aviation safety, highway planning, engineering, and maintenance, and other areas related to improved transportation. The Transportation Department also chairs the interagency CBI Transportation Working Group, which serves as a forum for private sector proposals to solve Caribbean Basin transportation problems. Two AID-sponsored initiatives to encourage private sector investment in improved sea and air transportation have resulted.

U.S. Information Agency

The U.S. Information Agency (USIA) has played a key role informing Caribbean Basin companies of the new opportunities for business provided by the CBI, via videotape and radio programs, wire service feeds, and special publications. In cooperation with the Department of Commerce, USIA sponsored a Spanish-language teleconference in which business audiences throughout the region had an opportunity to question a panel of trade experts in Washington.

U.S. Peace Corps

The U.S. Peace Corps has some 900 volunteers contributing to Caribbean Basin economic development. Peace Corps now offers pre-service training in business planning and feasibility assessment. Roughly half the volunteers in the region are at work developing small and medium-size ventures, focusing on agribusiness in some of the poorest rural areas. Peace Corps volunteers also help U.S. companies establish co-ventures with small-scale producers in the region.

Chairman PICKLE. We thank you very much.

Let me ask you first-I should note, did you or any of your representatives go with the President to Grenada?

Ambassador YEUTTER. We did not, Mr. Chairman. We considered that, as to whether it would be helpful or worthy of my personal time on that particular day to accompany the President and the decision was that that was not necessary.

Chairman PICKLE. Have your representatives been to the Caribbean nations and have they been monitoring the progress of the CBI? Have they been there in person?

Ambassador YEUTTER. Oh, yes. Jon Rosenbaum, who heads our Caribbean activities, at USTR, and who is here this morning, has been there many times.

Chairman PICKLE. Which of the various Government agencies had the most interaction with the USTR?

Ambassador YEUTTER. All of them, Mr. Chairman, on a regular and continuous basis. Everybody who will be testifying here this morning relates very closely to USTR, Mr. Chairman.

Chairman PICKLE. When a decision is made about a procedure under our CBI agreement, do you make the decision? Does the Department of State, Department of Commerce, Department of Agriculture? Do you consult with them? How does it work?

Ambassador YEUTTER. Well, there are several committees that have been set up in the structure, Mr. Chairman. One involving policy, Caribbean Basin Initiative policy, is cochaired by State and USTR. And then there are other committees that are involved with the operational and transportation aspects, chaired by other agencies of the Government.

They will report that this morning. For example, there is a transportation subcommittee that is chaired by the Department of Transportation.

Chairman PICKLE. I am going to ask a question-maybe a judgmental question, but I do not know how you will respond to it.

The CBI Act that we passed specifically exempts certain products from duty-free treatment. There is quite a list of them, footwear, handbags, luggage, flat goods, work gloves, certain leather wearing apparel, textiles, tuna, sugar, and other quotas and limitations. I want to ask you a specific question about sugar, but specifically, have we exempted too many products? Have we put too much limitation? Should this be a matter of review by the committee?

Ambassador YEUTTER. It certainly should be a matter of review on a continual basis, Mr. Chairman, it seems to me. Because obviously any exclusions or limitations make it more difficult for this program to succeed. At the same time, one must be sensitive to the reasons why those products were excluded or excepted in the first place.

And as you know, much better than I, there was intense congressional debate on those topics at the time the initiative became law. Chairman PICKLE. Let me read to the committee, a statement made-I believe it came from your office. Your note that—

It is noted further that the negative impact of lower U.S. sugar quotas held serious political ramifications for sugar producers, such as in the Dominican Republic, St. Christopher-Nevis, and Belize because of (a) large number of jobs are at stake for unskilled labor forces with no alternative; (b) sugar industry unions hold significant

clout; and (c) the heavy drain on CBI government revenue to subsidize sugar undermines economic readjustment programs.

Has the sugar limitations and the quota caused serious problems down there?

Ambassador YEUTTER. Absolutely, Mr. Chairman.

Chairman PICKLE. What should we do?

Ambassador YEUTTER. Well, it would be-as I indicated just a moment ago, it would clearly be desirable if we could improve market access of CBI sugar into the United States. That will not come easy, because there are obviously strong interests here in the United States-

Chairman PICKLE. Well, I take it that you assume that the same kind of increased access, or more imports, would be true for say textiles or leather goods?

Ambassador YEUTTER. We have responded on textiles with this new program, Mr. Chairman, that should be really quite helpful. So it seems to me that the textile situation is comfortable at the moment, certainly much enhanced.

Sugar is a different story. We have retrogressed in sugar. It is not a matter of improving market access on sugar. We have retrogressed in the sense that market access has been progressively denied through the years.

Chairman PICKLE. I think what bothers me, and I think the committee as a whole, that after 2 years of operation with both the United States and all the Caribbean nations launching this program with great enthusiasm and the full support of the administration, we find that imports generally have been 23 percent lower particularly in those industries affected by petroleum.

Why do you make the distinction between the two categories? Must we not admit that overall we have not had as much progress as we had hoped for? That we have got yet to move forward with the speed and commitment that we think it should have if this program is going to work?

Ambassador YEUTTER. Mr. Chairman, it is true that the CBI probably has a greater reliance on energy products than it should have, and additional diversification will be helpful. That ought to be one of the basic objectives of this program. But one cannot diversify out of petroleum products overnight and so there is some very painful structural adjustment, because as you know the prices of petroleum products have plummeted very quickly.

