCE

    Mr. Robinson. Thank you very much, Honorable Chairwoman 
Donna Christensen, Honorable Congressman Faleomavaega Eni 
Hunkin, Members of the Committee and staff. On behalf of the 
American Samoa Chamber of Commerce, may I welcome you here 
today. Thank you for making time today to hear various 
testimonies on this very important subject.
    Madam Chair, the origins of the Federal minimum wage 
applying to American Samoa appear to have been motivated by 
political points scoring rather than a genuine concern for the 
people and the economy of American Samoa. The original minimum 
wage bill as approved by the Democrats beginning January 2007 
exempted American Samoa from the minimum wage increase 
proposal. It was not until the Republicans made an issue of the 
fact that the headquarters of Del Monte, the owners of the 
StarKist Tuna Cannery are located in Mrs. Nancy Pelosi's 
electorate in San Francisco that the bill was amended to 
include American Samoa.
    The amendment appears to have been made without any serious 
degree of prior economic research on the impact of the 
potential negative outcomes that would arise for American Samoa 
and without the appropriate level of consultation with the 
Governor and senior government officials. The idea that the 
local minimum wage in a small Pacific island country should 
become consistent with one of the world's largest economies 
seems quite absurd. At the time, the Chamber of Commerce 
requested that American Samoa not be included in the minimum 
wage bill. The Chamber felt that the escalator clause included 
in the bill would have significant impacts that would be 
detrimental to the economy of American Samoa namely the two 
canneries whose operations would become uncompetitive in the 
global trading environment and they would either scale down 
their operations or even decide to leave. It would impact the 
government, as the largest employer could embark on a 
retrenchment program. The private sector would be affected and 
they would probably retrench staff and, in some cases, be 
forced to close their business. The general wage scale parity 
in the territory would be upset by wage compression. There 
would be mass unemployment, and it would cause considerable 
outflow of capital. It would cause the banks to foreclose on 
delinquent accounts, it would cause an increase in crime rates, 
and property values would decline as vacancy rates soared.
    The position of the Chamber remains the same today in that 
the initial increase to the minimum wage was manageable, but 
any further increases should be decided on in a biennial 
review. This review would take into account the position of the 
economy to accept any increase, a position that is glaringly 
missing from the current legislation. The overall effect of the 
escalator clause in the bill will touch all facets of the 
economy and quality of life for the population of American 
Samoa.
    There would be a reduced collection of corporate and 
personal income tax, adding pressure to the government's budget 
and the Federal government would probably be called upon to 
increase its financial support as departments such as the 
Treasury, Health, and Education would all be short of funds. 
There would not be any much needed new investment and 
development projects. Increased wages would make us less 
competitive with other Pacific countries competing for 
investment dollars. There would be a significant tightening of 
credit and lending from our retail banks.
    Sea freight costs would increase and shipments would be 
less frequent causing shortages of basic food items. Cost 
increases would be passed on to the consumer causing 
unsustainably high inflation. Essential services and utilities 
such as their power, the telephone company, the hospital and 
public works would suffer due to lack of funding.
    Madam Chair, the recent report commissioned to assess the 
impact to the first increase in the minimum wage on our economy 
by the Department of Labor and the McPhee report, to evaluate 
American Samoa's future and the canneries' industry, both 
concur with the Chamber's concern. Our Congressman Faleomavaega 
has recently introduced a bill to put an end to automatic 
raises for American Samoa as to continue is to cause economic 
devastation to our economy, the Chamber is fully supportive of 
this initiative as it is vital that the escalator clause is 
removed. Time, unfortunately, is against us as the next 50-cent 
increase is due on 25th of May, and if this automatic increase 
is not stopped or the very least delayed for perhaps a year, it 
is the Chambers opinion that it will cause the canneries to 
make some serious pronouncements about their immediate and 
their longer term future here which will have a significant and 
detrimental effect on our economy.
    Madam Chairwoman, the Chamber would respectfully draw your 
attention to the recent establishment by the Governor of a 
private public partnership known as the Economic Advisory 
Council. This Council was established as a means for the 
territory to become more economically self sufficient and to 
deal with the impact of issues such as the imposition of the 
minimum wage. It is intended to bring closer collaboration 
between the private sector and the government in economic 
development. And it will aid government in understanding, 
designing, and implementing new economic development programs 
and policies. The Council has already made considerable 
progress toward the development of new projects in industry 
sectors such as agricultures, hydroponics and aquaculture, 
fisheries, light manufacturing, the environment and alternative 
energy. And the Council has also used data and recommendations 
from previous and very expensive economic studies and reports 
to assist it with its work.
    In this area of changing economic circumstances for the 
territory and then the rapidly new changing highly competitive 
global economy, the Chamber applauds its initiative and makes 
reference to it today as it demonstrates a will by the 
government to be proactive in its desire to stimulate the 
economy and to seek new development and investment from 
overseas and will assist in supporting the economy in the short 
term and continue to support it in the longer term if the two 
canneries decide to scale down or move their operations 
elsewhere due to unfavorable economic conditions that exist for 
them here in American Samoa.
    Madam Chairwoman, the Chamber of Commerce urges you and 
your Subcommittee to do everything in your power to ensure that 
the escalator clause is removed from the minimum wage bill 
immediately so that we have some time to encourage new 
investment into our economy, and we return to a regular 
assessment of the needs of our people on the minimum wage on a 
biennial review basis, and act to increase their wages in line 
with prevailing economic conditions at the time.
    Thank you.
    [The prepared statement of Mr. Robinson follows:]

                Statement of David Robinson, President, 
                   American Samoa Chamber of Commerce

    Madame Chairwoman:
    The origins of the federal minimum wage applying to American Samoa 
appear to have been motivated by political points scoring rather than a 
genuine concern for the people and the economy of American Samoa.
    The original minimum wage bill as approved by the Democrats at the 
beginning of January 2007 exempted American Samoa from the minimum wage 
increase proposal. It was not until the Republicans made an issue of 
the fact that the headquarters of Del Monte, the owners of the Starkist 
Tuna cannery, are located in Mrs Nancy Pelosi's electorate in San 
Francisco, that the bill was amended to include American Samoa.
    The amendment appears to have been made without any serious degree 
of prior economic research on the impact and the potential negative 
outcomes that would arise for American Samoa and without the 
appropriate level of consultation with the Governor and senior 
government officials.
    The idea that the local minimum wage in a small Pacific island 
country should become consistent with one of the world's largest 
economies seems quite absurd.
    At the time the Chamber of Commerce requested that American Samoa 
not be included in the minimum wage bill. The chamber felt that the 
escalator clause included in the bill would have significant impacts 
that would be detrimental to the economy of American Samoa. Namely----
      the two canneries whose operations would become 
uncompetitive in the global trading environment and they would either 
scale down their operations or even decide to leave;
      the government as the largest employer could embark on a 
retrenchment program;
      the private sector who would retrench staff and in some 
cases be forced to close their business;
      the general wage scale parity in the territory upset by 
wage compression;
      there could be mass unemployment;
      it could cause a considerable outflow of capital;
      it would cause the banks to foreclose on delinquent 
accounts;
      it would cause an increase in crime rates; and--
      property values would decline as vacancy rates soar.
    The position of the Chamber remains the same today, in that the 
initial increase to the minimum wage was manageable but any further 
increases should be decided in a yearly review. This review would take 
into account the position of the economy to accept any increase; a 
position that is glaringly missing from the current legislation.
    The overall effect of the escalator clause in the bill will touch 
all facets of the economy and quality of life for the population of 
American Samoa.
    There would be a reduced collection of corporate and personal 
income tax adding pressure to the government budget and the federal 
government would have to increase it's financial support as departments 
such as the treasury, health and education would all be short of funds.
    There would not be any much needed new investment and development 
projects--increased wages would make us less competitive with other 
Pacific countries competing for investment dollars.
    There would be a significant tightening of credit and lending from 
our retail banks.
    Sea freight costs would increase and shipments would be less 
frequent causing shortages of basic food items. Cost increases would be 
passed on to consumers causing unsustainably high inflation.
    Essential services and utilities such as the power authority, the 
telephone company, the hospital and public works would suffer due to 
lack of funding.
    Our Congressman Faleomavaega has recently introduced a bill to put 
an end to automatic rises for American Samoa as to continue is to cause 
economic devastation to our economy. The Chamber is fully supportive of 
this initiative as it is vital that the escalator clause is removed.
    Time is against us as the next $0.50 cents increase is due on 25 
May and if this automatic increase is not stopped, it is the Chamber's 
opinion that it will cause the canneries to make some serious 
pronouncements about their immediate and longer term future here which 
will have a significant and detrimental effect on our economy.
    Madame Chairwoman, the Chamber of Commerce urges you and your 
subcommittee to do everything in your power to ensure that the 
escalator clause is removed from the minimum wage bill so that we have 
some time to encourage new investment into our economy and we return to 
a regular assessment of the needs of our people on the minimum wage on 
an annual review basis and act to increase their wages in line with 
prevailing economic conditions at the time.
                                 ______
                                 
    Mrs. Christensen. The Chair would now recognize Mr. Brett 
Butler for his testimony.

   STATEMENT OF BRETT BUTLER, GENERAL MANAGER, STARKIST SAMOA

    Mr. Butler. Thank you Chairwoman Christensen. First of all, 
good afternoon to the Subcommittee members here. I am Brett 
Butler, General Manager of StarKist Samoa, a subsidiary of Del 
Monte Foods. Thank you for inviting me to testify on the 
subject of the economic effects of the recently increased 
minimum wage.
    As you know, the matter we are here today to discuss today, 
mandatory minimum wage increases, is of great interest and 
importance to the American Samoa economy and the businesses who 
have chose to locate here. Through Del Monte Foods, StarKist 
has been working with the U.S. Department of Labor as well as 
Congressman Eni Faleomavaega to ensure the Federal government 
and decision makers in Washington fully understand the gravity 
of the current mandatory wage increases.
    I began my employment with StarKist Samoa in 1995 as a 
Capital Appropriations Clerk, and I have held several 
supervisory and management positions prior to becoming plant 
general manager in 2005. I was born and raised in American 
Samoa where I attended elementary and high school. I received a 
Bachelor of Arts degree from Pomona College in 1993.
    Let me begin by informing the Committee of Del Monte's most 
recent involvement in this issue. As indicated by the United 
States Department of Labor, Office of the Assistant Secretary 
for Policy, Del Monte's employees we were interviewed on 
multiple occasions by the authors of the recent report on this 
subject issued on January 25 of this year and provided further 
information in writing as requested by the authors. From the 
sources cited in the report, the information provided by Del 
Monte was indeed included in their analysis. In addition to the 
Federal study, Del Monte provided responses to the questions 
asked by Malcolm D. McPhee & Associates, for inclusion in their 
recent report on the subject prepared for the Department of 
Commerce, American Samoa Government. It should be noted that 
the United States Department of Labor incorporated the report 
prepared by Malcolm D. McPhee & Associates in its report.
    With specific regard to American Samoa, we noted in our 
discussions with both teams of researchers that constantly 
shifting cost pressures, excess global tuna manufacturing 
capacity and uncertainty in labor markets means that the 
American Samoa tuna industry is at significant and immediate 
risk. Additionally, the continued uncertainty in the tax code, 
both Federal and local, dramatically shifting energy costs and 
exponentially increasing labor costs annually mandated by law 
conspired to create a significant detriment to American Samoa's 
economic viability as a place to continue to do business.
    The mandatory annual 50-cent-per-hour wage increases that 
are scheduled to continue in May, and each year thereafter 
creates the most significant new uncertainty and rapidly adds 
to the attraction of competing manufacturing locations in 
pursuit of our industry. While the Department of Labor report 
correctly notes that 85 percent of the American Samoa's economy 
is derived from tuna processing, American Samoa supplies less 
than 15 percent of the world's tuna supply. American Samoa only 
serves the U.S. market and primarily with commodity canned tuna 
products. Industry growth products such as pouch and other 
value added products are produced elsewhere like Ecuador. 
However, to date StarKist has remained committed to 
diversifying American Samoa production into these products if 
economically feasible.
    It is important to understand, however, that the U.S. 
commodity tuna market is declining. Indeed from 2004 to 2007, 
the overall U.S. tuna market declined by 8 percent. 
Furthermore, significant excess tuna processing capacity exists 
globally, primarily in nearby low costs countries such as 
Thailand and the Philippines, and Fiji who are eager to absorb 
this production. Furthermore, competitive trade advantages 
previously enjoyed by American Samoa no longer exist. Tuna 
processing countries in North and Central America are now 
completely duty free under CAFTA and NAFTA and in Africa are 
duty free currently under AGOA. Wage rates in these countries 
are considerably lower than American Samoa's.
    U.S. foreign tuna imports from 2003 to 2005 were the 
highest level ever, and from 2004 to 2005 these foreign imports 
officially surpassed total domestic production. Despite a 12.5 
percent duty, importers from low wage countries are still 
making a profit. These imports are split among Thailand, 47 
percent; Philippines, 22 percent; Ecuador, 14 percent; and 
Indonesia 9 percent. Even with this rapid growth in U.S. 
foreign tuna products, there remains significant excess 
capacity to absorb more production in these countries. As 
stated in the Department of Labor report on page 20, there are 
forty canneries in Thailand, and that nothing would have to be 
built or moved. To implement a production transfer, the 
companies would simply place more orders with existing plants. 
It has been reported that the world tuna processing has an 
excess of production capacity on the order of 20 to 40 percent.
    I read the following statement from Congressman Eni F.H. 
Faleomavaega: ``By way of our mutual cooperation and based on 
the findings of the DOL study, I am confident that the 
Governor, Fono, and I will send a unified message to Congress 
requesting an enactment of legislation which will put an end to 
automatic increases in minimum wage and which will empower the 
DOL, in consultation with the Secretary of the Interior and the 
American Samoa Government, to conduct economic assessments 
every two years to determine when and if our economy can absorb 
future increases.'' Del Monte supports the resolution outlined 
in this statement, and we pledge our support and assistance to 
the Governor, Fono, and the Congressman to achieve this 
outcome.
    Thank you again for the opportunity to appear here today. 
Thank you.
    [The prepared statement of Mr. Butler follows:]

              Statement of Brett Butler, Del Monte Foods, 
                    General Manager, StarKist Samoa

