Mr. SMART. The difference would be that the CBI products would be duty free, but they are, yes, competitive. Mr. THOMAS. I understand that, but what we are doing is in part creating pressures for Mexican fruits and vegetables to be handled in much the same way for a lot of the same arguments, and there you get tremendous volumes in direct competition with domestic fruits and vegetables. Mr. SMART. That is correct. Mr. THOMAS. Thank you, Mr. Chairman. Mr. ANTHONY. Mr. Chairman, I would like to make a suggestion as to how maybe we can work with the Commerce Department. If you could submit the 285 projects by country that were helped by CBI. I would make the suggestion that the subcommittee write a letter to the GAO requesting a study of those 285 projects and this will help the Congress and the administration make some type of a determination as to whether or not those were directly attributable to CBI. We will also see some of the problems that those particular projects may have encountered. I think the information that would come back from that would be very beneficial not only to the committee but to the Commerce Department. Chairman PICKLE. The Chair would write such a letter, and I think that is appropriate. We will be glad to do that. Thank you, Mr. Thomas. Do any other members have any questions they would like to ask the witnesses at this time? [No response.] Chairman PICKLE. If not, Mr. Smart, we want to thank you very much for your testimony, and we will keep in close touch with you and we will be looking forward to the information you are going to give us, in particular about these 285- Mr. SMART. Mr. Chairman, we would be delighted to give you not only the information you have asked for but anything you need in the future in the way of statistical or analytical information. We share your desire to understand fully where the CBI is heading and how it can be improved. This is a difficult problem that we are dedicated to helping with. Chairman PICKLE. All right. Thank you so very much, and thank you for your testimony. Now the Chair is going to call forward the next panel. The panel consists of Paul Taylor, Department of State; Stephen Shay, representing the Department of Treasury; John Simpson, Director of the Office of Regulations and Rulings, the U.S. Customs Service; Thomas Kay of the Agriculture Department; and Mike Stone, Special Assistant to the Administrator for the Bureau for Latin America in the Caribbean, AID. If you gentlemen will take your seat, we will pause just a moment while you get placed. [Pause.] Mr. Paul Taylor is Assistant to the Assistant Secretary of State, the Honorable Mr. Abrams. Mr. Abrams was here and had to go to the White House, and Mr. Taylor now is representing Mr. Abrams. Mr. Stephen Shay is the Deputy International Tax Counsel, representing the Department of Treasury. Mr. John Simpson is Director, Office of Regulations and Rulings, Customs Service. Mr. Thomas Kay is Administrator, Foreign Agricultural Service, U.S. Department of Agriculture. Mr. Michael Stone is from AID. I am going to recognize Mr. Paul Taylor first. We are sorry that Mr. Abrams had to leave, but we understand why it was necessary. I would ask each one of you to summarize your statement. Your entire statement will be included in the record. I am going to ask that each one of you be limited to a 5-minute summary because we have this panel and we have two other panels during the afternoon, so if we may proceed on that basis, I think we would move along quickly, then. So Mr. Taylor, if you would proceed first. STATEMENT OF PAUL TAYLOR, ASSISTANT TO THE ASSISTANT SECRETARY OF STATE FOR INTER-AMERICAN AFFAIRS, DEPARTMENT OF STATE Mr. TAYLOR. Thank you very much, Mr. Chairman. We at the Department of State are very grateful for this opportunity to be here to discuss with you the results to date of the Caribbean Basin Initiative and the Caribbean Basin Economic Recovery Act. Mr. Abrams is sorry that he had to leave, as you mentioned, but you have a copy of his testimony, so I won't try to repeat all of it but simply make a few points in summary, trying not to duplicate those remarks which have been made by other members of the administration earlier this morning. As you have seen by the President's recent trip to Grenada, the administration has a very high priority interest in the Caribbean Basin, and the efforts of the Congress to implement the Caribbean Basin Economic Recovery Act have made a very real contribution, and the committee here, of course, was central to those efforts. We have also seen recently in Haiti the political imperative of addressing Caribbean economic problems. We have heard this morning about some of the specific results of the Caribbean Basin Economic Recovery Act. It is clear, I believe, that the economic situation in the Caribbean Basin has not improved sufficiently to meet our expectations or to meet the desirable objectives that we as a government share. The initiative, though, does offer a framework of opportunity. The private sector must now take advantage of that framework; the effort of business will determine the real future of the economy of the Caribbean Basin. We are committed, from the President on down, through all the embassies in the region and to the various departments represented here today, to do everything we can to make the program succeeed. I might mention also that we had important help from other countries in this regard. Venezuela, Canada, and Mexico were in volved in early discussions predating the President's proposal to the Congress, as well as the Government of Colombia, the European Communities, their member states and Japan. Just to give you some examples of what other countries are doing in the Caribbean Basin to complement our efforts, Canada announced this past week a program similar to the Caribbean Basin Initiative, for the Commonwealth countries of the Caribbean. Under this program, which has the acronym Caribcan, products from the Commonwealth Caribbean countries will, with a few