[Congressional Record Volume 143, Number 75 (Wednesday, June 4, 1997)]
[Extensions of Remarks]
[Pages E1101-E1102]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]





                          AMERICA'S HONG KONG

                                 ______
                                 

                         HON. MICHAEL P. FORBES

                              of new york

                    in the house of representatives

                        Wednesday, June 4, 1997

  Mr. FORBES. Mr. Speaker, I would like to encourage my colleagues to 
read an article entitled ``America's Hong Kong'' in the current edition 
of the American Enterprise, the journal of the pestigious American 
Enterprise Institute. In the May/June edition, Ronald Bailey provides 
an indepth analysis of his recent factfinding trip to the Commonwealth 
of the Northern Mariana Islands [CNMI].
  Bailey recounts the history of the islands, which were the scene of 
some of the heaviest fighting during World War II. As he explains, it 
took more than 25 days of fierce fighting for the United States to 
secure the islands from Japan at a cost of more than 3,000 American 
casualties and more than 30,000 Japanese defenders.
  He explains that after the war, the poor and underdeveloped islands 
were administered by the U.S. military until 1975 when a covenant was 
negotiated with the United States that established CNMI as a ``self-
governing entity under the sovereignty of the United States.''
  Until the covenant, Bailey points out that the islands ``were an 
impoverished ward living off meager Federal handouts.'' By the mid-
1980's, a series of factors ``converged to create a remarkable economic 
boom.''
  Bailey refers to the Marianas as ``a true free-market success 
story.''
  He details the growth of the economy, increases in per capita GDP, 
and the drop in unemployment from 15 to 4 percent. The economic growth 
enabled the government to reduce tax rates.
  We can learn from their example. It is worth stressing that even 
though tax rates were cut, CNMI government revenue increased from $5 
million in 1978 to $220 million in 1996. As a result, U.S. 
contributions to their government operation ended in 1992.
  Bailey also addresses the charges of labor abuses and concedes that 
these existed, but that local officials were working to improve 
conditions. He cities Gov. Froilan Tenorio to the effect those who 
abuse workers ``are being investigated, prosecuted and convicted of 
crimes or administrative violations.''
  Mr. Speaker, there are some in this body and this administration who 
believe that they can manage the islands better from Washington. Bailey 
responds by quoting the Governor's simple plea: ``Don't permit 
Washington to micromanage us or impose its policies and theories on us. 
Don't send us back to the old cycle of dependency on Federal 
handouts.''
  I agree with this approach and hope that this article will serve to 
shed new light on how this American commonwealth has prospered and 
reduced its dependence upon the Federal bureaucracy.