Chairman PICKLE. Has any U.S. business complained to us about any violation in the Caribbean nations with respect to copyrights or any other agreements that they have reached? Have we had complaints from our business people?

Ambassador YEUTTER. There have been some, Mr. Chairman, and others can delineate those with greater specificity than I. There have been some in the intellectual property area, but it is much less of a problem in the Caribbean than in many other parts of the world.

There are some complaints about transshipments in the steel program and transshipments and other circumvention of the program in textiles, and also in ethanol; but those are relatively minor in terms of the total scope of the program, Mr. Chairman.

Chairman PICKLE. I am going to yield my time to Congressman Schulze for any questions he might have at this time.

Mr. SCHULZE. Thank you, Mr. Chairman.

Mr. Ambassador, thank you for appearing this morning. We appreciate your testimony.

You were not involved in this legislation when it was passed, but in my opinion, the biggest bang for the buck in the Caribbean is tourism. There were proposals put forth by myself and others which would have given a greater incentive to tourism in the Caribbean Basin, which both the committee and the administration opposed. One was deductibility for cruise ships for conventions held on cruise ships. If you have just conventions, you need to have a convention hotel, an airport, highways and roads to get from the airport to the hotels. You need massive infusions of capital in order to take advantage of the convention section.

With deductibility of cruises, all you need is a dock, and at first you can buy trinkets, and then gradually the infrastructure can be developed around that industry.

With the knowledge that you were not here, I don't know whether you want to comment but I felt very strongly that deductibility for cruise ship conventions was the way to get a rapid infusion of dollars into some of the poorer countries. Both the administration and the committee decided against it.

Do you have any thoughts on that, in retrospect?

Ambassador YEUTTER. Well, I would comment, Mr. Schulze. This is not an issue that has arisen for debate since I have been here, but knowing that area of the world as well as I do, it seems clear to me that tourism is one of the biggest potential economic winners of all. Those white beaches are unique. There is just nothing comparable to them anywhere in the world, in my personal judgment, and I have traveled most of the world.

So I would strongly support your basic thesis that we ought to do what we can to facilitate development of tourism in that area. If the particular issue you have raised merits reconsideration, perhaps that can be reconsidered, notwithstanding the constraints of Gramm-Rudman. That obviously is a very severe impediment to doing anything further at this point in time.

But in terms of, as you put it, bang for the buck, I would fully subscribe to your hypothesis that there is probably greater bang for the buck in the general area of tourism than perhaps any other

area.

Mr. SCHULZE. Mr. Ambassador, you mentioned bilateral investment treaties. Would you go into it in a little more detail on that? Have we run into problems which have forced this discussion of bilateral investment treaties, and what have those problems been? And is there something we can do to overcome those difficulties? Ambassador YEUTTER. I would like to ask Jon Rosenbaum to come up and cover that point, if he would, because he has been involved in this activity and can provide greater specificity. I would simply say that it is probably as much inertia as anything else, not only with the Caribbean but with other parts of the world. There ought to be more bilateral investment treaties with a lot of lesserdeveloped countries, and they are just slow to engage in this activi

ty, notwithstanding the fact that it would be to their individual benefit. Jon?

Chairman PICKLE. Mr. Rosenbaum, would you identify yourself, please?

Ambassador YEUTTER. Jon Rosenbaum, who is our Assistant USTR for Latin American, Caribbean and African Affairs.

Chairman PICKLE. Mr. Rosenbaum, I want to ask that you respond briefly to the suggestion of Mr. Yeutter.

I want to remind the committee that we have several witnesses today, and I want to ask each member to stay within the 5-minute limitation, or less, if possible, but we want to move as quickly as possible.

Proceed, Mr. Rosenbaum, if you would.

Mr. ROSENBAUM. Thank you, Mr. Chairman.

We have had discussions with most of the beneficiaries under the CBI about the possibility of negotiating bilateral investment treaties. As Ambassador Yeutter mentioned, we have already concluded treaties with Haiti and Panama.

Recently we have been discussing these treaties with Antigua, the Dominican Republic, Barbados, St. Lucia, and Jamaica, and we have consulted, as I said before, on these treaties with all the other countries, or most of the other countries, as well.

The aspect, I think, which causes the most problem is merely one of inertia. These countries have many things to consider. They have small staffs in their governments in most cases, and we are being quite active in following up where there is an expression of interest.

Mr. SCHULZE. I guess my question was what brought about the need for the treaties? Were there investment policies or governmental policies in the islands that were prohibiting investment? Mr. ROSENBAUM. Well, there are some problems in the individual countries

Mr. SCHULZE. That's what I want to know.

Mr. ROSENBAUM. The basic problem is, I think, the fear on the part of some potential investors that the investment climate will change as individual governments change. What the investor is looking for is a feeling of security that the investment climate-Mr. SCHULZE. How could a treaty change that?

Mr. ROSENBAUM. Well, a treaty establishes a legal relationship between the U.S. Government and the government concerned. There is also in these treaties-

Mr. SCHULZE. Well, not binding on a succeeding government? Mr. ROSENBAUM. Well, it is. There is also, and I think it is important to know, a requirement in these treaties to have-

Mr. SCHULZE. Well, let me understand this. Businessmen are saying that they are not investing because of the long-range political climate?

Mr. ROSENBAUM. Many of them are.

Mr. SCHULZE. And that was the main motivation for drafting these treaties?

Mr. ROSENBAUM. That's correct. They also provide a third party forum of settlement of investment disputes, which is important.