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Among the previously dutiable items, the biggest gains in shipments

were recorded by frozen orange juice concentrate, various fresh vegetables and melons, fresh pineapples and dasheens (taro). As returns from recent investments begin to pay off and beneficiary countries learn how to export successfully to the U.S. market, we expect horticultural exports from the region to increase.

While there have been some positive results in the Caribbean Basin's production and export of non-traditional agricultural products, there have been problems in areas of traditional agricultural export earnings such as

sugar.

U.S. imports of sugar from the 12 Caribbean countries which have a sugar import quota (Barbados, Belize, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Jamaica, Panama, St. Christopher-Nevis, and Trinidad and Tobago) have declined by more than two-fifths since 1984. Similarly, their export earnings have declined from $405 million to $230 million, a drop of $175 million or 43 percent.

This decline in export earnings from sugar is a serious concern for the economic outlook for many Caribbean Basin countries, and is one of the primary reasons why the President, when signing the Food Security Act of 1985, noted that the sugar provisions of the Act needed to be amended.

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With respect to the CBI's impact on U.S. agricultural interests, USDA

is monitoring all imports of perishable products to prevent injury to domestic producers. The CBI's "fast-track" provision provides emergency relief-within

The

21 days-for U.S. producers being injured by imports from the CBI. Department has worked with Customs and the Department of Commerce to develop a data system by which we can track U.S. imports of perishable products within a short time of their entry into the United States. To date no U.S. producers have filed a request for import relief from CBI imports under the "fast-track" procedure.

Mr Chairman, that concludes my statement. I will be pleased to answer

questions.

Chairman PICKLE. Thank you, Mr. Kay.

Now, Mr. Stone, would you care to make a statement?

STATEMENT OF MICHAEL STONE, SPECIAL ASSISTANT TO THE ASSISTANT ADMINISTRATOR, BUREAU FOR LATIN AMERICA AND THE CARIBBEAN, AGENCY FOR INTERNATIONAL DEVELOPMENT

Mr. STONE. Yes, Mr. Chairman, thank you.

First I would express Mr. Peter McPherson's apologies to the committee for not being able to be present today. He was scheduled to be in Europe today. I believe his trip was cancelled either last night or this morning, but I know he had intended to be here.

I had a prepared statement to read to the committee, Mr. Chairman. I think I am going to abandon it, recognizing your request to be brief, and will try to spend my few minutes, if I may, giving a few personal examples of some of the things that I have seen going on under the CBI in the last month. These vignettes try to respond to your committee's questions, as I have heard them this morning, about some evidence of what is happening under the CBI in this very important area for the United States. Some of these accomplishments can be attributed to the CBI, at least in part. I emphasize that these are experiences that I have personally been involved in, in the last 4 weeks, and in one case just before Christmas.

I sense that there really is a pickup in the pace of investment and industrial activity in the CBI countries, and the examples that I will now recite, I hope, will illustrate that pickup.

In the case of the island of Antigua, I visited two electronics plants 3 weeks ago. Neither of those plants was in existence 2 years ago. One of them is making 50 transformers a month for Emerson Electric and shipping them back to the United States.

The other plant represents a wholly-owned subsidiary of a U.S. company which is shipping its production to facilities for further processing in California and the east coast of the United States and also to Ireland for onward sale in the European market.

In the neighboring island of St. Kitts, there is a very interesting operator which utilizes a form of investment called the shelter concept. This is a concept whereby the local entrepreneur provides the building, the labor, the insurance, the government relations, all of the local services; and the U.S. investor supplies the raw material, the engineering drawings, and in this case the capital equipment which amounts to $1 million. The local entrepreneur processes the raw material and ships it back to the United States. This operation was not in existence a year ago, and today is employing 150 new workers on the island of Saint Kitts.

I am sure that some of your members, Mr. Chairman, know of the extensive data processing industry development that has taken place in the CBI region. Some of this involves the very simple work of sorting grocery coupons, separating the Wheaties coupons from the Lever soap coupons, and allocating the proceeds to the right grocery store recipient. Some of it is much more sophisticated.