    Good morning. I am Brett Butler, General Manager of StarKist Samoa, 
a subsidiary of Del Monte Foods. Thank you for inviting me to testify 
on the subject of the economic effects of the recently increased 
minimum wage.
    As you know, the matter we are here to discuss today--mandatory 
minimum wage increases--is of great interest and importance to the 
American Samoan economy and the businesses who have chosen to locate 
here. Through Del Monte Foods, StarKist has been working with the U.S. 
Department of Labor as well as Congressman Eni Faleomavaega to ensure 
the federal government and decision makers in Washington fully 
understand the gravity of the current mandatory wage increases.
    I began my employment with StarKist Samoa in 1995 as a Capital 
Appropriations Clerk, and have held several supervisory and management 
positions prior to becoming Plant General Manager in 2005. I was born 
and raised in American Samoa, where I attended elementary and high 
school. I received a Bachelor of Arts degree from Pomona College in 
1993.
    Let me begin by informing the Committee of Del Monte's most recent 
involvement in this issue. As indicated by the United States Department 
of Labor, Office of the Assistant Secretary for Policy, Del Monte 
employees were interviewed on multiple occasions by the authors of the 
recent report on this subject, issued on January 25 of this year, and 
provided further information in writing as requested by the authors. 
From the sources cited in the report, the information provided by Del 
Monte was indeed included in their analysis.
    In addition to the Federal study, Del Monte provided responses to 
the questions asked by Malcolm D. McPhee & Associates, for inclusion in 
their recent report on the subject prepared for the Department of 
Commerce, American Samoa Government. It should be noted that the United 
States Department of Labor incorporated the report prepared by Malcolm 
D. McPhee & Associates in its report.
    With specific regard to American Samoa, we noted in our discussions 
with both teams of researchers that constantly shifting cost pressures, 
excess global tuna manufacturing capacity, and uncertainty in labor 
markets means that the American Samoan tuna industry is at significant 
and immediate risk. Additionally, the continued uncertainty in the tax 
code--both Federal and local, dramatically shifting energy costs, and 
exponentially increasing labor costs annually mandated by law conspire 
to create a significant detriment to American Samoa's economic 
viability as a place to continue to do business.
    The mandatory annual $0.50/hour wage increases that are scheduled 
to continue in May, and each year thereafter, creates the most 
significant new uncertainty and rapidly adds to the attraction of 
competing manufacturing locations in pursuit of our industry.
    While the Department of labor report correctly notes that fully 85% 
of the American Samoan economy is derived from Tuna processing, 
American Samoa supplies less than 15% of the world's canned tuna 
supply. American Samoa only serves the U.S. market, and primarily with 
commodity canned tuna products. Industry growth products (such as pouch 
and other value added products) are produced elsewhere, like Ecuador. 
However, to date StarKist has remained committed to diversifying 
American Samoan production into these products if economically 
feasible.
    It is important to understand, however, that the U.S. ``Commodity 
Tuna'' market is declining. Indeed, from 2004--2007, the overall U.S. 
tuna market declined by 8%. Furthermore, significant excess tuna 
processing capacity exists globally, primarily in nearby, low labor 
cost countries such as Thailand, the Philippines, and Fiji who are 
eager to absorb this production. Furthermore, competitive trade 
advantages previously enjoyed by American Samoa no longer exist. Tuna 
processing countries in North and Central America are now completely 
duty free under CAFTA and NAFTA and in Africa are duty free currently 
under AGOA. Wage rates in these countries are considerably lower than 
American Samoa's.
    U.S. foreign tuna imports from 2003--2005 were the highest level 
ever, and in 2004 to 2005 these foreign imports officially surpassed 
total domestic production. Despite a 12.5% duty, importers from low 
wage countries are still making a profit. These imports are split among 
Thailand (47%), Philippines (22%), Ecuador (14%) and Indonesia (9%).
    Even with this rapid growth in U.S. foreign tuna imports, there 
remains significant excess capacity to absorb more production in these 
countries. As stated in the Department of Labor Report, on page 20, 
``...there are forty canneries in Thailand, and that nothing would have 
to be built or moved. To implement a production transfer, the companies 
would simply place more orders with existing plants...It has been 
reported that the world tuna processing has an excess of production 
capacity on the order of 20 to 40 percent.''
    I read the following statement from Congressman Eni F.H. 
Faleomavaega, ``By way of our mutual cooperation and based on the 
findings of the DOL study, I am confident that the Governor, Fono, and 
I will send a unified message to Congress requesting enactment of 
legislation which will put an end to automatic increases in minimum 
wage and which will empower the DOL, in consultation with the Secretary 
of the Interior and the American Samoa Government, to conduct economic 
assessments every two years to determine when and if our economy can 
absorb future increases.'' Del Monte supports the resolution outlined 
in this statement and we pledge our support and assistance to the 
Governor, Fono and Congressman to achieve this outcome.
    Thank you again for the opportunity to appear here today.
                                 ______
                                 
    Mrs. Christensen. Thank you, Mr. Butler.
    The Chair now recognizes Mr. Galea'i for his testimony.

 STATEMENT OF ALFONSO ``PETE'' GALEA'I, PLANT HUMAN RESOURCES 
       MANAGER, CHICKEN OF THE SEA SAMOA PACKING COMPANY

    Mr. Galea'i. Chairwoman Christensen, Congressman 
Faleomavaega, and members of the Subcommittee, I am Alfonso 
Pete Galea'i, Plant Human Resources Manager, COS Samoa Packing 
Company of Chicken of the Sea International. On behalf of 
Chicken of the Sea, thank you for the opportunity to testify on 
the economic effects of the recently increased minimum wage.
    This hearing is not only timely but it is also very 
important for the people and businesses of American Samoa. As 
the Department of Labor reported only weeks ago, the new 
minimum wage requirements could result in the closure of the 
tuna canneries which could cause severe and wide spread damage 
to the American Samoa economy. While my comments today will 
focus primarily on the minimum wage, I will also discuss some 
of the additional economic issues that we face as a business 
operating in American Samoa. I will be happy to address 
questions related to any of these economic issues.
    Chicken of the Sea has been a partner with American Samoa 
since 1954. We have nearly 2,000 employees in American Samoa, 
and their welfare and that of their families is very important 
to us. We understand our responsibilities to the local economy 
and have worked to maintain operations in American Samoa. 
Unfortunately, changing economies, which include high labor 
costs, have undermined the profitability of tuna canneries in 
American Samoa.
    These labor costs decrease our ability to compete with 
foreign businesses who enjoy significantly lower labor costs in 
Thailand, Philippines, Ecuador, Mexico, and Papua New Guinea to 
name a few. Moreover as the Department of Labor reported, our 
competitive disadvantage cannot be offset by increased 
productivity, or reduced profits, or high prices passed along 
to consumers. Our concerns about the increasing minimum wage 
are well founded. According to the Department of Labor, there 
appears to be a genuine cause for concern that at some point 
before the escalation to $7.25 per hour is reached, the rising 
minimum wage combined with other factors may lead to the 
closing of both canneries in American Samoa. As you well know, 
the loss of canneries' jobs in American Samoa would devastate 
the territory's economy. About 7,825 job losses would result 
from the closure of both canneries in American Samoa. That is 
the equivalent to 40 percent of all employment in American 
Samoa.
    The Department of the Interior predicted that direct wage 
loses from the closure of two canneries would amount to $33.4 
million a year. This figure excludes management compensation or 
the immediate second tertiary losses including goods and 
services provided to fishing fleets and crews. According to the 
Department of the Interior, the total loss is likely to be 
significantly higher. The potential costs to the U.S. 
Government, if the canneries shut down, are significant. The 
American Samoa Government would lose its primary source of 
corporate revenues and the economic and financial distress 
caused by such an event would result in increased use of 
Federal assistance. This assistance would take the form of food 
stamps, temporary assistance to needy families, Women, Infant, 
and Children (WIC), and Medicaid. It is estimated that those 
affected directly by the cannery shutdown may number as many as 
19,189 persons. This means the total estimated Federal aid can 
be as much as $46.3 million a year, twice the amount of current 
discretionary Federal grants to the American Samoa Government.
    Over time, the closing of the cannery will likely result in 
a $150 million to $200 million shortfall in the local 
governments' revenue--revenue that could only be replaced with 
a Federally appropriated subsidy according to a letter sent 
from Congressman Faleomavaega and Senators Inouye, Bingham, and 
Akaka who are ranking members of the Health, Education, Labor 
and Pensions Committee, and Mr. Michael Ensi. Given the 
constantly shifting cost pressures, excess global manufacturing 
capacity and uncertainties in labor markets, the American Samoa 
tuna industry is at a significant and immediate risk. Moreover, 
the potential and exponential and annual increase in labor 
costs undermines American Samoa's economic viability as a place 
to continue to do business. Those most hurt by the negative 
effects of the minimum wage increase are actually the people 
intended to benefit from the Fair Minimum Wage Act of 2007. 
This reality is recognized by those tasked with protecting the 
people of American Samoa.
    In a letter to the Chairman of the Committee on Energy and 
Natural Resources Jeff Bingaman, American Samoa Governor 
Togiola requested that the future increases to the minimum wage 
be conditioned on the Secretary of Labor's determination that 
the increase be economically feasible and will not 
substantially curtail employment in American Samoa. Likewise 
Congressman Faleomavaega introduced H.R. Bill 5154 which would 
amend the Fair Minimum Wage Act of 2007 and condition further 
increases in the minimum wage on a determination by the 
Secretary of Labor that such increases will not have an adverse 
impact on American Samoa's economy.
    On behalf of Chicken of the Chicken of the Sea, I would 
like to express our strong support for Congressman 
Faleomavaega's important legislation as well as Governor 
Tulafono's efforts to encourage Congress to enact similar 
measures. Calibrating the labor costs in American Samoa with 
the territory's economic viability is only one step in the 
process of strengthening the island's economy. American Samoa 
is seeking to diversify its corporate economy, attracting new 
investments, and creating new business opportunities. To do 
that, American Samoa must address additional cost issues like 
fuel cost and local taxes. We support the efforts to strengthen 
the American Samoa economy, and Chicken of the Sea would be 
honored to help Congress develop an economic incentives package 
geared toward the territory's economic diversification and 
stabilization.
    Thank you for the opportunity to testify before you today. 
I am happy to answer any questions you might have.
    [The prepared statement of Mr. Galea'i follows:]

 Statement of Alfonso ``Pete'' Galea'i, Plant Human Resources Manager, 
      COS Samoa Packing Company, Chicken of the Sea International

    Chairwoman Christensen, Congressman Gallegly, Congressman 
Faleomavaega, and members of the subcommittee, I am Alfonso ``Pete'' 
Galea'i, Plant Human Resources Manager for COS Samoa Packing Company of 
Chicken of the Sea International. On behalf of Chicken of the Sea, 
thank you for the opportunity to testify on the economic effects of the 
recently increased minimum wage. This hearing is not only timely, but 
it is also very important for the people and businesses of American 
Samoa. As the Department of Labor reported only three weeks ago, the 
new minimum wage requirements could result in the closure of the tuna 
canneries, which would cause severe and widespread damage to the 
American Samoa economy. 1 While my comments today will focus 
primarily on the minimum wage, I will also discuss some of the 
additional economic issues that we face as a business operating in 
American Samoa. I would be happy to address questions related to any of 
these economic issues.
---------------------------------------------------------------------------
    \1\ U.S. Department of Labor, Impact of Increased Minimum Wages on 
the Economies of American Samoa and the Commonwealth of the Northern 
Mariana Islands, 17 (Jan. 2008).
---------------------------------------------------------------------------
    Chicken of the Sea has been a partner with the people of American 
Samoa since 1954. We have nearly 2000 employees in American Samoa, and 
their welfare and that of their families is very important to us. We 
understand our responsibilities to the local economy and have worked to 
maintain operations in Samoa. Unfortunately, changing economies--which 
include high labor costs--have undermined the profitability of tuna 
canneries in American Samoa. 2 These labor costs decrease 
our ability to compete with foreign businesses who enjoy significantly 
lower labor costs in Thailand, Philippines, Ecuador, Mexico, and Papua 
New Guinea, to name a few. Moreover, as the Department of Labor 
reported, our competitive disadvantage cannot be offset by increased 
productivity, reduced profits, or higher prices passed along to 
consumers. 3
---------------------------------------------------------------------------
    \2\ Id. at 16.
    \3\ Id. at 14.
---------------------------------------------------------------------------
    Our concerns about the increasing minimum wage are well-founded. 
According to the Department of Labor, ``[T]here appears to be genuine 
cause for concern that, at some point before the escalation to $7.25 
per hour is reached, the rising minimum wage combined with other 
factors may lead to the closing of both canneries in American Samoa.'' 
4 As you well know, the loss of cannery jobs in American 
Samoa would devastate the territory's economy. About 7,825 job losses 
would result from the closure of the two canneries; that is the 
equivalent of 40 percent of all employment in American Samoa. 
5 The Department of Interior predicted that direct wage 
losses from the closure of the two canneries would amount to $33.4 
million a year. 6 This figure excludes management 
compensation or the immediate secondary and tertiary losses, including 
goods and services provided to fishing fleets and crews. According to 
the Department of Interior, the total loss is ``likely to be 
significantly higher.'' 7
---------------------------------------------------------------------------
    \4\ Id. at 18.
    \5\ Id. at 21.
    \6\ Office of Insular Affairs, U.S. Department of the Interior, The 
Economic and Financial Impact of American Samoa Cannery Shutdown on the 
Territory's Economy, Employment, Public Sector and the Federal Budget, 
3 (July 2006).
    \7\ Id.
---------------------------------------------------------------------------
    The potential cost to the United States government if the canneries 
shut down are significant. The American Samoa Government (ASG) would 
lose its primary source of corporate revenues, and ``the economic and 
financial distress caused by such an event would result in increased 
use of Federal assistance.'' 8 This assistance would take 
the form of food stamps; temporary assistance to needy families (TANF); 
women, infants, and children (WIC); and Medicaid. It is estimated that 
``those affected directly by the cannery shutdown may number as many as 
19,189 persons.'' 9 This means the ``total estimated Federal 
aid can be as much as $46.3 million a year, twice the amount of the 
current discretionary Federal grant to the ASG.'' 10 Over 
time, the closing of the canneries ``would likely result in a $150 
million to $200 million shortfall in the local government's revenue--
revenue that could only be replaced with a federally appropriated 
subsidy,'' according to a letter sent from Congressman Faleomavaega and 
Senators Inouye, Bingaman, and Akaka to the Ranking Member of the 
Health, Education, Labor & Pensions Committee Michael Enzi. 
11
---------------------------------------------------------------------------
    \8\ Id. at 5.
    \9\ Id.
    \10\ Id.
    \11\ Letter from Congressman Eni Faleomavaega and Senators Daniel 
Inouye, Jeff Bingaman, and Daniel Akaka to The Honorable Michael Enzi, 
Ranking Member of the Health, Education, Labor & Pensions Committee, 1 
(Dec. 13, 2007).
---------------------------------------------------------------------------
    Given the constantly shifting cost pressures, excess global 
manufacturing capacity, and uncertainty in labor markets, the American 
Samoan tuna industry is at significant and immediate risk. Moreover, 
the exponential and annual increase in labor costs undermines American 
Samoa's economic viability as a place to continue to do business. Those 
most hurt by the negative effects of the minimum wage increase are 
actually the people intended to benefit from the Fair Minimum Wage Act 
of 2007. This reality is recognized by those tasked with protecting the 
people of American Samoa:
      In a letter to Chairman of the Committee on Energy and 
Natural Resources Jeff Bingaman, American Samoa Governor Togiola 
Tulafono requested that the future increases to the minimum wage be 
conditioned on the Secretary of Labor's determination that the increase 
``economically feasible and will not substantially curtail employment 
in American Samoa.'' 12
---------------------------------------------------------------------------
    \12\ Letter from The Honorable Togiola T.A. Tulafono, Governor of 
American Samoa, to The Honorable Jeff Bingaman, Chairman of the Energy 
and Natural Resources Committee, 2 (Dec. 27, 2007).
---------------------------------------------------------------------------
      Likewise, Congressman Faleomavaega introduced H.R. 5154, 
which would amend the Fair Minimum Wage Act of 2007 and condition 
further increases in the minimum wage on a determination by the 
Secretary of Labor that such increases will not have an adverse impact 
on American Samoa's economy.
On behalf of Chicken of the Sea, I would like to express our strong 
support for Congressman Faleomavaega's important legislation, as well 
as Governor Tulafono's efforts to encourage Congress to enact similar 
measures.
    Calibrating the labor costs in American Samoa with the territory's 
economic viability is only one step in the process of strengthening the 
island economy. American Samoa is seeking to diversify its corporate 
economy, attracting new investments and creating new business 
opportunities. 13 To do that, American Samoa must address 
additional cost issues, like fuel cost and local taxes. We support the 
effort to strengthen the American Samoa economy, and Chicken of the Sea 
would be honored to help Congress develop an economic incentives 
package geared toward the territory's economic diversification and 
stabilization.
---------------------------------------------------------------------------
    \13\ Rick Turner and Adam Stein, American Samoa Business 
Opportunities Report, 1 (July 2007).
---------------------------------------------------------------------------
    Thank you for the opportunity to testify before you today. I am 
happy to answer any questions that you might have.
                                 ______
                                 