exceptions, similar to those of the CBI, enter Canada in a one-way duty-free trade zone. The European Communities through the Lomé Convention give preferential treatment to exports from various developing countries which have a special relationship with the European Communities. The countries include all of the Commonwealth Caribbean. We are looking at ways to cooperate more closely so that investors could simultaneously take advantage of the benefits of our Caribbean Basin Initiative, the Caribcan in Canada, and the Lomé Convention in Europe. We have also, as you know from the statement, increased assistance programs over the past few years to improve the economic well-being of the people of the Caribbean Basin. As you will hear from my colleague from the Agency for International Development, the Central American region has by far the highest priority in the Western Hemisphere for economic assistance on a per capita basis. The administration also gives a high priority to the island nations of the Caribbean in its allocation of economic and development assistance. We hope to work with you to avoid any measures which will dilute the Caribbean Basin Initiative's benefits and which would reduce access rather than expanding access for exports from the Caribbean Basin to our own economy. With those remarks, Mr. Chairman, I will close. I look forward to your questions. [The statement of Elliot Abrams follows:] STATEMENT OF ELLIOTT ABRAMS, Assistant SECRETARY FOR INTER-AMERICAN AFFAIRS, DEPARTMENT OF STATE I welcome this opportunity to testify today on the Caribbean Basin Initiative (CBI) - a major priority of the - Department of State and the Administration. The CBI and U.S. National Interests The broad bipartisan support that marked the passage of the Caribbean Basin Economic Recovery Act (CBERA) 1983 reflected the consensus of the Congress and of the American people that U.S. interests require the political and economic well-being of the region. The CBI embodies the U.S. effort to contribute to the region's political stability, social tranquility, and economic growth and development. The CBI is a historic program, central to the achievement of our foreign policy objectives in the region. Our own national self-interest generates a natural active concern over the stability of a region which is an immediate neighbor in fact, our third border. Fifty percent of our trade -- including most of our oil imports passes through - - the Caribbean shipping lanes, including the Panama Canal. The Caribbean Basin is the second largest source of illegal immigration into this country. Lack of jobs at home is the principal reason. In some Caribbean Basin countries unemployment is as high as 40 percent. We have a mutual interest that the peoples of the region have the opportunity to find useful employment in their domestic economies rather than being forced to seek jobs elsewhere. We have a significant and expanding export interest in the region. It constitutes an important proximate market for our goods; last year, the CBI countries together absorbed $6.3 billion of our exports, making them our seventh largest market. (The CBI is a larger market, for example, than the USSR plus Eastern Europe, than all of Africa, than France or Italy.) Likewise, we have important investments in the Caribbean Basin, amounting to $5.8 billion in non-financial investment (i.e. all industries except banking, finance and insurance) at the end of 1984 (the latest available data). We share an interest with the people of the region in fostering and preserving a favorable climate for foreign investments not only to protect existing U.S. investment there, but to attract new investment as well. -2 The United States also has a strong interest in curtailing the production and shipment of narcotics from or through the region to the U.S. Prosperous and growing economies afford alternate opportunities and should reduce the incentives for the production and export of narcotics to the United States. Active engagement on the part of governments in fighting narcotics traffic is a disincentive to producers and shippers, and the CBI legislation calls for cooperation in this effort. These are specific concrete examples of the way in which our national interests are served by the Caribbean Basin Initiative. Clearly, we have a clear interest in preventing the emergence of a string of hostile states in this area. The importance of the CBI to our national interest remains unchanged. There is a risk that, since the CBI is no longer new and is off the front pages, it may seem to be a passing fancy. That is not the case. This Administration continues to be strongly committed to promoting the economic development of the Caribbean Basin. Development serves our interest in stability and democracy in the Americas. There can be no clearer sign of the Administration's intent and of the President's personal commitment than the recent visit by the President to Grenada and the statements which he made there. Moreover, the CBI goes beyond any particular U.S. Administration or personal Presidential commitment. It will continue as an important part of U.S. foreign policy for its full twelve years because it reflects the fundamental interests of this nation. It was because of this overarching national interest that the program was passed by strong bipartisan majorities and continues to enjoy broad support. State Department's Role As a representative of the Department of State, let me say a few words on the role of the Department in the program; I know that this question is of interest to the Committee. The Department has a principal role in both the policy formulation and implementation of the CBI. As the co-chairman of the inter-agency policy sub-committee, the Department is involved in all aspects of the program direction of the Initiative. Department personnel are also active in the subcommittee on implementation and in carrying out the policies agreed upon on an inter-agency basis. There are six priority areas for the Department's action: |