One operation I have seen in Jamaica takes telephone records from Illinois Bell which are shipped down in the form of microfilm, transcribes the customer records, on to diskettes which are then

sent back to Illinois Bell for storage on mainframe computers. This is data processing work that is not time-sensitive. There are a dozen of these facilities in the Caribbean carrying out this type of work. This industry has all developed in the last 2 years. I do not say it has developed entirely as a result of the CBI, but it has developed within the context of the increasing interest in this area and the increasingly favorable environment in which it can be carried out.

A fourth example is the case of a Honduras furniture manufacturer that I visited in December 1985. This is the second largest furniture manufacturing facility in that country. It is located very close to the capital city of Tegucigalpa. While I was there, I saw seven shipping containers of furniture being loaded for delivery to New Orleans, where it would be distributed in the U.S. market.

Another manufacturer in Honduras whose facility I visited, a much smaller one, has production that is now listed in the Spiegel mail order catalog in the United States. That work was not being conducted 11⁄2 years ago.

A final example, alludes to a company which was mentioned by Under Secretary Smart. I bring it up again because it is a very interesting example of CBI development involving a very well-known prestigious American corporation, Westinghouse.

I had the privilege of accompanying Westinghouse on an exploratory trip to the CBI countries about 6 months ago. Westinghouse has 14 different plants in Puerto Rico, 5 plants along the American-Mexican border, and no plants in the CBI. As a result of the 6day trip that we took from Monday to Saturday, Westinghouse subsequently decided to build a major 155,000 square foot facility in the Dominican Republic which will be in operation shortly, and will employ over 1,000 new workers.

It is a major milestone for corporate development in that part of the world, and I think it is going to send out a very interesting signal in terms of major involvement in a new part of the world for that corporation.

These are the examples that I would like to give to the committee, Mr. Chairman. I could go on and explain that AID has been involved in the development of each one of these projects, and each of the areas of involvement represents the type of commitment that AID, the agency as a whole, is making to the CBI.

Thank you, sir.

[The prepared statement and subsequent submissions follow:]

PREPARED STATEMENT OF

MICHAEL STONE

SPECIAL ASSISTANT TO THE ASSISTANT ADMINISTRATOR
BUREAU FOR LATIN AMERICA AND THE CARIBBEAN
AGENCY FOR INTERNATIONAL DEVELOPMENT

I welcome this opportunity to testify on the Caribbean Basin Initiative (CBI). The timing of these hearings is opportune as A.I.D. is now engaged in a major stocktaking of our role in the CBI, the preliminary results of which underly what I am pleased to report to you today. I believe the following information will satisfy the questions put to us by the Chairman in his February 18, 1986, letter to A.I.D. Administrator Peter McPherson.

I would emphasize at the outset that the CBI is of course an A.I.D. priority, manifested through a steadily increasing commitment of technical and economic resources to Basin countries. From fiscal year 1982, when total assistance to the region totaled $695 million, A.I.D.'s support to the CBI has grown steadily. Over the four fiscal year period, 1982 - 1985, the Agency obligated total funding of well over $2 billion in CBI related program activities. More details follow on the nature and level of our program response to CBI.

A.I.D. Objectives for CBI and Relationship to Goals

Our role and strategy with regard to CBI implementation has evolved over the past three years. The CBI is a broad effort linked closely with the A.I.D. program designed to promote economic development, social welfare and political stability in Basin countries. Our role to implement the Initiative, in a somewhat more limited sense, is focused on economic growth with equity, increased and sustainable employment, and improved foreign exchange earnings. Further, as a leading strategic objective, we are working to develop an improved business and policy environment in Basin countries so that they may take maximum advantage of trade and investment opportunities offered by the Initiative. More specifically, we are attempting to: (1) promote economic and financial stabilization and an environment conducive to private investment; (2) encourage production, trade and investment in non-traditional exports; and (3) enhance management and marketing capacities of the nations' business communities.

To address the above objectives, we have undertaken the following programs throughout the region:

(1) Balance of Payments and Budget Support: ESF resources provide scarce foreign exchange to help alleviate balance of payments shortfalls and support stabilization and critical policy reforms. These reforms, which illustratively include tax reform, privatization, elimination of state controls on commodity markets, and exchange rate reforms, reduce both government involvement in the marketplace and constraints on private sector-based production and investment.