    Mrs. Christensen. I would like to thank all of the three 
panelists for their testimony. I now recognize myself to start 
the first round of questioning. I will begin with Mr. Robinson, 
representative of the Chamber of Commerce. Those who believe 
that because the canneries have not shut their doors and left 
after the first 50-cent increase that perhaps the next 50-cent 
increase would yield the same results and wouldn't have a great 
impact. What do you say to those who feel that way.
    Mr. Robinson. Thank you, Madam Chair.
    We do not subscribe to that line of thinking. It is the 
belief of the Chamber and its members that if the second 50 
cents goes on on the 25th of May, this will encourage both 
canneries to review their current operations and the effects of 
the outcome of their review, we feel would either be a scaling 
down or in fact a departure from American Samoa.
    Mrs. Christensen. I would believe that you know it was 
always envisioned that after 50 years of--continue with it Mr. 
Robinson--being under the Special Industry Committee, that 
American Samoa's wages would have progressed at least to maybe 
what the U.S. wages were--$5, perhaps $5.50--the whole U.S. 
minimum wage. I am sure that that was the thinking that somehow 
it would have increased over that 50-year period. So why in 
your opinion has that not occurred, and what do you see as the 
main factor in the Industry Committee's deliberations that has 
prevented the wages from increasing more than they have over 
these 50 years?
    Mr. Robinson. Madam Chair, I have not been privy to those 
previous meetings, but my understanding of the documentation 
that I have read regarding the outcomes from those 
deliberations would suggest that the private sector, excluding 
the canneries, was forever seeking to raise the minimum wages 
to a much higher level than they were. But it was the canneries 
in fact who objected to that on the basis of the fact that the 
impacts of any significant wage increase would have a severe 
impact on their operations.
    Mrs. Christensen. Let me turn to the canneries. It has been 
the impression that the canneries have been the main obstacle 
to increase the wages over the years. How do you respond to 
that impression and to Mr. Robinson's testimony?
    Mr. Butler. We can't help the fact that 50 percent of the 
private sector is operated by the canneries. It is a 
competitive arena that we work in globally, and labor is one of 
the cost significant cost factors in our industry. And this is 
an area where we will take a position to lower costs to become 
competitive in the global market. That is basically our 
position in these Industry meetings.
    Mrs. Christensen. Well, let me ask this question first. You 
have--do each of you have canneries in other parts of the 
world?
    Mr. Butler. StarKist has a cannery that operates in 
Ecuador.
    Mrs. Christensen. How does that compare in size to the one 
here?
    Mr. Butler. How does that compare in size in terms of 
people?
    Mrs. Christensen. Number of employees.
    Mr. Butler. I can tell you that we employ close to 2900 
people here in American Samoa. I can't give you the facts but I 
can get that information to you for Ecuador.
    Mr. Galea'i. Samoa Packing is the sole cannery of the 
Chicken of the Sea.
    Mrs. Christensen. This is a sole packing?
    Mr. Galea'i. Yes.
    Mrs. Christensen. How many employees? Do you have companies 
in other places? You have factories or other than the packing? 
It is just the packing occurring here?
    Mr. Galea'i. Packing and marketing.
    Mrs. Christensen. So what is the total number of employees?
    Mr. Galea'i. Two hundred Chicken of the Sea International 
and 2,000 Samoa Packing employees.
    Mrs. Christensen. Two hundred and 2,000?
    Mr. Galea'i. Yes.
    Mrs. Christensen. I am going to let Mr. Faleomavaega take 
his initial questions and I will come back.
    Mr. Faleomavaega. Thank you, Madam Chairwoman. And I do 
want to thank Mr. David Robinson for doing such a fantastic job 
as a President of the American Samoa Chamber of Commerce with 
the years that he has taken this position. For all these years, 
Madam Chair, I have always been very critical of the fact that 
it is very difficult to really get a sense of what the needs 
are from our business community because our Chamber was not 
very effective, and let alone even the numbers, let alone even 
having received any input of their concerns as far as the 
business community is concerned whenever there are issues 
affecting the economy of the territory's concern. So I want to 
really commend Mr. Robinson for his leadership and for doing 
this for the territory.
    Mr. Robinson, how many members are there in the chamber?
    Mr. Robinson. 62 at the moment.
    Mr. Faleomavaega. How many businesses do we have here in 
the territory approximately? Stores, well enterprises for that 
matter. I guess Mr. Paopao can probably give us a number.
    Mr. Robinson. He could probably give me a more accurate 
take on that in terms of stores and things like that. In terms 
of stores, there are 230, I think, and in terms of other 
business I would say another 100. I would say round figures 400 
perhaps.
    Mr. Faleomavaega. Would you say maybe 1,000 business 
licenses have been issued by the Department of Commerce in 
terms of business being conducted here in the territory?
    Mr. Robinson. I don't know that that is an accurate figure, 
but I would say there are a considerable number of licenses 
issued.
    Mr. Faleomavaega. And from that only 62 members are 
involved with the Chamber of Commerce?
    Mr. Robinson. Yes.
    Mr. Faleomavaega. I know there has been a lot of discussion 
of diversification. I believe this issue has been with our 
territory for the last 100 years, the idea of diversification 
of our economy. And now we come to the point where 80 percent 
of our entire economy depends on the standing and the 
livelihood of our two canneries, and you had indicated in your 
testimony that suggestions as you have offered--and by the way 
I want to commend the Economic Advisory Council for being 
visible in terms of looking into areas where we need to do this 
part of our diversification. I had indicated earlier to the 
Lieutenant Governor and to the President of our Senate, do you 
know what our economic priorities are in our government?
    Mr. Robinson. No.
    Mr. Faleomavaega. Do you know what the priorities are of 
our government?
    Mr. Robinson. I know what they should be.
    Mr. Faleomavaega. So when we raise the issues of economic 
development and what should our $300 million budget that we are 
under, I am a little confused myself in terms of--the 
difficulty of my job in trying to determine how I could best 
compliment, if I know what our economic priorities are.
    Mr. Robinson. You are quite right and don't think I am 
being flippant about this. I am not. My response to that would 
be that perhaps over the years, over the past years and in the 
past many years, there has been a reliance on the canneries and 
the government to be the employers of choice here on the 
island. And there has been a great reliance on the generosity 
of the Federal government in supplying on an annual basis a 
quantum of dollars which allows the territory to operate. I 
would add to that that I think there has been as a result of 
that the reliance on those three areas. There has been 
perhaps--how should I say it--simply a lack of attention to a 
specific strategic development plan. As you said before, there 
have been many, many economic studies, surveys, reports carried 
out. And I think that most of them are being filed away neatly 
in various filing cabinets over the years and never see the 
light of day.
    I would suggest to you once those reports are in existence, 
I have a chance to have a look at most of them. And those 
reports have one significant failure, all of them. They are all 
very good recorders of historical events. They are all very 
good reporters about a ``wish list'' of things they would like 
to see done, but not one single one of them articulates the 
real opportunities on how those opportunities can be carried 
out. Not one. So, therefore, in my testimony before hand, I 
refer to an initiative by the government made last year of the 
Economic Advisory Council. And we have taken those reports for 
what they are worth. I have extracted from those reports the 
relevant sections that apply to the committees we have 
established in this Council, and there are five of them. And we 
have used the information from those reports to provide to the 
chairs of each of those committees as a basis to start the 
overview of their industry sectors then to perhaps identify 
some of the areas that can be developed and can be supportive 
and can stimulate the current economy.
    Mr. Faleomavaega. Your understanding of the declining of 
the business community here in the territory, who controls the 
retail industry right now in the territory?
    Mr. Robinson. I would say that it is controlled 
predominantly by the Asian community and predominantly in that 
Asia community by the Koreans.
    Mr. Faleomavaega. How many Korean stores do you think we 
have now in place in the territory?
    Mr. Robinson. I think probably over 190 of them.
    Mr. Faleomavaega. Would you say they have a tremendous 
impact in the economy of the territory?
    Mr. Robinson. I would say that most of them have their own 
particular agendas and most of them don't really integrate into 
the economy. They don't integrate into societies they should. 
They don't put back what they should put back given the amount 
of revenue that they take.
    Mr. Faleomavaega. So that might also play a very important 
impact on the overall economic health of our territory in that 
respect?
    Mr. Robinson. They certainly do. If it was that they were 
paying the right level of income tax; if it was that they are 
paying the right level of duties when bringing in goods; if it 
was that they were doing all other things that perhaps non-
Asian companies do, I would suggest that their impact on the 
economy would be much greater.
    Mr. Faleomavaega. May I ask how many members from our 
Korean community are members of the Chamber?
    Mr. Robinson. Of the Asian community?
    Mr. Faleomavaega. Yes.
    Mr. Robinson. At the present time, there are none. Last 
year there were, from memory, eight and most of them were 
Koreans and a couple of them Filipinos.
    Mr. Faleomavaega. So 196 retail stores are run and operated 
by members of the Korean community and not one is a member of 
the Chamber of Commerce in this territory. So how are we going 
to expect to work a real positive economic plan if they are not 
even participants in the process of developing our economy?
    Mr. Robinson. Well, as I said, Mr. Congressman, they have 
their own agendas. They don't want to be part of an 
organization like the Chamber of Commerce. To them it doesn't 
offer them any particular value. The only reason why they 
joined in the first place a year or two back, it was because 
they collectively thought that the Chamber of Commerce could 
offer them some assistance when there was a great deal of 
pressure put on by the immigration on the renewal of work 
visas.
    Mr. Faleomavaega. Madam Chair, I know my time is up. I will 
wait for my second round because I still want dialogue with our 
friends from the canneries. Thank you.
    Mrs. Christensen. Thank you, Mr. Faleomavaega.
    I would like to ask maybe I will start with Mr. Galea'i 
because you spoke to this in your testimony. For many years now 
there has been tuna canneries in like Thailand where I believe 
Chicken of the Sea is owned by Thai Union, one of the largest 
tuna canneries or second largest and Ecuador maybe in the world 
which Mr. Butler referred to. And they have done that with 
extremely low wage rates and little or no environmental 
regulation. Yet the tuna canneries have continued to stay here 
in American Samoa where there is environmental regulation and 
the wages are slightly higher. So there must be some advantage 
to staying here despite the fact that those low wages already 
exist and less regulation is there. So could you tell me and 
Mr. Butler, you can follow up, I am asking this directly to Mr. 
Galea'i because he mentioned this in his testimony. What are 
the advantages because they obviously have something? What are 
the factors that determine your profitability in American Samoa 
versus Thailand or elsewhere? How does American Samoa measure 
up despite the other places, but basically I am trying to 
establish that there must be some advantage to being here 
despite the higher salaries that you pay and the more 
regulations that you have to adhere to.
    Mr. Galea'i. Thank you, Chairwoman Christensen. That is a 
very good question. The advantage is for the canneries locating 
to American Samoa in the first place are the Pago Pago port, 
the fact that we are in the middle of good fishing grounds 
particularly for albacore, central to tuna fishing grounds. The 
fact that we have preferential treatment in the United States 
market although that is under siege by the free trade 
initiatives by the Bush Administration. Our wages are below the 
mainland wages. These mixtures of advantages have been eroding 
because of other factors. The fact of rising fuel costs, again 
the free trade initiatives NAFTA provides.
    Mexico duty free access for canned tuna to enter since 
January 2008.
    Mrs. Christensen. The energy costs that shouldn't be a big 
difference in the factors between here and somewhere else 
should they?
    Mr. Galea'i. They are about twice. Our costs are about 
twice what they are in the mainland and even more so what they 
are in the foreign countries such as Thailand and Asian 
countries, Ecuador.
    Mrs. Christensen. Apart from wages?
    Mr. Galea'i. Yes, apart from wages. Our wages are about 
four to five times higher than our foreign competitors.
    Mrs. Christensen. What about energy costs?
    Mr. Galea'i. Energy costs are about twice what they are
    Mrs. Christensen. Twice here?
    Mr. Galea'i.--yes, what they are in the mainland. And that 
includes electricity and steam that we use for cooking fish.
    Mrs. Christensen. Do you issue reports annually that would 
show us the way we can really take a look at these numbers?
    Mr. Galea'i. Yes. We have that information readily 
available.
    Mrs. Christensen. Do you have it available?
    Mr. Galea'i. No, I don't have it with me.
    Mrs. Christensen. I think the committee would like to take 
a look at that so that we can get a better handle on it, maybe 
the challenges that you do face or do not face elsewhere as 
compared to American Samoa.
    Mr. Faleomavaega. Madam Chair, if I may, I think it would 
be welcome for by both Mr. Butler and Mr. Galea'i to submit 
whatever records to make it to be part of the records if they 
could submit whatever information that would be helpful to the 
committee. Data, facts, and information that will support what 
we are trying to achieve here under the recently introduced 
bill H.R. 5154.
    Mr. Galea'i. I will be happy to introduce that information.
    Mrs. Christensen. Companies have to plan and in your 
planning I am sure as you project over the years, we've heard a 
lot of talk about uncertainties, but every company deals with 
some uncertainties. You have to plan. You have to make 
projections as to costs over the years, and I would be 
surprised if an increase in wages was not a part of that 
planning. And I would be very interested to know what kinds of 
increases were factored for use in factoring out your plan in 
going forward. Did you just assume then as you projected what 
your operating costs might be going forward if there was no 
minimum wage increase, or did you assume 35 cents, 25 cents 
every two years? What did the company use as you planned your 
expenditures going forward in your business plans?
    Mr. Galea'i. If I may.
    Mrs. Christensen. That is both you and Mr. Butler.
    Mr. Galea'i. If I may if you are talking about the initial 
escalator 50 cents, that was an abrupt increase in our labor 
cost of $2 million. We could not properly plan for that abrupt 
increase in our cost.
    Mrs. Christensen. What I am really asking of both of you is 
you have been here how many years? 50?
    Mr. Galea'i. I have been here much of my life.
    Mrs. Christensen. But the packing--
    Mr. Galea'i. 13 years with the canneries.
    Mr. Butler. 13 years.
    Mrs. Christensen. We realize that 50 cents was imposed and 
that, of course, was imposed because the wages had not gone up 
significantly barely, but as companies plan you know future 
budgets and project growth or changes, they ought to be 
projecting within that what the cost of salaries would be and 
what the cost of wages would be. Are you telling me that the 
company projected over 13 years no increase or 2 percent 
increase in wages over that time?
    Mr. Butler. I would like to answer that. Generally, we make 
a forecast. You look at trends. It is what the trend is for the 
last previous years that we use to anticipate wage increases. 
And to prove Galea'i's point, the 50-cent increase was 
introduced on July 24--maybe to affect--but it did come all of 
a sudden. And because that is long out that there is 50-cent 
increases every year, that is obviously an easy forecast for us 
to make; so it is basically history trends that we look at and 
anticipate what we see in wages.
    Mrs. Christensen. Same for you?
    Mr. Galea'i. We've, of course, forecast our costs, and we 
have the ``bean counters,'' so to speak, and they make the 
forecasts based on scenarios and how costs are going currently 
and make projections; so, yes, we do forecast increases and 
incorporate anticipated increases in minimum wage across the 
board for our employees.
    Mrs. Christensen. Well, when the Special Industry Committee 
meets and ask you for your input, have you ever suggested well 
because in your business plans and projections, you have 
projected such and such an increase that the company could 
really tolerate 15 cents, 25 cents, 35 cents? And have you ever 
said to the Industry Committee that you can accept a raise more 
than 2 cents or 3 cents?
    Mr. Galea'i. Our position is that was that we provided the 
Industry Committee with response to the criteria they were to 
base whether or not to provide any increase. We provided that 
economic information to them to make their determination 
whether what increase was warranted.
    Mrs. Christensen. Does Chicken of the Sea speak for itself 
and StarKist speak for itself so you all don't get together 
and----
    Mr. Butler. I can't answer that question because I have 
never been part of the Special Industry Committee directly but 
past management, I can make that a request to that question and 
get a response to you.
    Mrs. Christensen. It sounds to me as though the projections 
were based on no increases until the 50 cents came up.
    Mr. Butler. Can you repeat that please?
    Mrs. Christensen. What I am hearing is that there was never 
any consideration that wages would increase with the 
