Dominica, the Dominican Republic, El Salvador, Grenada, Guatemala, Haiti, Honduras, Jamaica, Montserrat, the Netherlands Antilles, Panama, St. Christopher-Nevis, St. Lucia, St. Vincent, and Trinidad and Tobago. The countries which remain eligible but have not yet qualified for the benefits of the CBI are: Anguilla, the Cayman Islands, Guyana, Nicaragua, Surinam, and the Turks and Caicos Islands.

DETAILS FOR SUBMISSION OF REQUESTS TO BE HEARD:

The Subcommittee invites additional testimony from those interested in CBI activities, private sector groups currently and previously involved in doing business in Caribbean Basin countries, and other members of the public. Individuals and organizations interested in presenting oral testimony must submit their requests to be heard by telephone to Harriett Lawler [(202) 225-3627], no later than Friday, February 14, 1986, to be followed by a formal written request to Joseph K. Dowley, Chief Counsel, Committee on Ways and Means, U.S. House of Representatives, 1102 Longworth House Office Building, Washington, D.C. 20515. The written request must be received by February 17, 1986, and must include a detailed outline of no more than two pages summarizing issues and any problem areas to be discussed in the testimony. Notification to those scheduled to appear will be made by telephone as soon as possible after the filing deadline. Any questions concerning a scheduled appearance should be directed to the Subcommittee staff (202) 225-5522.

It is urged that persons and organizations having a common position make every effort to designate one spokesperson to represent them in order for the Subcommittee to hear as many points of view as possible. Time for oral presentations will be strictly limited to five minutes with the understanding that a more detailed statement may be included in the printed record of the hearings. This process will afford time for Members to question witnesses. In addition, witnesses may be grouped as panelists.

All witnesses scheduled to appear before the Subcommittee are required to submit 100 copies of their prepared statements to the Subcommittee office, Room 1105 Longworth House Office Building, by close of business, Monday, February 24, 1986. Failure to comply with this requirement may result in the witness being denied the opportunity to testify in person.

Requests to be heard, prepared statements to be presented in person, and statements filed for the printed record of the hearings, must contain the following information:

1. The name, full address, and capacity in which the witness will appear, (as well as a telephone number where the witness or a designated representative may be reached); and

2.

A list of any clients or persons, or any organization for whom the witness appears.

WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE:

Persons submitting written statements for the printed record of the hearings should submit at least six (6) copies by the close of business, Thursday, March 6, 1986, to Joseph K. Dowley, Chief Counsel, Committee on Ways and Means, U.S. House of Representatives, 1102 Longworth House Office Building, Washington, D.C. 20515. (See other requirements enumerated above.) If those filing written statements for the record of the printed hearings wish to have their statements distributed to the press and the interested public during the hearings, 100 additional copies for this purpose must be provided to the Subcommittee Office, Room 1105 Longworth House Office Building, Washington, D.C. 20515, at least two (2) hours before the hearing begins.

i

Chairman PICKLE. The Chair will ask the subcommittee to come to order, and we ask our guests to please take their seats so that we may proceed.

The purpose of these hearings is to evaluate the impact and the effectiveness of the Caribbean Basin Initiative after 2 years of experience.

The Committee on Ways and Means, working together with the administration, developed a CBI proposal which was enacted into law on August 5, 1983. The CBI has subsequently been implemented by the United States on January 1, 1984. To date, thus, we have had 2 years of experience with which to evaluate the progress of the CBI. With 16 Caribbean countries and 6 Central American countries eligible for the benefits of the CBI, we can expect different reports from the various countries as well as common concerns and results. So, I look forward to the testimony today from the administration officials and from the various businesses who have had firsthand experience and knowledge about the CBI Program. The CBI has several goals. The first and most important function of the CBI is to grant tariff relief or duty-free treatment to CBI imports. The purpose of these trade preferences is to aid CBI nations by increasing their economic development, diversifying their economics, and encouraging stability in these countries by providing jobs to their citizens. Our first priority, thus, in this hearing is to see whether these trade concessions have helped in achieving these worthwhile goals.

The U.S. agencies with direct responsibility for the CBI are the Department of State, the Department of Commerce, and the U.S. Trade Representative.