                          America's Hong Kong

       The Commonwealth of the Northern Mariana Islands (CNMI) is 
     a chain of 14 tiny islands directly north of Guam in the 
     western Pacific. The island of Saipan is home to 90 percent 
     of the commonwealth's population. For centuries, Spain 
     administered the islands as colonial possessions; then they 
     were sold to Germany and eventually handed over to Japan 
     after World War I.
       As the Second World War approached, the Japanese fortified 
     the islands. U.S. troops invaded Saipan on June 15, 1944. It 
     took 25 days of fierce fighting to secure the island at a 
     cost of more than 3,000 dead American soldiers and more than 
     30,000 dead Japanese defenders. The islands are still 
     littered with the debris of the battles: rotting gun 
     emplacements, Japanese command posts and bunkers, rusting 
     armored vehicles. Of the many war memorials that dot Saipan, 
     the most sobering is at Suicide Cliff. From that precipice, 
     hundreds of Japanese men, women, and children jumped several 
     hundred feet to their deaths rather than surrender to the 
     American invaders.
       After the war, the poor and undeveloped islands were 
     administered by the U.S. military, which closed them to 
     outsiders because of a very elaborate, secret CIA covert 
     operations base on Saipan. In the 1970s, this sleepy tropical 
     backwater began to negotiate a new status with the United 
     States. This eventually resulted in a 1975 covenant that 
     established the Commonwealth of the Northern Mariana Islands 
     as a self-governing entity under the sovereignty of the 
     United States. The relationship is made clear on island 
     license plates, which proudly read ``CNMI USA.''
       Essentially, the locals became U.S. citizens, but without 
     the right to vote in presidential elections, and without 
     federal income taxes. Although most federal laws apply, the 
     covenant reserved some crucial areas to the control of the 
     CNMI government, including minimum wage rates, immigration 
     rules, and customs. In 1978, the islands established a 
     democratically elected bicameral legislature with a Senate 
     and a House of Representatives, an executive branch headed by 
     a governor, and an independent judiciary.
       Until the covenant, the Mariana Islands were an 
     impoverished ward living off meager federal government 
     handouts. In 1970, the 1,000 or so indigenous people who were 
     employed had annual wages totaling $1.5 million, and the 
     largest employer was the Trust Territory government. In 1970, 
     the total number of hotel rooms in the islands was 83.
       Even after the covenant, full economic takeoff had to wait 
     for the conferring of American citizenship on CNMI residents 
     to be finalized by various bureaucrats. But by 1986, three 
     factors--the stability assured by affiliation with the United 
     States; the opening of air service to Japan; and the 
     abandonment of restrictions on foreign investment--converged 
     to create a remarkable economic boom. A tourist flood 
     resulted--the number of hotel rooms rose from 740 
     accommodating 117,000 visitors who spent $59 million in 1980, 
     to 3,600 rooms for 650,000 tourists who spent $522 million in 
     1995. The second pillar of the CNMI economic miracle in the 
     garment industry. It rose from essentially nothing in 1985 to 
     a $419 million business in 1995. Total gross commercial 
     revenue in the islands has grown from $244 million in 1985 to 
     $1.5 billion in 1994.
       What I found on a recent fact-finding trip to the Marianas 
     was a true free-market success story. The economy grew at 13 
     percent per year from 1980 to '90, and per-capita GDP 
     quadrupled from $2,400 to $10,000. Unemployment dropped from 
     15 percent to 4 percent. In addition, the Commonwealth 
     slashed income taxes by 90 percent, cut capital gains taxes 
     to half the U.S. rate, reduced excise taxes, and eliminated 
     import duties. There are no inheritance, property, or sales 
     taxes on the islands. Meanwhile, CNMI government revenues 
     have increased from $5 million in 1978 to $220 million in 
     1996, and the U.S. contribution to government operations 
     ended entirely in 1992.
       The flood of private investment in the Marianas soon ran up 
     against a dilemma. There were not enough local people to fill 
     the new jobs being created. The solution was hiring thousands 
     of temporary ``guestworkers.''
       Under the covenant, the CNMI has complete control over 
     immigration. The hotels, garment factories, and construction 
     firms currently employ 29,000 guestworkers, and guestworkers 
     make up nearly half of the islands' population of 60,000. 
     Some 20,000 of the nonresident workers are Filipinos, while 
     7,000 are from mainland China.
       ``If you look at a map, you will see that we are the first 
     tropical beach immediately south of Japan, Korea, Taiwan, and 
     the China coast. `This means that we have enormous potential 
     to reap the benefits of our geographic location. But we 
     cannot achieve that potential with our tiny local population 
     alone,'' says CNMI Governor Froilan Tenorio, ``What kind of 
     investment climate do you think we will have if I have to 
     tell a prospective investor, `Sorry, we can't supply enough 
     local manpower, and the federal government won't let us bring 
     in any more foreign workers?' ''
       The Government's question is not merely a rhetorical one. 
     Pushed by U.S. labor unions--who are upset by the prospect of 
     a laissez-faire, loose wage, low-tax economic model 
     blossoming under American sponsorship--and emboldened by 
     instances of guestworkers being cheated and mistreated, the 
     Clinton administration is threatening to clamp down on this 
     mini-Hong Kong.
       Allen Stayman, Director of the Office of Insular Affairs in 
     the U.S. Department of the Interior, has threatened to rake 
     control of immigration and wage policy away from the CNMI 
     government. Clinton officials ``are firmly convinced that a 
     gradual increase in the CNMI wage rate and the eventual full 
     application of the Fair Labor Standards Act would benefit the 
     economy,'' testified Stayman this past February in support of 
     a bill that would force up CNMI minimum wages, Governor 
     Tenorio, on the other hand, argued in his own House testimony 
     that all such federal intervention will do ``is ruin our 
     economy.  . .and assure that our Commonwealth will remain 
     permanently dependent on federal assistance.''
       The irony is that these interventions are being proposed 
     just when other Pacific territories are jealously eyeing the 
     CNMI's humming economy. One hundred twenty miles to the 
     south, Guam is trying to negotiate a covenant with the U.S. 
     similar to the one the CNMI has, in which Guam would gain 
     control over immigration and labor regulations. And even as 
     Clinton administration officials attack the CNMI, they have 
     had a change of heart that leaves them looking favorably at