projections of business planning of the companies moving 
forward, and I find that would be between 1990 and 2000. Now 
correct me if I am wrong. Between 1990 and 2000, did you 
forecast any increase in wages, or were you just confident 
based on past years before that Industry Committees would never 
raise the wages and so your own projections did not include any 
wage increases at all?
    Mr. Butler. And to answer your question that we looked at 
previous increases in the past and we used those increases as a 
trend to forward forecasts or projections. You have to project 
some sort of increase, and with the 50-cent increase that went 
into effect on July 25th that was definitely not in our 
projection but will be now since it is locked.
    Mr. Galea'i. If I may add, we Samoa Packing has provided 
performance-based increases to our employees, and it was based 
on meeting performance goals that could pay for the increases. 
So yes, we have had a voluntary hand performing wage increases 
during that time frame that you mention 1990-2000, and we have 
forecasted increases in labor costs as well as all the other 
cost factors based again on trends.
    Mrs. Christensen. What level of increase? Could you give me 
an example? How much of an increase based on the performance, 
and how many employees, other than 2,600 or so, might have met 
those performance standards to get an increase?
    Mr. Galea'i. The performance increase is more across the 
board increases of the same amount, the same percentage of 
increase across the board. And it was offered to our employees, 
and they were made aware exactly of what performance goals had 
to be met and what time frame they had to be met and when they 
were met.
    Mrs. Christensen. When was the last year that it was done?
    Mr. Galea'i. I believe and my recall may be in error. I 
believe it was 2003, 2004.
    Mrs. Christensen. And so that was done internally, but was 
there ever a time that a wage increase was recommended to the 
Special Industry Committee by either company?
    Mr. Butler. I can get you that information from StarKist. 
Again, I wasn't part of this special committee but I can look 
it up for you and let you know.
    Mrs. Christensen. We would ask for that information as 
well.
    Mr. Galea'i. Same for me, please.
    Mrs. Christensen. Mr. Faleomavaega?
    Mr. Faleomavaega. Thank you, Madam Chair.
    I certainly don't intend to want to make Mr. Butler and Mr. 
Galea'i feel uncomfortable. In terms of the questions that are 
being asked, please they are not in any way a personal attack 
on both of you. We know that you do your job to the best of 
your abilities; so please bear with us. We are just trying to 
get some answers here.
    You noted that in the Department of Labor's report 
mentioning that somebody from the tuna industry had mentioned 
that if there was a possibility or the situation as whether or 
not the canneries were going to leave and the response was in 
minutes. And I wanted to know from both of you gentlemen that 
if there was some indication that it seems to imply that the 
canneries are going to leave not necessarily because of any 
love or compassion for the Samoa people but it is a matter of 
profit; and it is a matter of losses in terms of having to pay 
dividends to your stockholders. And that is absolutely 
understandable in those terms. But I would appreciate maybe if 
you could clear for the record that you really didn't mean that 
you are going to leave in minutes just for the record because I 
don't think that really it was the intent of the response and 
the report did not say who exactly in the tuna industry they 
met with or contacted but the response was you guys were going 
to leave in minutes. Could you clarify that?
    Mr. Butler. Congressman Faleomavaega, obviously it was 
meant with no disrespect to Americana Samoa and the people of 
American Samoa but in the business that we work in, again, the 
term ``in minutes''--there are a lot of connotations one can 
look at--but there is extra capacity elsewhere, in Thailand 
particularly. And all it takes is a matter of communications to 
these other canneries to say, ``I cannot produce 100,000 cases 
here because of costs. Move it to Thailand--have it produced.'' 
That is simply the message of how quick or how easy it is to 
move volumes out of American Samoa into a competitive low-cost 
country.
    Mr. Faleomavaega. Mr. Galea'i?
    Mr. Galea'i. Thank you Congressman.
    Mr. Faleomavaega. Could you please speak a little louder?
    Mr. Galea'i. Thank you very much, Congressman. I have no 
statement to that because I didn't make that statement.
    Mr. Faleomavaega. Well, leave it at that. I realize that 
the tuna industry has spoken, and you have indicated that it is 
a real competitive situation. Now I used to brag for years that 
we have the largest tuna canning operation in the world. No 
longer. I just met with the Chairman and owner of the Thai 
Union company which owns Chicken of the Sea Samoa Packing. The 
canneries they have there alone in Thailand employs 20,000 
employees. That is four times more than the workforce that we 
have here in American Samoa. So I fully recognize the 
competitiveness of the market given the fact it is no longer 
just American Samoa and Puerto Rico previously. We have 
approximately 20 countries competing for the exporting of tuna 
to the United States. The U.S. is the largest consumer market 
in the United States. There is absolutely no question that the 
presence of our two canneries is the very base foundation of 
our economy; and I think the concern, as everybody has all been 
worried about the fact that if in fact the canneries do plan to 
leave, I believe the total investment facilities StarKist has 
is about $70 million, and the investment the StarKist has made 
in the facilities and everything. What is the dollar value of 
StarKist as far as the facilities are concerned?
    Mr. Butler. I can get you that information, Congressman. I 
can try to get that for you.
    Mr. Faleomavaega. Can you submit that for the record? Mr. 
Galea'i, can you do the same? What is the value of Samoa 
Packing with all the money, the millions that you put in to 
make this a better operational facility for our workers.
    Mr. Galea'i. Congressman Faleomavaega, let me just clarify 
what--COS Samoa is the only cannery of the Chicken of the Sea. 
The Thai Union, which owns Chicken of the Sea, yes, has quite a 
few canneries in Thailand and is the largest tuna processing 
entity in the world.
    Mr. Faleomavaega. Well, thank you.
    Mr. Butler. I would like to add, Sir, that StarKist Samoa 
is the largest single producing cannery in the world.
    Mr. Faleomavaega. All right. I am not going to argue with 
you. Gentlemen. The process of pouch packaging, as you know, is 
a new system where tuna is no longer canned; but the tuna now 
is going to be put in pouches, which is a very labor-intensive 
form of packaging tuna. I want to ask you both, are StarKist 
and Chicken of the Sea going to be doing pouches here in our 
territory?
    Mr. Butler. Sir, we have already been producing pouches. 
We've been producing pouches for our U.S. military. We actually 
produce pouches for our soldiers in Iraq, and we are continuing 
an investment that is looking closely at the minimum wage, 
where this is going, for expansion of pouch. So we have 
capabilities currently, and we are looking at potential 
expansion efforts but are looking at the economic feasibility 
of these investments at this time.
    Mr. Faleomavaega. Mr. Galea'i?
    Mr. Galea'i. Yes, similar to Brett's and Del Monte's plans. 
Pouch represents a very small portion of our business.
    Mr. Faleomavaega. What is the total dollar value of the 
amount of canned tuna that we exported to the Unites States 
last year? Both canneries?
    Mr. Butler. I can't really give you that information right 
now but I could again yeah
    Mr. Faleomavaega. Can you submit that for the record?
    What about two years ago? Do you have any knowledge? I just 
want to make sure I get my facts correct. Wasn't it somewhere 
around $500 million in gross sales and the cans that we export
    Mr. Butler. I have no clue until I can get that information 
to you, Sir.
    Mr. Faleomavaega. Both canneries, can you submit that for 
the last 5 years? The total dollar value of canned tuna that we 
exported to the United States in the last 5 years. And 
gentlemen, would it also be possible to suggest what is the 
total dollar value of the amount of canned tuna that we 
exported in the last 50 years? Can you supply that for the 
record?
    Mr. Galea'i. We'll, certainly try. As you know, we've gone 
through different owners in that 50 years.
    Mr. Faleomavaega. I know. I know.
    Mr. Butler. It would be difficult. I would say that.
    Mr. Faleomavaega. About ten years ago and I am going to 
work on this with the Library of Congress to assist me through 
the Congressional Research Service. The last time, I think, the 
amount--it was over $40 billion worth of canned tuna that this 
territory exported to the United States during a 30-year 
period. So I just wanted to share that with you.
    Tax incentives: I think our canneries have been receiving 
tax incentives ever since we started. Let's say the last 40 
years maybe from the local government? Is that still in place?
    Mr. Butler. Yes. We are currently under tax exemption with 
the American Samoa Government.
    Mr. Faleomavaega. And these tax exemptions have been 
renewable every 5 years or 10 years?
    Mr. Butler. Our exemptions expires in April this year.
    Mr. Faleomavaega. And you are negotiating now another 
exemption?
    Mr. Butler. We will be, Sir.
    Mr. Galea'i. Let me clarify. Samoa Packing, formerly Van 
Camp Seafoods, was under partial tax exemption. Partial tax 
exemption and it was structured on a progressive, the more 
profits we make, the higher tax rate, the lower the tax 
incentive. So I just want to clarify that.
    Mr. Faleomavaega. I also want to clarify something for the 
record for both of you gentlemen. Mr. Robinson, I will get back 
to you.
    In no way am I ever to imply or to suggest that our two 
canneries should not be making a profit. That is what business 
is all about, absolute supporter of the business community. 
This is where economic growth is to be given and to have our 
people depend less on employment with the government but with 
private sector. I think this is what our Governor, our leaders, 
and government are advocating very strongly. So I just want you 
both gentlemen to know. Don't misunderstand or think that I am 
against the presence of our canneries. Absolutely not, and I 
guess as you may have heard our Lieutenant Governor say 
earlier, the only problem I have with our friendly canneries is 
that I don't know what marginal profit you are operating on so 
that that way, perhaps, it will make it more reasonable for the 
government or the leaders to say well maybe this is how we 
should work out a minimum wage that is reasonable based on the 
margin of profits that any business will operate on, I suppose. 
And knowing that both canneries, Mr. Galea'i, as you know, last 
year I was under heavy attack. Chicken of the Sea was the first 
company that came out with its intention to lay off 200 
workers, and I had to personally go to San Diego and have a 
real double edge argument with the top executives of Chicken of 
the Sea because they were making presumptions that were not 
based on what we are trying to do under the provisions of the 
Federal law.
    If I might ask both of you, have there been layoffs from 
the canneries since we implemented the 50-cent increase in 
wages?
    Mr. Butler. I can tell you we've been hiring more people as 
a result of pouch expansion actually went into the effect prior 
to the 50-cent increase. So we have been gearing ourselves up 
for those new opportunities that we are bringing into StarKist 
Samoa and American Samoa. But more importantly, and I can 
probably speak for Pete and Kosey that the canneries, it is a 
manufacturing business and you need to produce the volumes to 
offset the high fixed costs that we have. It is very labor 
intensive; so to lay off people means you are going to reduce 
your volume in a sense. It is not an effective way to run the 
business we are in particularly with fish.
    Generally, the smaller the fish, the more labor you need to 
get the volume out. The fish sizes we experienced in the last 
two or three years here have gone smaller which require more 
people, and that is the challenge StarKist Samoa faces and I am 
sure Chicken of the Sea faces as well.
    Mr. Galea'i. If I may add, Brett is correct about the 
realities of our business. We are only able to offset, not 
completely, the $2 million increase in labor costs by 
increasing volume. But there is a ceiling to that. We are at 
that ceiling. We are at maximum capacity. Another additional 
increase we can't utilize the same economy of scale benefits 
that we prevail for the first increase because we are at 
maximum capacity right now.
    Mr. Faleomavaega. Thank you, Madam Chair, for your 
patience. And I want to say this to Mr. Robinson. I want to say 
this for the record. I am utterly disappointed for the lack of 
any sense of interest and participation for the members of our 
business community, the Korean business community, and our 
Chinese business, and Filipino business community for showing 
any sense of their presence because the fact is millions of 
dollars are also just as much involved in the economy. We talk 
so much about the 50-cent increase but that is only one portion 
out of the overall picture of the economy knowing exactly if 
the revenue is collected. I hope, Mr. Robinson, we are probably 
losing $20 million a year in not collecting revenue amounts 
that seems to disappear or not be getting by our local 
government to address some of these issues about wages and the 
sort. But I again, if I have a couple more questions, but Madam 
Chair and I want to thank Mr. Robinson again. I think the 
Chairwoman has more questions.
    Mrs. Christensen. I have a few more. Thank you, Mr. 
Faleomavaega.
    Mr. Robinson, I wanted just to go back for a moment to ask 
to your knowledge, has the Chamber ever recommended any 
increase to the Industry Committee? You said you have not 
participated but would the Chamber be asked for recommendation; 
and if so, has the Chamber recommended an increase at any level 
in minimum wage?
    Mr. Robinson. Thank you, Madam Chair. I think it is true to 
say that in the years gone by, the Chamber was a member of the 
committee looking at biennial wage increases. I am not sure. To 
be quite honest with you, what sort of recommendation the 
Chamber put forward or whether they just went along with the 
general feeling and the recommendations of the committee. In 
last year, I think there was another one of the biennial 
committee meetings due to take place, at which the Chamber was 
going to be represented, and I was going to represent the 
Chamber. At that time we were certainly, through the Chamber, 
planning to take a fairly aggressive stance on the question of 
increase of minimum wage.
    Mrs. Christensen. Aggressive stance?
    Mr. Robinson. In terms of trying to raise it.
    Mrs. Christensen. Trying to raise it. Did you have a 
particular amount in mind?
    Mr. Robinson. No. We were overtaken by events.
    Mrs. Christensen. But prior to the events overtaking you, 
were you going to suggest a specific amount?
    Mr. Robinson. No. We were in the presence of our review at 
the time so we haven't gotten as far as that I am afraid.
    Mrs. Christensen. Mr. Butler, in your testimony you talk 
about biennial review by the Department of Labor, Department of 
the Interior, and the American Samoa Government. Are you 
putting that forward as a preferred method of deciding on wage 
increase to the Special Industry Committee?
    Mr. Butler. Not to the Special Industry. You mean versus 
Special Industry?
    Mrs. Christensen. Yes.
    Mr. Butler. No. It seems like legislation that is already 
out there appears to be that the Department of Labor's 
involvement, and we think the two years is a prudent time frame 
to understand the effects and to get the government involved 
with the Secretary of the Interior I think would be fair as 
well as community members in American Samoa's territory. But it 
wasn't in a sense to say versus the Special Industry.
    Mrs. Christensen. So you were using what was in the 
legislation in making that statement?
    Mr. Butler. Exactly.
    Mrs. Christensen. It is about--but you wouldn't, so you are 
not opposed to continuing this Special Industry Committee, or 
do you think one is a better
    Mr. Butler. I think the Special Industry Committee provided 
a democratic approach. You are hearing from different views. I 
believe it would make sense that the Department of Labor's 
involvement--probably better background statistical analysis of 
the economic situation on island would be of benefit. But I 
think in theory the Special Industry approach is supporting 
because it is well-rounded. It is democratic. You get to hear 
views from a lot of people from a lot of different 
perspectives.
    Mrs. Christensen. You don't feel that there is a greater 
ability to control the outcome by one industry or another or 
the business community that counts, and the Special Industry 
Committee versus the departments?
    Mr. Butler. If there is a perception that the tuna 
canneries are controlling the committee, that is false. It 
seems like the lines of questions are heading that way. It is 
not.
    Mrs. Christensen. If any one industry feels that they might 
be mostly more impacted by another, wouldn't they be able to 
exercise more influence over the Special Industry Committee?
    Mr. Butler. I think everyone gets hurt equally. I can't see 
how one would--you know, the canneries are again the biggest 
industry. I mean it is looked at as the big boy on the block 
but I think the special industry approach is everyone equally. 
And the decision is made by a panel that is I think well-
rounded. So that is I think my view on that. But I would like 
to add I haven't been directly participating into the Special 
Industry Committee's hearings, but again that is from my 
perspective.
    Mr. Faleomavaega. Chairwoman, may I----
    Mrs. Christensen. Sure.
    Mr. Faleomavaega. Because the question is very important. I 
have been personally involved in the Special Industry for 
years, and I would say right now for the record, I do not 
support the structure and the way the Special Industry 
Committee was set up. My concern was that we had 
representatives from the government, representatives from the 
business industries, but there was no one representing the 
workers. And I dare say probably all the workers there at the 
canneries are afraid to come up and testify before the 
committee for fear of their jobs. Now I know with all due 
respect to Mr. Butler, understandably it is nice if it is done 
in an ideal situation but it is not. And I dare say I want to 
say I will not support any Special Industry Committee as it has 
been done, one. Second, I think a neutral agency like the 
