The existence of duty-free treatment for many imported products, as you are aware, acts as a magnet for transshipments by traders eager to realize duty benefits of the CBI, without necessarily contributing to the developmental purposes of the program. Ten Čaribbean countries have now registered measurable citrus production since the CBI Program became effective, with increasing exports of frozen concentrated orange juice to the United States. Indeed, based on available United States import figures for the period December 1984 to November 1985, at least three of these countries have been the source of more imported juice than they have the capacity to produce, Guatemala, Honduras and Jamaica. We have submitted with our testimony some data to illustrate this point. Even with the full utilization of the known estimated evaporating and concentrating capacity in these countries, they could not have been the source of the volume of juice reportedly shipped in the past year. Accordingly, one must conclude that some of the juice reportedly originating in Caribbean beneficiary countries may actually be transshipped from larger, non-CBI countries, such as Brazil and Mexico. Another recent development poses an even greater threat to the industry. OPIC has recently announced a reversal of its long-standing policy not to provide financing and insurance benefits to citrus development plants in foreign countries, and now proposes to entertain such requests for assistance in the CBI countries. This announced change in policy is reportedly based on the inaccurate conclusion that recent freezes in Florida have caused a permanent shortage of supply, and that increased aid to Caribbean duty-free citrus growing projects would be of benefit to the U.S. industroy. To the contrary, this would be extremely harmful to the domestic citrus industry. One of the results of two severe Florida freezes in the last few years, in addition to the high cost to Florida growers of recovery efforts, has been the expansion of worldwide citrusgrowing capacity. Record levels of FCOJ production around the world are exerting a severe downward price pressure with delivered prices for orange solids declining from $1.70 to $0.85 per pound during the last 12 months. Efforts of Florida growers to rejuvenate freeze damage citrus groves are already endangered by the world oversupply of processed citrus products, which will only increase in the near term as recently planted groves in Brazil and Central America reach productive levels. In the 1981 congressional debate on legislation reauthorizing OPIC's activities, specific assurances were given that OPIC would not be authorized to approve insurance or any other support for U.S. investments abroad affecting the U.S. citrus industry. The import sensitivity of the industry has greatly increased since the 1981 debate. Furthermore, the U.S. International Trade Commission has recently concluded that any elimination of an existing countervailing duty suspension agreement concerning FCOJ from Brazil would threaten to cause material injury to the domestic processed citrus industry. If foreign government subsidies have been found to cause injury to the domestic injury, we do not understand why a U.S. subsidy to foreign producers would not have the same results. In conclusion, I would simply like to state our basic position, that OPIC policies in support of the Caribbean Basin Program should not be used in a fashion to the serious detriment of U.S. citrus growers in the U.S. industry. Chairman PICKLE. Thank you very much. Let me ask the last gentleman, your name is Matthew what? [The prepared statement of Bobby F. McKown and attachments follow:] STATEMENT OF BOBBY F. MCKOWN, EXECUTIVE VICE PRESIDENT, Before the SUBCOMMITTEE ON OVERSIGHT HEARING TO REVIEW THE IMPACT Mr. Chairman and members of the Committee, I am Bobby F. McKown, Executive Vice President of Florida Citrus Mutual, Lakeland, Florida. FCM is a voluntary cooperative association which includes in its membership 12,962 growers of citrus for processing. Appearing with me is Mr. Matthew T. McGrath of Barnes Richardson & Colburn, counsel to FCM. We sincerely appreciate the opportunity to testify before you this morning concerning the impact and effectiveness of the Caribbean Basin Economic Recovery Act (CBI), and would like to offer our views on how this program has affected both Caribbean and U.S. growers of citrus fruits for processing. We wish to raise two critical concerns: (1) the possible transshipment of citrus juice through Caribbean countries from large, non-beneficiary producing countries; and (2) the recent reversal of policy by the Overseas Private Investment Corporation in order to finance and insure citrus projects in the Caribbean, to the serious detriment of U.S. growers. - 2 The CBI was properly envisioned as a trade and tax benefit program which would advance the economic development of certain Caribbean countries and contribute to the regional stability in this important area. FCM did not oppose the fundamental objectives of the CBI when it was introduced and we stated our positions before the Subcommittee on Trade and before the Senate Finance Committee. We advanced certain suggestions, which were adopted by the Congress, to improve the effectiveness of the CBERA while preventing any serious consequences to the competitive U.S. industries producing citrus fruits. Congress recognized the import sensitivity of the U.S. citrus industry as was reflected in certain provisions adopted in the CBERA: (1) Rules of origin are to be strictly enforced and a product is not to be considered an article of the Caribbean as a result of having undergone minor processing operations such as reconstitution of frozen concentrated orange juice. (2) In the event of injury to the domestic industry caused by importations of duty-free concentrated citrus juice and other agricultural commodities, a fast track relief mechanism exists to prevent serious disruption to domestic markets.. Similar provisions recognizing the sensitivity of our industry were incorporated in the U.S.-Israel Free Trade Area. - 3 In the two years that citrus juices from the CBI beneficiary countries have been eligible for duty-free treatment, citrus growers in those countries have enlarged; and their outlook for future growth appears to be good, as indicated by testimony already provided before this Subcommittee by members of the Administration. It is important to note, however, that the concerns we voiced in 1983 and with which the Committee agreed, have already begun to manifest their ill effects and threaten to injure the U.S. citrus industry. The existence of duty-free treatment for many imported products acts as a magnet for transshipments by traders eager to realize duty benefits of the CBI, without contributing to the developmental purposes of the program. Of the beneficiaries of the program, at least ten countries have registered measurable citrus production since the CBI program became effective. Imports of frozen concentrated orange juice (FCOJ) from these countries have increased in recent years. Indeed, based on available U.S. import figures for the period December 1984 to November 1985, at least three of these countries have been the source of more imported juice than they have the capacity to produce: Guatemala, Honduras, and Jamaica. (See attached Table) Even with the full utilization of the estimated evaporating capacity in these countries, they could not be the source of the volume of juice reportedly shipped in the past year. Accordingly, one must conclude that some of the juice reportedly originating in the Caribbean beneficiary countries may actually be transshipped from larger, non-CBI countries such as Brazil and Mexico, |