[[Page E1102]]

     Guam's request. Why? In February, the Washington Post 
     reported that Guam got the attention of the Clintonites after 
     Governor Carl Gurierrez raised and delivered nearly $900,000 
     in combined contributions to the Clinton-Gore re-election 
     campaign and the Democratic National Committee. These 
     handsome campaign contributions made the citizens of Guam, 
     who cannot vote in U.S. elections, the biggest donors to the 
     Democratic Party per capita of any part of the U.S. Governor 
     Gutierrez has met with President Clinton in person twice 
     since making the contributions.
       Maybe the CNMI missed a bet. If Governor Tenorio had hosted 
     a fundraiser for Clinton, and then flown to the White House 
     for a coffee date, he might not be facing today's threat to 
     the common-wealth's right to direct it own economy.
       Certainly there are problems in the CNMI. One is a large 
     local bureaucracy. The 1997 budget shows that nearly 4,600 of 
     the 27,500 U.S. citizens on the islands work for the 
     government. The islands' long period of federal dependency 
     fed cultural attitudes that are found all too often in poor 
     countries around the world today. ``Our people were enticed 
     out of the fields and fishing boats and into desk jobs where 
     they were taught that working for the government was the road 
     to riches and that other people would do the dirty work,'' 
     Governor Tenorio testified at a recent Congressional hearing. 
     ``Worse, we were inculcated with a welfare mentality. Uncle 
     Sam paid the bills and cleaned up the messes, and we came to 
     rely on that.''
       When I suggested to one government official on my recent 
     visit that too many locals were working for the government, 
     he answered: ``Well, they're not trained for anything else. 
     If we didn't pay them to work for the government, they'd be 
     on welfare.'' A tourist boat captain joked to me that the 
     traditional Marianas' greeting, ``Hafa Adai,'' really means 
     ``half a day,'' which is all that an islander wants to work. 
     Several other locals proudly cited the claim that islanders 
     consume more Budweiser per capita than any other people in 
     the world. Anheuser-Busch has twice sent out a vice-president 
     to see what is going on.
       There is also little question but that some guestworkers 
     have been mistreated. Government officials do not deny this, 
     and say they are making new officers to enforce contracts and 
     apply existing labor standards. ``Employers and others who 
     abuse our guestworkers are no better than common criminals,'' 
     testified Tenorio on Capitol Hill. ``They are being 
     investigated, prosecuted, and convicted of crimes or 
     administrative violations.''
       The Governor argues ``It would be impossible to understand 
     how [federal agencies] could possibly do a better job in the 
     CNMI than we are now doing.'' Taking over Immigration control 
     and raising minimum wages would only destroy economic 
     opportunities and hurt employees and employers alike. The 
     current minimum in CNMI garment factories, $2.90 per hour, is 
     already more than ten times the average wage in mainland 
     China, which the New York Times has recently reported to be 
     28 cents per hour. The overwhelming majority of CNMI guest 
     workers request that their labor contracts be renewed upon 
     expiration. Governor Tenorio's summary plea to Congress is a 
     simple one: ``Don't permit Washington to micro-manage us or 
     impose its policies and theories on us. Don't send us back to 
     the old cycle of dependency on federal handouts.''

     

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