Department of Labor--what they need is data and information. 
That is what is the problem here, and I think if we can make 
sure that the Department of Labor with the Department of the 
Interior working together come up with a comprehensive economic 
study for the territories of American Samoa and CNMI, then we 
can get a better gauge exactly what type of minimum wage we 
should be given.
    The Industry Committee, Madam Chair, may I also note the 
fact we had 18 separate different minimum wages. Unheard of in 
America. When you have one minimum wage, it should go to 
everybody if you are flipping hamburgers at McDonald's and 
digging ditches, that is a minimum wage one. This is the only 
territory that has 18 separate minimum wages. Unbelievable how 
they come up with this. I just want to note that, Madam Chair, 
I didn't mean to interrupt but with due respect to Mr. Butler's 
statement, I will not support any Special Industry Committee 
because in my humble opinion, it did not speak well enough for 
the needs of our workers.
    Mrs. Christensen. Well, I should have asked Mr. Robinson 
before Mr. Faleomavaega jumps in what his opinion was of having 
a Special Industry Committee versus Department of Labor, 
Department of the Interior, and the Government come together to 
make that decision?
    Mr. Robinson. Thank you, Madam Chairwoman. It is a 
difficult question to answer directly because there is a number 
of different angles to this. One of the things many companies 
in the private sectors, excluding the canneries, and let's talk 
about the private sector excluding canneries excluding 
government, one of the things that we at the private sector do 
is to pay our people for what we think is a reasonable amount 
of money. We are not governed and controlled by the minimum 
wage necessarily although it might be a benchmark on which to 
use for paying some of our workers at the bottom end of the 
scale. But generally speaking, we would like to set up a wage 
that we feel comfortable with in terms of providing that worker 
with the right level of wage for the type of job that the type 
of person is doing. So, therefore, when this first 50-cent 
increase came around, there were quite a lot of companies who 
were able to manage the situation quite well because it didn't 
affect a great number of their stock.
    Second thing about it is too if it was the company had a 
lot of workers at the bottom end of the scale and their wages 
were increased by 50 cents or whatever it was, this has a 
compression effect on the rest of the staff and company. This 
is something which is of great concern to the private sector. 
You are gradually pushing wages lower pay getting closer to the 
higher pay so what do you do? The higher pay turns around and 
say well the gap between us now is not as great as it was 
before. We need ours to be increased as well, too. So suddenly 
you find in the private sector you have an enormously big wage 
built. So to come back to the original question, the question 
of Industry committees, plus I think they are important. They 
don't necessarily have the sort of bearing on the private 
sector perhaps they would have on the canneries or on the 
government which individually employ larger amounts of people.
    Mrs. Christensen. Thank you.
    Mr. Galea'i. Excuse me. May I respond to your question?
    Mrs. Christensen. Sure.
    Mr. Galea'i. As I have been involved with the Special 
Industry Committees, both as a member of the Chicken of the Sea 
Samoa Packing Company and as Director of Commerce--formerly the 
Department of Planning and Economic Development--I am very 
familiar with the procedures. And I agree with Mr. Butler. I 
believe the Special Industry Committee provides you with a 
community based forum that was identified--representatives of 
the Department of Labor, employee-employer, and industry. That 
as an alternative to a Federal agency dictating what our 
appropriate wages in American Samoa, approximately 5,000 miles 
away, I believe that it is, you know, to me doesn't make sense, 
OK. The Special Industry Committee is a much more 
representative, responsible forum to make determinations on 
appropriate minimum wages. As far as Congressman Faleomavaega's 
perception that there was not adequate input from the 
employees, all I can say is the hearings were open to all 
employees as well. And I just want to say many of the employees 
at Samoa Packing, most likely at StarKist, are very aware of 
the fact that we are constantly looking for things to save 
costs to keep our footing on being competitive with the low 
costs. So, they are very appreciative and they understand that 
our primary objective--although we would like to increase 
wages, too, and be able to pay for them--our main 
responsibility is job preservation, viability preservation. And 
I strongly would like to discuss with you, Congressman, the 
Special Industry Committee--perhaps you would consider at some 
point.
    Mr. Faleomavaega. May I respond to that, Madam Chair?
    Mrs. Christensen. Yes.
    Mr. Faleomavaega. I appreciate Mr. Galea'i's statement and 
listen, that is great. I appreciate your concern but I would 
just like to comment on your statement that you are against a 
Federal agency dictating what the wages should be for American 
Samoa. With all due respect, the Congress is the one that sets 
the law for the entire nation. And this is what the minimum 
wage is going to be for America. Now, we are making exceptions 
for that. And one of the things that is very difficult for me, 
especially when I meet with my Republican friends is what are 
you being an exception? I have 30 percent unemployment in my 
district. Jobs have gone overseas and all of this stuff, and 
American Samoa is given a break but not given the minimum wages 
they should be with all other states. So I am confronted with 
that predicament, but I would say to my good friend Mr. Galea'i 
to suggest that the Federal agency is dictating this, what I am 
saying is the Department of Labor is the best source of person 
or agency that could give us a comprehensive economic study. 
And in addition to that I might also note I am not an 
economist. When you look at wages, the fact of the matter is we 
have no unions in our territory, Mr. Galea'i, teachers' union, 
government employees' union, cannery workers' union, nothing. 
So who do our workers have to depend on for speaking on their 
behalf in terms of what should be the proper minimum wage no, 
no. Now with all due respect and this is not being critical of 
the fact that our CEO of Del Monte gets paid $2.6 million in 
annual salaries or the previous owner of StarKist, but I meant 
Del Monte's $2.6 million-plus bonuses. And then previous owners 
of StarKist Heinz Corporation, the CEO of that corporation was 
paid $65 million per annum in salaries. Maybe I am just too 
simple in my outlook in saying, with such tremendous executive 
pay that come in from the top executives of the corporation, to 
suggest that our working people here do not deserve a raise. I 
might also mention that this raise has been the biggest that it 
has ever had in the history of American Samoa. When was the 
last time we had a raise with the Special Industry Committee 
recommending 10 cents an hour? I have never heard it or even 15 
cents an hour. But 2 cents an hour, it is OK; 3 cents an hour, 
it is OK. But now we've gone up to 50 cents an hour, I would 
like to ask the two gentlemen what is the cost now of our two 
canneries because of the raising of 50 cents per hour salaries 
for our cannery workers? I am curious. How much do the two 
canneries spend with this increase for the cost of our workers 
there in the canneries? Do we have a figure on that?
    Mr. Galea'i. I mentioned that it was an additional $2 
million cost.
    Mr. Faleomavaega. $2 million?
    Mr. Galea'i. $2 million to Samoa Packing.
    Mr. Faleomavaega. Now I would like to ask our Director of 
the Department of Commerce, Mr. Paopao, how much was this cost 
to ASG for government workers on account of this 50-cent 
increase on the minimum wage?
    Mr. Paopao. For the first increase is zero.
    Mr. Faleomavaega. It did not cost ASG workers anything?
    Mr. Paopao. No.
    Mr. Faleomavaega. Thank you, Mr. Paopao. I was just curious 
about it.
    I'm sorry, Madam Chair.
    Mrs. Christensen. A few questions. Let's see. I want to go 
over some of the reasons why the canneries have said they 
cannot afford minimum wage increases, and Mr. Robinson spoke 
about when you increase at the lower paid level of employees at 
50 cents up, you have to probably increase those above them 
because the gap begins to close. But both of you have different 
wage rates for your hourly employees depending on the kind of 
work that they do. What are the hourly wages at the top of the 
wage scale? There is going to be a follow-up. Dis those wages 
go up in the last year or two, and how much did they go up?
    Mr. Butler. Without getting too specific, because I don't 
have that data in front of me that the 50-cent increase, the 
initial 50-cent increase compressed the wage categories in 
StarKist Samoa.
    Mrs. Christensen. It compressed?
    Mr. Butler. It compressed the wage pay categories in 
StarKist Samoa, so meaning same example as David Robinson, that 
we had a pay grade category of 17 separate pay grades. The law 
affected minimum wage earners so that 17 pay-grade system went 
down to 15 pay grades in that. So, we've compressed it as a 
result of trying to look to offset the minimum wage earner.
    Mrs. Christensen. What I am trying to get at--testimony has 
been given by either or both companies that if you increased at 
the lower levels, you have to increase everybody. And I am 
trying to ascertain--
    Mr. Butler. That is not necessarily true.
    Mrs. Christensen. Not necessarily true?
    Mr. Butler. No.
    Mr. Faleomavaega. The increase was just for those starting 
pay at minimum wage?
    Mr. Butler. The law expressed the minimum wage earners.
    Mrs. Christensen. I am not really referring to the law but 
I think that there was testimony somewhere that if you increase 
the minimum wage for those of lower level that you have to 
increase it--it should also be noted that it is policy of the 
StarKist Samoa to apply to all grades any percentage increase 
applied to the minimum wage and which as I understand it that 
means if you increase the minimum wage, everybody else had to 
get an increase. What I am trying to get at is, have there been 
wage increases at the upper level that have not been passed 
down across the board? I mean, does it work both ways--if you 
raise it at the lower level and everybody has to get an 
increase; if you increase at the upper level then you also 
increase across the board? And have there been any increases at 
the upper levels of the wages?
    Mr. Butler. As a result of the 50-cent increase?
    Mrs. Christensen. No, not as a result--say before July, did 
StarKist and Chicken of the Sea say they had not provided--
based on the fact that if you increase for some, you increase 
for all. Can you tell me say in 2006, you did not increase 
anyone else's wages because you would have had to increase 
everybody else's?
    Mr. Galea'i. If I may answer this. In increases, minimum 
wage increases and performance based increases that I mention 
earlier, the proportion or percentage of increase was applied 
across the board and that was to maintain the integrity of wage 
differentials and classification system. We have not been able 
to do that with the last 50 cents because of the significant 
increase, but we did have compressed wages similar to StarKist 
Del Monte. We raised, of course, the minimum wage by 50 cents 
and then provided increases of 15 cents to 25 cents for all the 
other classifications. We went from 12 classifications to 9 
classifications because of the compression. I will say that 
whenever you do compress your wages, you have moral problems 
because wage differentials no longer represent the skill 
differentials that are inherent in your classifications system.
    Mrs. Christensen. So--
    Mr. Butler. It is basically what we do. When you increase 
the minimum wage earner a certain amount, you are not going to 
necessarily give everyone across the house the same increase, 
but there is a certain increase that is given with the same 
idea to reflect job responsibilities scale level that we 
separate when we classify the pay grade level.
    Mrs. Christensen. So when you increase just as Mr. Galea'i, 
he said they increased across the board by the same percentage. 
If you had given increases at the top that applied to StarKist 
at the top, you increase by the same percentage increase?
    Mr. Butler. Not necessarily. The increase will be taken but 
not necessarily the same increase to the minimum wage earner.
    Mrs. Christensen. So really we can't use that statement 
against an increase in the minimum wage that an increase in the 
minimum wage will have to apply to everyone across the board?
    Mr. Butler. That is correct.
    Mrs. Christensen. To strike that from StarKist testimony in 
2005. There is two other areas that I would like to try to 
clarify because the Department of Labor apparently spoke to the 
Industry Committee even though they didn't speak to government 
officials because they have some quotes in their report that 
refer to what the companies told the Department of Labor. The 
consumers choose their tuna based on price, and it is really 
little or no brand loyalty. I don't know who said that, or is 
that your experience? Do you stand by that statement? There is 
no brand loyalty that people choose by price.
    Mr. Butler. Do you eat tuna, Ma'am?
    Mrs. Christensen. Yes, I know how I choose my tuna.
    Mr. Butler. How do you choose it? By price?
    Mrs. Christensen. Not by price. But I am saying this is 
what the canneries--I don't really maybe Del Monte said that 
there is no brand loyalty. They choose it based on price, and 
this was to say that increasing the minimum wage would increase 
the price and make them less competitive. Yet in another 
statement to the SCC they said that their brand is everything. 
And those two statements are inconsistent. Brand name, 
recognition in the product, quality associated with our brand 
are key factors in the success of our products, that was what 
was said to the SCC but when it came to the DOL report, it was 
a different story.
    Mr. Butler. I can't speak for those who made those 
statements depending on the conditions it was said on and the 
exact questions that were asked. There is in fact both parts a 
lot of price driven on your commodity items. It is definitely 
price driven but your higher priced item, for instance pouch, 
that is more it tends to be more loyalty there with higher 
priced tuna items.
    Mrs. Christensen. But let me just--let's cut through the 
basic question. Mr. Galea'i and Mr. Butler, what is the most 
important for the company? Brand or the price in terms of your 
competitiveness?
    Mr. Butler. It would be price.
    Mrs. Christensen. Price?
    Mr. Butler. Price.
    Mr. Galea'i. Tuna is a price driven commodity basically.
    Mrs. Christensen. I never look at the price. I look at a 
brand I know.
    Mr. Galea'i. I wish all our consumers were like you.
    Mrs. Christensen. I figure they're all probably cost close 
the same. I mean I am not going to buy any no-name brand 
because it costs less. I am sorry.
    Mr. Galea'i. Can you tell us whether you prefer Chicken of 
the Sea or Del Monte?
    Mr. Butler. We have a profile with people.
    Mrs. Christensen. Some of the stores sell some and some 
stores carry the other but you are one of them. Let me ask this 
other question. Do you foresee either of your companies going 
through the process of calculating, or maybe you have done this 
already, when you are going through calculations to determine 
what level of wage increase can the company sustain it? It has 
been said that if it goes up another 50 cents in May, other 
options are going to be considered. And maybe some options have 
been considered already. Do you foresee the companies going 
through that kind of a process where you say we can sustain 
this kind of increase every two years, or have you already done 
that and if you go through that process which I imagine you 
will if you have not already, would you see sharing that with 
either the Department of Labor and the Department of the 
Interior and the government if they are going to be the 
deciders or Special Industry Committee? Would you share those 
projections as to what you could sustain as an increase because 
obviously the cost of living is going up and people have to be 
able to meet the cost of living to provide for their families. 
So do you foresee going through that kind of assessment? And do 
you see sharing that?
    Mr. Butler. If I had a crystal ball to tell you that, I 
would give you that answer, but the fact of the matter is we 
are right now looking at potentially moving some volumes into 
Ecuador as a result of the 50-cent increase that is projected 
in May. So there is a debate going on as we speak right now, 
and we consider these things dynamically. There are a lot of 
costs and pressures not only in wages but in the taxes, the 
economic climate of that environment we operate in; so it is an 
ever moving variable here that we are looking at. I can't tell 
you what number it is because I don't really know.
    Mrs. Christensen. No. I don't expect you to know but I was 
just asking, do you foresee the company going through that 
process and saying, well we can sustain another 20 cents in two 
years or maybe another 20 percent. And this is as much as we 
can tolerate to keep our companies profitable here in American 
Samoa?
    Mr. Butler. It is difficult to assess that because of other 
cost pressures that you don't know where they're going; you 
don't know the duty free advantages in other countries; where 
that law or potential law is going. So it is a variable 
assessment to make. But I could say we are looking right now 
and we are trying to be as competitive as we can with the 
current situation that we are facing at this very point.
    Mr. Galea'i. Chicken of the Sea American Samoa Packing 
Company is currently looking at the increased cost for the next 
escalator. And as Congressman Faleomavaega actually stated, we 
have a lot of tuna capacity in Thailand, and we are always 
competing with whether or not we can provide a competitive 
edge.
    Mrs. Christensen. How much weight is given to the fact that 
you are in a U.S. territory, a stable country, and maybe 
because you are here you have the opportunity to market to the 
military? It seems to me that that would carry a lot of weight 
in the decision-making processes.
    Mr. Galea'i. You are correct, Chairwoman Christensen. The 
fact we are a domestic, the last domestic cannery for Chicken 
of the Sea has value, and again our duty free preferential 
treatment into the U.S. market certainly is another factor but 
when you combine all other costs going up--fuel, shipping--and 
the fact that duty free is being extended to or is planned to 
be extended to our competitors, it weighs against the benefits 