Today, we will present their reports on U.S. efforts to implement the CBI. Other Federal agencies, such as the Department of Treasury and the U.S. Custom Service, will comment on specific areas of concern such as tax and financial exchange of information agreements and the transshipment of goods through CBI countries into the United States. Also, the Department of Agriculture and the Agency for International Development will discuss their role in administering the CBI.

As important, we will have U.S. businesses who have been involved in the CBI. Some have been successful investing in the Caribbean area, and others have not. We want to know the reasons why.

Before we commence this hearing, I want to make two comments. We are very early in the CBI. It is inappropriate to believe that there has been enough experience to make a final determination about the success or the failure of CBI.

The law, wisely, to my mind, contemplates a 12-year program. This fact alone underlines the long-term nature of our Nation's commitment to the Caribbean Basin.

The chairman of the full Ways and Means Committee and the Trade Subcommittee both requested months ago that these oversight hearings be held. Thus, it is time for the subcommittee to consider where the CBI is today and to identify its strengths and weaknesses. Where necessary, the subcommittee will report to the Trade and full committee any proposal for changes of direction or legislative recommendations.

In conclusion, I want to mention that last week the President made a planned visit to Grenada. As a result, news stories have provided quick fix judgment about the effectiveness of the CBI. Further, over the past 2 years, we have had executive speculation about the successes or the failures of the program. This week, the Oversight Subcommittee is going to collect the facts and ask questions as a matter of official record. Our review will not end after these hearings but rather continue. At a later date, I hope the subcommittee will be able to observe the impact of the CBI firsthand with a visit to several of the Caribbean Basin countries. So the hearings we have today is the beginning of a steady process of review over the CBI Program.

Now the Chair would like to yield to my colleague, Congressman Schulze, for any opening statement that he might care to make. Mr. Schulze.

Mr. SCHULZE. Thank you, Mr. Chairman.

I would like to congratulate you for holding these hearings. It is imperative that we perform the oversight function.

The CBI legislation was enacted to provide the Caribbean Basin with tax and trade incentives which would encourage economic development and prosperity in this region. The Congress and the President thought this legislation important because of this country's economic, social, and political ties in the Caribbean Basin.

The hearings we are now conducting should allow us to determine how effective the CBI legislation has been and where it can be improved. I am particularly interested in determining the effectiveness of the convention tax benefit in increasing tourism in the basin, the effectiveness of the trade incentives in enhancing economic development, and whether the President's recommendation of a 10-percent investment tax credit, which we did not put into the legislation, would have made any kind of a dramatic difference or would have increased economic activity in a way that would have been extremely beneficial.

The witnesses assembled by the subcommittee should provide us with a comprehensive review of the progress made to date under the CBI. In addition, I am hopeful that they will provide us with ideas on how we might improve the existing provisions. I hope they will keep in mind the restraints we have on expenditure of funds so that we can make great improvements in an economical

manner.

Congratulations on holding the hearings, Mr. Chairman.
Chairman PICKLE. Thank you, Mr. Schulze.

Does any other member want to make a preliminary statement? [No response.]

Chairman PICKLE. If not, we will proceed.

Our first witness this morning is the Honorable Clayton Yeutter, United States Trade Representative.

Mr. Ambassador, should we say "Yiter" or "Yawter." We are having a discussion up here.

Ambassador YEUTTER. You can use any of them, Mr. Chairman. Somehow or other, it got to be "Yiter" in most places, part of the time.

Chairman PICKLE. Well, we will try to make it that this morning.

We are pleased to have you. Ambassador Yeutter has come on to this program now as USTR at a time when we need strong leadership, and he has been giving that to us in the various trade matters, and we are pleased that you would be here this morning in person, Mr. Ambassador. So if you will proceed, we will be glad to have your testimony.

Incidentally, your entire statement will be included in the

record.

STATEMENT OF HON. CLAYTON YEUTTER, U.S. TRADE REPRESENTATIVE, ACCOMPANIED BY JON ROSENBAUM, ASSISTANT U.S. TRADE REPRESENTATIVE FOR LATIN AMERICAN, CARIBBEAN, AND AFRICAN AFFAIRS, AND RON SORINI, DEPUTY CHIEF TEXTILE NEGOTIATOR, OFFICE OF THE U.S. TRADE REP

RESENTATIVE

Ambassador YEUTTER. Thank you, Mr. Chairman.

