[Congressional Record Volume 145, Number 164 (Thursday, November 18, 1999)]
[Senate]
[Pages S14777-S14778]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   THE CARIBBEAN BASIN INITIATIVE AND THE IMPACT ON TRADE WITH ISRAEL

  Mr. JOHNSON. Mr. President. I would like to alert my colleagues to an 
issue raised by H.R. 434, the African Growth and Opportunity Act and 
the Caribbean Basin Initiative, regarding trade with Israel under the 
U.S.-Israel Free Trade Area Agreement. Notwithstanding our free-trade 
agreement with Israel, the CBI provisions of this legislation would 
unfairly discriminate against U.S. imports from Israel.
  Under that legislation, most U.S. textile products made with Israeli 
inputs, such as yarn, fabric or thread, would not be eligible for duty 
free treatment when assembled into apparel in the Caribbean. To 
illustrate the contrast with current law, today, if a U.S. company uses 
Israeli yarn in manufacturing fabric, the products made from such 
fabric would be eligible for CBI benefits. The trade bill creates a 
unilateral change from the status quo in our trade with Israel and a 
major barrier to U.S. companies using Israeli-origin inputs.
  I would like to submit for the Record a letter from the Economic 
Minister of the Israeli Embassy that was sent to each of the Members of 
the Senate Finance Committee urging Congress to treat Israeli inputs on 
par with U.S. inputs in this trade legislation. I ask unanimous consent 
that letter be printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                            Embassy of Israel,

                                    Washington, DC, June 15, 1999.
       Dear Senator: I am writing to you, as well other members of 
     the Committee on Finance, to ask for your support during the 
     Committee's mark-up of the U.S.-Caribbean Basin Trade 
     Enhancement Act (also known as the ``CBI'' trade parity bill) 
     to ensure that it does not impose an economic barrier against 
     U.S. imports of Israeli-origin inputs, such as yarn, fabric 
     or thread, under the U.S.-Israel Free Trade Area Agreement 
     (``FTAA'').
       My Government urges the inclusion of a provision in the CBI 
     legislation that will enable U.S. companies to continue 
     utilizing Israeli-origin inputs in producing American-made 
     products without making such products ineligible for CBI 
     duty-free trade prefrences.
       The current CBI trade program provides preferential tariff 
     treatment to apparel made from U.S.-formed components that 
     are finished in a CBI-eligible country. Currently such 
     components may be cut from fabric, or formed from yarn, 
     originating either in the United States or Israel. The 
     legislation before the Committee incorporates a U.S.-only 
     fabric and thread forward rule of origin. The CBI bill 
     recently approved by the House Ways and Means Committee also 
     incorporates a U.S.-only ``yarn forward'' requirement for 
     knit-to-shape products. Either bill in its current form would 
     adversely affect Israeli exports to the United States. Market 
     conditions would all but require U.S. companies to halt 
     imports of Israeli inputs so as not to disqualify their 
     products from the duty-free trade preference to be extended 
     unilaterally to CBI-eligible countries. The loss of sales to 
     the U.S. market would harm

[[Page S14778]]

     both Israeli companies and U.S. companies that supply raw 
     materials used in the manufacture of Israeli inputs, such as 
     nylon yarn.
       I am bringing this matter to your attention because the 
     legislation to be considered by the Finance Committee should 
     not damage U.S.-Israeli trade. Protecting against such harm 
     can be accomplished by providing in the legislation that 
     Israeli-origin inputs will, for purposes of CBI preferences, 
     be treated no less favorably than U.S. inputs. Such a 
     provision would ensure that restrictive consequences of the 
     proposed legislation would not adversely affect U.S.-Israeli 
     trade.
       The legislative measure that we are asking you to support 
     is consistent with previous trade measures approved by your 
     Committee and enacted into U.S. law to preserve U.S.-Israeli 
     trade under the FTAA. Such a provision would preserve the 
     status quo in U.S.-Israeli trade, a goal that has been 
     endorsed previously on a number of occasions by the 
     Committee. It is not intended to create any new benefit for 
     Israeli products.
       In sum, our objective is to ensure that the CBI trade bill 
     does not withdraw the practical benefits of the U.S.-Israel 
     Free Trade Area Agreement and our mutual goal of expanding 
     bilateral trade. I would very much welcome the opportunity to 
     review this issue with you.
           Sincerely,
                                                      Ohad Marani,
                                                Economic Minister.

  Mr. JOHNSON. I do not think that it is the intent of the CBI 
legislation to undermine our trade with Israel. Preserving our existing 
trade with Israel will not in any way lessen the trade benefits we 
extend to the CBI countries. And it is critically important that we 
consider our existing trade agreement with Israel as we develop further 
trade measures. I urge my colleagues to address this issue as this bill 
moves forward, so that we do not prejudice our trade with Israel under 
the U.S.-Israel Free Trade Area Agreement.

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