of being able to provide a pouch for the military or the USDA. 
And that part of our business is not a major part of our 
business as well, but we certainly want to hang on to it. I can 
say that Chicken of the Sea lost money in 2006. We had a 
marginal year in 2007. The additional increase in the next 
escalator would be very difficult in trying to offset that 
increasing production because, like I said, we are at maximum 
capacity. So the owners of Thai Union will review what are the 
options and that will include the transfer of production to our 
Thailand canneries. And any time you have transfer of 
production, the economies of the business become exacerbated, 
such as the ability to meet overhead costs, and are further 
eroded. It is a vicious circle. So we want to maintain a 
certain level of production capacity to be able to sustain the 
operations here in American Samoa.
    Mrs. Christensen. Last round of questioning.
    Mr. Faleomavaega. I just want to ask Mr. Robinson the 
current status of our Samoa Advisory Economic Council. What are 
its plans? Has the Council made some firm recommendations? I 
know you presented several areas--I think maybe a part of our 
diversification system--but I am just curious--where does the 
Council's activities go from here? I guess primarily it just 
serves to advise the Governor, right?--not necessarily the 
Legislature? Is it just an effort to develop the 
Administration's position in terms of what its economic 
priorities will be or should be?
    Mr. Robinson. Thank you, Congressman. Yes, it is. I think 
it is true to say since the inception of the Economic Advisory 
Council, which was at the end of November last year, we've made 
a lot of progress in identifying the various industry sectors 
that we have divided the council up into. We have identified a 
lot of new business opportunities. We've only been at it for a 
couple of months, and it is a little bit difficult to come up 
for an instant fix.
    Mr. Faleomavaega. Are you under some kind of a deadline to 
say this certain time you are going to make some kind of 
recommendation, or is this going to continue on? I just want to 
know where the Advisory Council goes from here in terms of its 
activities. The bottom line I really am trying to get from our 
government is what are our economic priorities? And thus far, I 
have yet to find a resolution or statement unified form by 
Legislature, Governor endorsing it. What are our economic 
priorities?
    Mr. Robinson. Let me tell you. As far as we are concerned 
in the Council, we had a mandate issued by the Governor which 
lasted for two years to produce a set of policies, plans, and 
strategies to improve the economic conditions of the territory. 
And that was broad in the mandate, and that is for a two-year 
period.
    Mr. Faleomavaega. I don't know if you had a chance Mr. 
Robinson to review the report of the American Samoa Economic 
Study Commission. My fear if we're not duplicating the very 
recommendation and things of this commission had recommended 
five years ago, are we repeating the wheel trying to come out 
with something firm? Not to say we dealt with tourism, we dealt 
with all this, but still no absolute definition--I am sorry 
definition of where exactly are we as far as our priorities are 
concerned.
    Mr. Robinson. Thank you, Mr. Congressman. I was about to 
add that we have adopted a totally different approach in this 
Council. And once we have a mandate which lasts for two years, 
I have made it very clear as is my Co-Chair in the Council that 
we do not wish to be another committee, another council which 
produces a nice glossy document at the end of the two-year 
period. And by that time, most of us won't be in business, 
especially the way things are going. We don't want to do that. 
So we decided to accelerate the situation. We meet every month. 
We were not mandated to do. We were mandated every quarter but 
we have met so far every month. We have divided Council members 
up into five committees, and we have made an awful lot of 
progress in identifying in those five committees which comprise 
agriculture and fisheries----
    Mr. Faleomavaega. I know my time is limited. I didn't mean 
to cut you off. The word in Washington is that if you want to 
know your priorities--if tourism is our priority--how much is 
being allocated of the $300 million budget we are operating 
under in tourism if tourism is really a serious priority? You 
have had a chance to review the budget of the territory?
    Mr. Robinson. I am sorry the time is running short. Perhaps 
we can extend the time because these issues are very important. 
I think it is very vital that we have a chance to explain our 
opposition particularly in this question of economic 
development. If I may continue for a little bit with your 
indulgence Madam Chairwoman. I know we are over the time but I 
would just like to explain a little bit further if I may what 
we are doing and what we are trying to achieve in terms of this 
economic development issue. We have divided the Council up into 
five separate committees--Agriculture, Fisheries, Light 
Manufacturing, Policy Reform and Privatization, Education and 
Work Force Training, and Recycling, Environment, and Tourism. 
And in each of those areas, the chairs of those committees are 
being tasked with providing for the Council co-chairs before or 
by the 25th of March next month a firm focus on what they think 
they can achieve in those particular industry sectors and how 
they propose to achieve it. As I mentioned before in most of 
the other reports that have gone on before, those two issues 
were not addressed. So we are making progress. There is no 
quick fix to the economy but I think by the time we have 
finished our first report, which I am going to put to the 
Governor by the end of April, it will identify the priorities. 
It will identify the issues, and it will also identify a number 
of issues that the Governor has to attend to in terms of policy 
reform in order the economic development can go forward. A 
policy reform not the least of which is our tax policy which is 
an inhibitor toward economic development.
    So we are addressing those. We are closely working with DOC 
to provide a meaningful, and the emphasis is on meaningful, 
document which will articulate the sort of issues that you have 
been talking about--and perhaps some of the issues that have 
been overlooked or glossed over in the past. So I think I can 
safely say by the end of April, we will have a very meaningful 
document in the hands of the Governor. One thing I would like 
to say and it may be just a little bit irrelevant, Madam 
Chairwoman, but we are doing this under the shadow of the 
potential of the canneries leaving. Time is not on our side at 
all, and you have heard the testimonies from both canneries 
that if they had another 50 cents put upon them and their wage 
goes up by $2 million or so odd dollars, they will think very 
seriously about their future. Unfortunately, we cannot afford 
the luxury of time. We cannot afford for the canneries to pack 
up and leave or even to scale down. We need them to be here 
until such time as my Council and the Department of Commerce 
and the other people who are working on the economic 
development issues can start to encourage new industry, new 
developments to come in, and either support the existence of 
canneries in our economy, or to fill the gap if they decide to 
scale down and leave.
    So from the private sector, I feel very, very strongly, 
very strongly indeed that Congress no matter which committee is 
involved and all others involved must support our Congressman 
in having this escalator clause removed and removed quickly 
because the next 50 cents goes on the 25th of May. And if it 
does that will accelerate the canneries' potential for doing 
something fairly quickly and exiting here altogether, and we 
just cannot afford it. We need more time, and we need your help 
through your committee to help us to gain this time.
    Mr. Faleomavaega. Thank you, Mr. Robinson. I know my time 
is up. Very quickly if I could ask our Director of Commerce, 
Mr. Paopao, if he could submit for the record a breakdown of 
the workforce that we have among the workers in American Samoa 
Government, not names but just numbers in terms of who's 
getting a certain pay grade in terms of how it is being 
currently structured. And I would really appreciate if Mr. 
Paopao can submit that for the record.
    Mr. Paopao. We have the information available in the 
insert.
    Mr. Faleomavaega. OK. Thank you.
    Also the two friends from the canneries do likewise. Submit 
a breakdown just where the curve is as far as the wages and 
salaries of our workers in the canneries. No names just the 
numbers just to kind of get an idea how it is being done.
    Madam Chair, I want to personally offer my apologies to 
Paramount Chief Galea'i. I read recently in the newspaper that 
he offered a very interesting proposal about the terms of a 
recent case by the Ninth Circuit Court, and a dear friend and 
now a member of the Supreme Court of the United States. Justice 
Anthony Kennedy is a dear friend who rendered that opinion. I 
want to assure that because our time is way over, I want to 
assure that his suggestions or recommendations are definitely 
noted by this member. And we will definitely follow up with the 
issues, and I do want to thank you for that.
    Madam Chair, I cannot thank Mr. Butler and Mr. Galea'i 
enough for their patience. Thank you so much. And I just want 
to say my best to Mr. Robinson for his being so articulate and 
also understanding what the situation we are faced with in this 
territory.
    Mrs. Christensen. I have just two very brief questions to 
Mr. Galea'i and Mr. Butler.
    Can you tell me what percentage of the canneries' jobs are 
held by local residents versus non-resident labor?
    Mr. Galea'i. 12 percent of our workforce are local 
residents; 88 percent are residents here.
    Mr. Butler. About 85 percent versus 15 percent.
    Mr. Faleomavaega. 85 percent Western Samoan and 15 percent 
other?
    Mrs. Christensen. 15 percent local?
    Mr. Butler. Local U.S. citizens, American Samoan, Tongan, a 
very small percent of that is in the 15 percent range, but 85 
percent from Samoa, independent countries, and 15 percent 
other.
    Mr. Faleomavaega. Madam Chair, with the 85 percent Western 
Samoa, how many are married to American Samoans?
    Mr. Butler. I can't answer that right now.
    Mr. Faleomavaega. Well, I think we need to submit that 
report for the record because it can be very misleading to 
suggest that they are aliens as far as our culture is 
concerned. Make sure we don't because they are not. So we don't 
twist it.
    Mrs. Christensen. To all three of you, to what extent does 
the Chamber and canneries support the community, community 
activity, support our hospital and schools. Is that part of 
something that you do on a regular basis, and can you give me 
some examples of support that you have given to the community? 
That is my last question.
    Mr. Robinson. Thank you, Madam Chair. On behalf of the 
Chamber one of our roles is community support. Recently we've 
been really actively involved in supporting the upcoming 
Festival of the South Pacific Arts as a initiative, and we have 
recently set up through the Chamber a new committee which we 
call the Young Professionals. Through that we are setting up 
the first I think American Samoa Institute of Management in 
order to look after young professionals to mentor them and make 
sure they get some guidance as they go through careers, set up 
also a new committee called the Environmental Committee which 
is looking at what we can contribute to helping the 
environment, burning fossil fuel, recycling of wastes, or 
alternative energy and issues such as that. So I think that 
certainly I am quite happy as President of the Chamber with 
doing whatever we can do to assist the community.
    Mrs. Christensen. I have visited the hospitals particularly 
interested. Can either of you want to talk about some of the 
things you have done in the community company wise?
    Mr. Butler. We do numerous things in the community. We help 
out with a lot of government, particularly in the schools area. 
We have a program called Charlie's Kids, where we basically 
look at the lower elementary level education and challenge them 
to come up with programs to help develop elementary-level 
students. And we basically aid them financially and award based 
on the selection of the programs that they have turned in to 
us. We constantly support the Shriners and Rotary Club 
activities in American Samoa. We have numerous requests from 
local agencies, private businesses for support, and we help 
them out in terms of, if not financially, we have a local gift 
we call ``wahoo'' and consistently support all these 
activities. We are actively involved with almost everybody they 
ask for here.
    Mr. Galea'i. Samoa Packing provides contributions to 
various organizations like Rotary, Department of Education, 
private schools, the Women's Auxiliary at the hospital that you 
mentioned. We contribute there. We provide community 
scholarships. We would like to help more but as you probably 
can guess, when people are looking for fundraising, the 
canneries are on top of their list; and unfortunately, we have 
a lot more requests than we can fill but we would like to 
provide more contribution.
    Mrs. Christensen. I don't have any more questions. I am 
sure you'd be glad to hear that. It has been a long afternoon, 
and I want to thank you for your patience and your willingness 
to be under fire for a couple of hours this afternoon. And also 
those decisions we were asking about, were decisions made above 
your level, but we really thank you for your answers and your 
participation in this. And we feel this is a very important 
hearing. Giving the people of American Samoa, through their 
elected leadership, the opportunity to speak on this very 
important issue, we are very cognizant of the time constraints 
under which we are working. If we weren't before, this morning 
the legislative bodies--the House and the Senate--did 
deliberately remind us that May 25th is not very far away and 
that we need to get to work on Eni's bill and try to get that 
passed so that we can stop the increase. So we are very mindful 
of that, and when we go back to Washington, I know that it is 
not easy. It is not easy to reach a perfect solution here. Cost 
of living is going up, and we want to ensure that the people of 
American Samoa--as well as people across all the territories 
and across our country--have a wage that allows them to meet 
the cost of living for themselves and their families and 
provide a good quality of life. And the businesses need to be 
able to survive as well. So I think that the testimony that 
we've heard this afternoon and the discussions with the House 
and the Senate have been very helpful to us and provide the 
information we need to move forward to continue to address this 
issue. And the testimony this afternoon as well, and we really 
thank you for the opportunity to be heard and to hear from all 
of you.
    I'm going to let Mr. Faleomavaega your own representative 
have the final word this afternoon.
    Mr. Faleomavaega. Madam Chair, I want to thank you. I heard 
from certain parts of our little territory that there has been 
some criticism suggesting that we shouldn't even come and hold 
this hearing here in American Samoa. But I think we really 
should come simply for the fact that we are doing this, and I 
cannot thank you enough and give this as my personal tribute 
and commendation for your initiative and leadership for coming 
to the territory and holding a hearing such as this. And I 
think it has been a very informative and educational one, and 
see how many people of the Congress of the United States 
operate in its committees and especially dealing with this very 
important issue that is now pending before the Congress as well 
as the concerns that have been expressed by our leaders from 
the community and our people.
    I would be remiss if I did not recognize some of these 
members of the staff that have traveled all the way. Mr. George 
Miller on the Floor of the House. The concerns I raised with 
him is after all it is his committee that is going to be 
holding primary jurisdiction in moving this legislation 
through. And in doing this, he has assigned two members of his 
committee to join us in this hearing. Mr. Jody Calemine and Mr. 
Ben Miller--both from the Committee on Education and Labor--
nice guys--and I also would like to recognize again Mr. Rich 
Stanton, the senior staff member for Don Young, who is the 
senior Ranking Republican. As most of you know, we work on a 
bipartisan basis and when it comes to doing the job for the 
needs of the people, I want Don Young on my side to oversee the 
Department of the Interior. For that reason, we very much 
appreciate Mr. Stanton's presence. Of course, I want to thank 
our Staff Director, Mr. Tony Babauta, and Mr. Brian Modeste. 
And I will not forget my good friend, Allison Cowan, who's been 
very patient. I do want to say again, I want to thank the 
Lieutenant Governor, President of the Senate and Speaker of the 
House, members of our Legislature, our business community 
leaders, and especially our two executives from StarKist and 
Chicken of the Sea.
    Again, I think this is the challenge that we are faced 
with, and I sincerely hope that we'll find a resolution to make 
sure that our canneries will continue to stay here to provide 
employment for some 5000 of our working people in the 
territory. As I am sure they are also reasonable that if we do 
raise wages not just the canneries but also in the private 
sector.
    With that, Madam Chair, I want to thank also Paramount 
Chief Galea'i for his coming here to be part of our audience 
and joining our representatives from Ituau District, Mr. Archie 
Soliai and another top executive of StarKist Company shaking 
his head, Mr. Meki Solomona. At any rate, again thank you so 
much for having this hearing, and I sincerely hope that in the 
coming weeks we'll be able to find a resolution with the 
problem to the escalation clause. I think unanimously I think 
some changes pass the effect for the economy and I hope Jody 
and Ben will carry the same message to the committee.
    Mrs. Christensen. I thank the witnesses again for the 
valuable testimony and the members for their questions. I may 
have additional questions for the panelists, and we'll ask you 
to respond to those and the hearing record will be open for 10 
days. And I also want--this is very important. This is for 
members of the public for their interest and concerns on this 
issue, and I need to let you know that if you wish to submit 
testimony, please do so by March 7th. It will become a part of 
the official testimony and the official record of the 
Subcommittee hearing. So if there is nothing else, I want to 
also thank the staff and our witnesses, and the Subcommittee 
stands adjourned.
    [Whereupon, at 4:45 p.m., the Subcommittee was adjourned.]