It is a pleasure to be here before this subcommittee. Oversight is an important part of this program, and I am appreciative of the fact that you are performing that function, Mr. Chairman, and the other members of your subcommittee. Anything I can do personally to facilitate that process, you certainly have my full and complete cooperation.

The CBI program is relatively new to me, Mr. Chairman, as you know, since I have just come back into Government a few months ago, so I missed the first 18 months or thereabouts of the initiative. It is a personal pleasure to chair the CBI Task Force because I know that part of the world well. I have traveled throughout the Caribbean region on numerous occasions over the last 20 years and have a great deal of personal interest in the region.

Having come out of the private sector and being familiar with corporate decisionmaking processes, I would also like to second your comment, Mr. Chairman, that it is early to make anything other than a preliminary evaluation of this program. Two years is a very short timeframe in corporate decisionmaking, and one simply cannot expect American corporations, at least, to have made major investment decisions in this region in that short a period of time.

I would say that probably about 5 years ought to pass, Mr. Chairman, before we can get any realistic evaluation of the performance of this program. This is not to suggest we shouldn't do preliminary evaluations in the interim and determine problems and try to respond to them, but in terms of really evaluating what is happening or not happening in that region, it seems to me that that probably requires at least a 5-year timeframe.

Chairman PICKLE. Mr. Ambassador, let me interrupt you to say that we are in general agreement about the timeframe of it. I don't want to minimize the fact, though, that we have had 2 years experience. This is just not a passing review and a quick fix. We have had a lot of information gathered within this time to make a lot of valuable decisions about how we proceed.

Now, maybe 5 years is a good time, but I simply don't want to minimize the fact that we haven't had enough time. It has been a

short time, but enough to give us information to make some valuable decisions.

Ambassador YEUTTER. I have no disagreement with any of that, Mr. Chairman, and I think you should proceed on an annual basis or whatever the subcommittee deems appropriate.

As you also indicated, Mr. Chairman, there are representatives from a lot of the agencies here and they will be testifying this morning, and any specific questions, obviously, should be directed to them. I will try to do a bit of an overview, if I might do it quickly, and then provide an opportunity for questions.

There have been some newspaper articles lately indicating that the program has been somewhat disappointing because the export numbers from the CBI area to the United States are not all that impressive. If one simply looks at those numbers in the aggregate without analyzing them, that is obvious, but it just indicates how misleading statistics can be.

Clearly, exports were down in 1985 as compared to 1983, but nearly all of that was due to the fall in prices in the energy sector, and that obviously has had an effect not only on CBI but areas of this country like the one you represent, Texas, Mr. Chairman, and a lot of other places around the world, as well, including our neighbors to the south in Mexico.

So it is not unique for the Caribbean to experience the disadvantage of what has happened in the energy world.

In addition to that, like most developing countries or areas of the developing world, the Caribbean has suffered from a very weak economic situation in commodity pricing generally. In other words, a lot of what that part of the world ships to the United States and elsewhere would fall into the definition of what most of us call commodities, and anybody who has been in the commodity business over the last few years has suffered. That is certainly true of products like bauxite and sugar and others that are mainstays of the Caribbean economy.

Now, that is the bad news, if you will; but we need to be sure that that does not taint our overall perspective because there is some good news in the picture and we ought to recognize that. When one looks at nonpetroleum exports-and that includes some of the commodities to which I just made reference-they are up somewhere between 10 and 15 percent, depending on definitions, between 1983 and 1985, and in my judgment, that is a rather healthy performance.

So there are some good things in the picture. One of the reasons that deserves some mention is because those are the kinds of exports that the program was intended to facilitate and foster. So that is encouraging.

There has also been a substantial amount of investment. The numbers look small to us when dealing with billions and hundreds of billions of dollars in United States terms, but there have been something like 285 projects in the region during its first 18 months, investment projects, with a total of about $200 million and employment improvement of about 35,000 jobs. It seems to me that that, too, is a commendable development.

Over and above the numbers, Mr. Chairman, coming in as somewhat of an outsider, I am tremendously impressed by the commit