    [Additional material submitted for the record follows:]

    [A statement submitted for the record by Nikolao I. Pula, 
Acting Deputy Assistant Secretary of the Interior for Insular 
Affairs, U.S. Department of the Interior, follows:]

Statement of Nikolao I. Pula, Acting Deputy Assistant Secretary of the 
     Interior for Insular Affairs, U.S. Department of the Interior

    Madam Chairwoman and members of the Subcommittee on Insular 
Affairs, thank you for the opportunity to testify on the economic 
effects of the recently increased minimum wage in American Samoa and 
the Commonwealth of the Northern Mariana Islands (CNMI).
    Enactment of Public Law 110-28 last May not only raised the Federal 
minimum wage rate in the 50 states, but, for the first time, the 
Congress took direct action to increase the minimum wage rates in 
American Samoa and CNMI by 50 cents per hour on July 24 and 25, 2007, 
respectively. The law also scheduled additional annual 50-cent 
increases until the two territories reach the Federal minimum wage, and 
required that the U.S. Department of Labor (DOL) report on the effects 
of the minimum wage increases. Under this new law, American Samoa will 
reach $7.25 per hour across all industries in 2014, and the CNMI will 
reach $7.25 in 2015.
    The new minimum wage law precipitated the following actions:
    (1)  In December 2007, American Samoa Governor Togiola T.A. 
Tulafono proposed amending Public Law 110-28 so that (1) the annual 50-
cent increases be amended to make them biennial and (2) any scheduled 
minimum wage increase be postponed for two years if the DOL Bureau of 
Labor Statistics determines that such an increase would ``substantially 
curtail employment in'' American Samoa.
    (2)  In January 2008, the U.S. Department of Labor issued its 
report on the minimum wage increases in American Samoa and the CNMI 
describing potential adverse economic effects of the increases.
    (3)  On January 29, 2008, Congressman Eni F.H. Faleomavaega 
introduced H.R. 5154, which would condition future increases in minimum 
wage rates in American Samoa or the CNMI on a determination by the 
Secretary of Labor that an increase will ``not have an adverse impact 
on the economy of'' the respective territory.
History
    In 1938, when the Fair Labor Standards Act (FLSA) first established 
a United States minimum wage, special industry committees were 
established to phase in the minimum wage in those places when a minimum 
wage hike would substantially curtail employment. It was the intent of 
Congress that the minimum wage in such areas be raised in increments 
that would not destroy industries and jobs.
    But after World War II, the industry committee system continued to 
set local minimum wage rates only in Puerto Rico, the U.S. Virgin 
Islands, and American Samoa. In 1989, the Congress determined that the 
full application of the Federal minimum wage rate to the U.S. Virgin 
Islands and Puerto Rico could be accomplished without significant harm 
to continued economic growth and development. Both territories have 
been subject to the Federal minimum wage ever since.
    Before enactment of Public Law 110-28, a special industry 
committee, appointed by the Secretary of Labor, determined the minimum 
wage rates in American Samoa under authority of the FLSA. Composed of 
members representing industry and labor as well as disinterested 
persons representing the public, the committee reviewed minimum wage 
rates in the various local industries every two years. The committee 
recommended changes based on input from the community and an analysis 
of the extent to which the economy could support increases in the 
minimum wage without substantially curtailing employment. Minimum wage 
increases required a majority vote of industry committee members, and 
the committee's recommendations were binding. The most important aspect 
of the committee process was that it took into account the economic 
reality and the unique circumstances of this small island economy.
    The covenant that created the CNMI ``in political union with and 
under the sovereignty of the United States of America'' became law in 
1978. The covenant establishing the Commonwealth provided potential 
exemption or relaxation of some U.S. legal requirements affecting 
employment and immigration law, including the FLSA minimum wage 
provisions. The minimum wage in the CNMI was set by Public Law 9-73 at 
$3.05 per hour in 1996 when the U.S. minimum wage was $4.75 per hour.
    In enacting Public Law 110-28, Congress declined to continue the 
special industry committee for American Samoa, but nevertheless was 
concerned about whether the mandatory increases in minimum wage would 
cause serious and irreversible economic and financial harm to the CNMI 
and American Samoa. To provide needed information about this 
possibility, the statute mandated the Department of Labor to report on 
the impact of the minimum wage increases on living standards, 
employment and the economy in the two territories within 8 months of 
enactment of the Act.
DOL Study
    DOL released its much anticipated report, titled ``Impact of 
Increased Minimum Wages on the Economies of American Samoa and the 
Commonwealth of the Northern Mariana Islands'' late last month. The 
report notes that it was not possible to analyze the actual impact of 
the minimum wage increase, given the short (eight-month) prescribed 
timeframe for the report and absence of timely labor market data for 
American Samoa and the CNMI. Nevertheless it raises concerns that 
future increases in the minimum wage rate in American Samoa and the 
CNMI will likely cause significant economic and financial harm to the 
territories.
    An economy's capacity to create jobs and wealth should be one of 
the primary factors taken into account when minimum wage rates are 
adjusted. While the mainland U.S. economy had the strength and 
flexibility to adjust to a minimum wage increase, the economic 
situations of the CNMI and American Samoa are very different from the 
U.S. mainland. These territories face unique challenges in attracting 
private sector businesses because of their geographic isolation and 
location in a part of the world where most neighboring economies have 
much lower minimum wages and living standards. Given the structure and 
tempo of these economies, doubling of the minimum wage over a 10 year 
period, as would happen in American Samoa and the CNMI under Public Law 
110-28, would present significant challenges to each territory.
    The largest sources of employment in the American Samoa economy are 
the tuna cannery operations and the American Samoa Government (ASG). 
The DOL report notes the likelihood that both the canneries and the ASG 
would be significantly affected by future increases in minimum wage 
rates. The DOL report says:
        At present, the tuna canneries continue in operation, but there 
        is concern that they will be closed prior to the escalation of 
        the minimum wage to $7.25 per hour in 2014 and that production 
        will be shifted to facilities outside U.S. jurisdiction where 
        labor costs are significantly lower.

        An input-output model analysis commissioned by the government 
        of American Samoa (conducted by McPhee and Associates) has 
        estimated that closure of the tuna canneries will cause a total 
        loss of 8,118 jobs--45.6 percent of total employment (in 
        American Samoa)--including both direct effects (5,538 jobs) and 
        indirect effects (2,580 jobs).
    The canneries, which have shipped processed tuna to the United 
States for more than 50 years, have noted that in the future, they may 
leave the territory and take their production to other countries where 
labor costs would be much lower, such as 60 cents to 70 cents per hour 
in Thailand and the Philippines. The canneries are extremely important 
to the American Samoa economy as a result of their export of tuna 
products and the support of secondary trade and services businesses.
    The canneries are not only the most critical component of the 
private sector, they also make up a significant part of the tax base 
supporting ASG operations. Without the canneries as an anchor for the 
private sector tax base, cutbacks in local government operations and 
services would likely be necessary.
    ASG is the territory's single largest employer. In 2006, the 5,894 
ASG employees represented 33.9 percent of total employment in the 
territory. ASG is a unitary system of government, with no local or 
municipal governmental layers and it performs not only the usual 
governmental functions, it also manages public utilities. If ASG's 
minimum wage increases continue as mandated in Public Law 110-28, the 
DOL report says: ``Paying for the increases in government worker 
minimum wages will present a significant challenge to ASG.'' 
Numerically, if the minimum wage rate rises to $7.25 in 2015, as 
scheduled, ASG's increase in wage costs could be at least $5.2 million 
in 2015, according to the DOL report.
    The DOL report also addresses the minimum wage issue with regard to 
the CNMI. The DOL report notes that the effect of the minimum wage 
increase in the CNMI, would be like raising the Federal minimum wage to 
$16.50 per hour in the 50 states. The report states that job losses in 
the CNMI will result in the return of foreign workers to their home 
countries and the migration of United States citizen workers to other 
United States jurisdictions.
    The DOL report suggests that scheduled minimum wage increases could 
cause the canneries in American Samoa to relocate to lower cost 
countries long before they are forced to pay $7.25 per hour, and that 
more garment factories in the CNMI may close sooner than otherwise 
expected. The shuttering of industries in American Samoa and the CNMI 
could cause the respective economies to suffer prolonged and wrenching 
contractions.
Conclusion
    In light of the risks to the American Samoa and CNMI economies that 
are identified in this statement and in the DOL report, the 
Administration suggests that Congress give strong consideration to 
amending P.L. 110-28 in order to avoid increases in the minimum wage 
that could result in significant job loss and harm the economies of the 
two territories. We offer some suggestions regarding the factors that 
should be kept in mind in evaluating any potential legislative 
revision.
    First, regarding proposals for a determination by the Secretary of 
Labor that would stop the implementation of an increase in the minimum 
wage, we would draw Congress's attention to the difficulty inherent in 
making any objective determination about the impacts of a proposed 
minimum wage increase before it goes into effect. Increases in the 
minimum wage have numerous, complex impacts on an economy and, 
generally speaking, create some positive and some negative economic 
impacts. Broad language that would postpone an increase in minimum wage 
based on a finding of any adverse impact on the respective economies of 
the CNMI or American Samoa might have the effect of preventing all 
progress towards a higher minimum wage. Narrower language requiring a 
determination that the increase will not substantially curtail 
employment allows more flexibility, but the difficulties for the 
Secretary of Labor of obtaining reliable information upon which to base 
any determination will be significant.
    Another model that Congress might consider is the special industry 
committee that set the minimum wage rates biennially in certain areas 
of the United States and American Samoa for over 60 years. The 
advantage of the committee structure is that it ensures that the people 
who determine the minimum wage increases share first-hand knowledge of 
island economies, while representing different stakeholder groups 
within those economies as well as the public interest. When compared 
with proposals to vest the decision making authority in the Secretary 
of Labor, this model offers the advantage of ensuring that local 
knowledge is fully incorporated and that stakeholders in the 
territorial economies are able to play significant roles.
    Thank you for considering the Administration's views.
                                 ______
                                 
    [A statement submitted for the record by The Honorable 
Togiola T.A. Tulafono, Governor of American Samoa, follows:]

                 Statement submitted for the record by 
    The Honorable Togiola T.A. Tulafono, Governor of American Samoa

    Talofa and greetings Chairwoman Christensen and Honorable Members 
of the Committee. I greatly appreciate this opportunity to testify 
before the Committee on the urgent need for remedial legislation 
addressing the minimum wage increases that Congress has mandated for 
American Samoa.
Current Economic Conditions in American Samoa.
    In its January 25, 2008 report to Congress, the Department of Labor 
states that the economy of American Samoa is small and developing. 
Similarly, in hearings before the Senate Committee on Energy and 
Natural Resources on March 1, 2006, Deputy Assistant Secretary David 
Cohen of the Department of Interior stated, ``American Samoa has the 
narrowest economic base'' of the four territories. To document this 
point, Secretary Cohen noted that the per capita domestic product (GDP) 
in American Samoa ranks far below the other territories.
    Further evidencing the urgent need for economic development: (1) 
American Samoa has a per capita income that is only one-fifth that of 
the rest of the United States. (2) The territory has a large number of 
subsistence workers who cannot find paid employment. (3) 88 percent of 
all farms in the territory operate on a subsistence basis. (4) Despite 
a large out-migration of American Samoans to the United States, the 
territory still has a young, rapidly growing population. (5) The 
territory's income primarily comes from two fish canning operations and 
from the Federal Government's operational and capital grants. (6) 
Recent employment gains in the territory have occurred mainly in low 
wage sectors. Even in the low-wage sectors, however, the territory is 
at a competitive disadvantage to the Philippines and Thailand where 
wages are a fraction of the mandated federal minimum wage in American 
Samoa.
    To compensate for the territory's wage disadvantage, its remote 
location, limited resources, and small internal market, the Federal 
Government previously had provided trade and tax incentives for 
economic development in American Samoa. Specifically, preferential 
quota allocations, particularly for canned fish, as well as favorable 
tariff treatment and federal tax credits had allowed American Samoa to 
develop a seafood canning industry. As a recent Department of Interior-
funded study has reported, the fish canning industry is the mainstay of 
the territory's economy. The two canners in American Samoa are 
responsible for the employment of well over half of the territory's 
entire workforce directly and indirectly.
    Such a heavy reliance on two canneries is not economically sound, 
and the Government of American Samoa with assistance from the 
Department of Interior has pursued every opportunity to diversify the 
territory's economy. The territorial government has actively promoted 
business investment opportunities for agriculture, fisheries, tourism, 
call centers, and electronic information processing. If American call 
centers can operate in India and Guatemala, they should certainly be 
able to operate in American Samoa.
    Recognizing that the territory's economic level is far below that 
of the 50 states, Congress had previously decided to establish the 
federal minimum wage rate in American Samoa proportionate to economic 
development. Under a procedure that had been applied to Puerto Rico and 
the Virgin Islands, Congress adjusted the minimum wage in American 
Samoa administratively every two years so as to reflect the territory's 
progress. Such adjustments, therefore, were economically sustainable. 
The biennial adjustments over time would raise the territorial minimum 
wage to parity with the regular federal rate.
    As part of Public Law 110-28, the U.S. Troop Readiness, Veterans' 
Care, Katrina Recovery, and Iraq Accountability Appropriations Act of 
2007, however, Congress increased the regular federal rate nationwide. 
Congress also mandated an immediate 50-cent increase in the hourly 
minimum wage rate for American Samoa as of July 24, 2007 with an 
additional 50-cent increase every year thereafter until the minimum 
wage in the territory matched the new federal rate of $7.25. This 
minimum wage hike for American Samoa, similar to the tariff and tax 
changes, was inserted in the rush to enact the larger legislation 
without assessing the impact on the territory.
    That legislation did call for an after-the-fact review of the 
consequences. The Department of Labor has now submitted that report to 
Congress and the report predicts bitter results for the people of 
American Samoa. For the level of economic development in the territory 
the Department illustrates the impact in a telling way. The Department 
states that the mandated wage increase is equivalent to raising the 
federal minimum wage to $16.50 an hour in the states. The economic and 
political fall-out of such a drastic hike for the United States' 
economy is obvious. The territory must now contend with these very 
consequences.
Minimum Wage Legislation.
    The regular federal rate reflects the United States' advanced 
industrialized economy. American Samoa needs to undergo major economic 
development to match the United States' economic level. The Department 
of Interior reports that per capita GDP in American Samoa amounts to 
$9,041 which is equal to 34.4% of per capita GDP in the lowest of the 
states and 22.8% of the national average. This also compares to a 
higher $13,350 per capita GDP in the Commonwealth of the Northern 
Mariana Islands, $22,661 on Guam, and $25,815 in the Virgin Islands.
    Our per capita income is the lowest of the territories and only 
one-fifth that of the United States. Can the new minimum federal wage 
rate which reflects a developed, industrialized economy be sustainable 
in American Samoa? To this question, the Department of Labor reports 
that the mandated increase is not sustainable in American Samoa. The 
report noted that 77.8 percent of workers in the territory currently 
earn less than the federally mandated hourly minimum wage. Raising 
hourly wages to $7.25 an hour, the report says, will result in an 
increased wage bill of $40 million per year across all American Samoa 
industry sectors. Based on the $120 million annual payroll across all 
American Samoa industries reported by the 2002 Economic Census, this 
would represent a 33 percent increase in wage costs. General economic 
experience suggests that it is not likely that such an increase in 
wages could be absorbed through increased productivity, reduced 
profits, or higher prices passed along to consumers.
    An earlier Department of Interior-financed study of the minimum 
wage impact on the fish canning industry predicted the closure of the 
two canneries in the territory. From this economic analysis, the 
Department of Labor concludes that losing the canneries would eliminate 
44 percent of all jobs in American Samoa. The economic contraction 
would increase costs for the remaining sectors. Moreover, the remnants 
of the territory's economy would depend almost exclusively on Federal 
Government funds to survive.
    In view of the Department's stark assessment, I request expedited 
enactment of remedial legislation so as to make future increases of the 
minimum wage in American Samoa contingent on the Secretary of Labor's 
determination (through the Bureau of Labor Statistics' analysis) that 
such increase is economically feasible and will not substantially 
curtail employment in the territory. For the Bureau of Labor Statistics 
to conduct a substantive analysis, future increases should occur every 
two years. This position is along the same lines that you Madam 
Chairwoman had outlined with honorable Senators Inouye, Bingaman, Akaka 
and our Delegate in a letter on May 18, 2007 to congressional leaders.
    Legislative inadvertence is partly due to the fact that the Bureau 
of Labor Statistics and the Census Bureau do not collect timely 
economic data on American Samoa. Regular data collection provides 
Congress with ample details on labor market conditions, employers, and 
households in the 50 states, Puerto Rico, and the Virgin Islands. But 
the lack of such data for American Samoa leaves Congress and the 
federal Departments unaware of the economic consequences to this very 
distant part of the country. The remedial legislation should also 
require such data collection.
Territorial Operational Costs.
    Increased business development in American Samoa depends on 
attracting investments from the United States. Following the 
recommendations of the American Samoa Economic Advisory Commission, the 
Government Accountability Office, and the Intergovernmental Group on 
Insular Areas, the American Samoa Government has worked on an economic 
development program. This program is similar to the initiatives various 
U.S. states have adopted to promote business development. Basically, 
these state programs offer economic incentives to businesses that 
commit to investments, hiring, and long-term operations in the 
respective state.
    The Government of American Samoa is absolutely committed to 
developing the territory's economy so as to raise people's standard of 
living. In addition to federal initiatives, the territory must create a 
local development program just as the states have. Following the best 
examples of state development initiatives, American Samoa is crafting 
its own local program. Resources for this and other territorial 
initiatives, however, have been diverted to cope with the problems 
produced by the mandated minimum wage increase.
    The Department of Labor's assessment of the impact of the minimum 
wage increase states: ``General experience in the U.S. and elsewhere 
has shown that potential adverse employment effects of minimum wage 
increases can be...offset to some degree by an expanding economy that 
is generating net employment growth. In a declining economy, any 
adverse effects on employment will not be offset.'' Let me note that 
the territorial economy at present is anemic and that the territorial 
government must cope with falling tax revenues.
    The Labor report also projects that the minimum wage increase for 
territorial government workers alone will increase operating costs for 
the Government of American Samoa by $7.2 million a year. The report 
concludes: ``Paying for the increases in government worker minimum 
wages will present a significant challenge to ASG [the American Samoan 
Government].... These increases may force ASG to make difficult choices 
between reducing government payrolls, reducing available hours of paid 
work, raising taxes, or cutting non-wage expenditures.'' I would point 
out that the first 50-cent mandated increase has already imposed added 
operational costs on the territorial government as will the second 
increase coming in May. As a result the territory must request 
supplemental budget authorization and appropriations to cover the 
additional operational costs imposed by recent federal legislation and 
also to implement its local development initiatives.
Conclusion.
    Madame Chairwoman, this Committee is acutely sensitive to the 
economic situation in American Samoa and has been very supportive. In 
particular, you and the Delegate sought to modify the 2007 minimum wage 
legislation to reflect actual economic conditions in the territory. On 
behalf of the people of American Samoa, I wish to publicly express 
appreciation for your attempt to ward off this well-meaning but 
disastrous legislative mandate.
    Now that the Department of Labor has documented the dire impact of 
the 2007 legislative change on American Samoa, I urgently request this 
Committee and Congress to enact timely remedial legislation. Committee 
support for the pursuit and enactment of tax and appropriation measures 
to correct the unintended but very real consequences of past actions is 
also needed and would be greatly appreciated. We in American Samoa are 
proud to be Americans and we have served our country with valor and 
devotion. Remedial legislation will help us to develop our economy so 
that we can stand with the other territories and the 50 states as one 
nation.
                                 ______
                                 
    [A list of documents retained in the Committee's official 
files follows:]

    The information submitted for the record by the following 
individuals and organizations has been retained in the Committee's 
official files:
      American Samoa Department of Commerce, submitted by 
Director Faleseu Eliu Paopao
      Lorn Cramer
      Salu Hunkin-Finau
      Lawrence and Jane French
      Paul Krampe, Executive Director, American Tunaboat 
Association
      Tony Langkilde, Tautai Fisheries Co., Inc.
      Alofagia Vaita Nomura
      LINA Saegaese Prendergast
      Ruby Reed
      Trudie Iuli Sala
      Carlos M. Sanchez, Longline Services Inc.
      Sisters of Nazareth of American Samoa
      Taulapapa William Sword
      P. Ben Teo
      Petition submitted by employees of Starkist Samoa of 
Starkist Inc.
      United States Department of Labor, submitted by Ronald 
Bird, Ph.D., Chief Economist in the Office of the Assistant Secretary 
for Policy

                                 
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