Chairman PICKLE. Thank you, Mr. Mitchell. It's good testimony. Now Mr. Stephen Lande, vice president of Manchester Associates, Ltd. Mr. Lande.

STATEMENT OF STEPHEN LANDE, VICE PRESIDENT,

MANCHESTER ASSOCIATES

Mr. LANDE. Thank you very much for the opportunity to appear here.

I am from New York and will try to make up for speed what is necessary to summarize my 10 points in the 5 minutes that you have. But I also hope it will be clear.

The future of the CBI is intimately connected with the Ways and Means Committee and the Subcommittee on Trade. Since the committee is responsible for trade in the House, it can and has thwarted legislation which undercuts the CBI.

CBI countries are indeed fortunate that the committee responsible for the CBI occupies such a strategic position.

Similarly, the committee's leadership is indispensable for new CBI initiatives. The necessity for the administration to balance different foreign interests may prevent it from taking the lead in developing and promoting a regional initiative. It is our hope that given the experience and what will come out of these oversight committee hearings that the committee will consider possible legislative initiatives, and if they are appropriate, will see that they are passed to the House and the Senate.

Below I have proposed some CBI improvements for consideration. Some or all of them, as well as some of the other proposals which have been offered, can be combined into a CBI package, perhaps CBI 2. Perhaps at the upcoming retreat on trade policy that your committee will be holding, or perhaps during your visits to the Caribbean themselves and thereafter in your report, you will see fit to make some proposals for legislative changes.

There is a vehicle which exists and which was provided in the 1984 Trade Act, and this is the section 102 authority which allows the granting of nontariff barrier concessions and which also allows the expansion of tariff concessions in the context of a non-MFN agreement.

We think that this type of arrangement may be appropriate for a further deepening of the CBI provisions. We have reviewed the types of commitments which CBI countries have undertaken in order to become eligible. Largely due to the work of U.S. Trade Representative Bill Brock and the negotiator John Rosenbaum of the Interagency Team, Caribbean countries gave forth many concessions which we to this very day are trying to get either in the context of the GATT, the multilateral trade negotiations, or perhaps in some bilateral discussions.

We think that if these particular concessions were analyzed and looked at, they might form the basis of the Caribbean contribution to this type of tariff and nontariff agreement that we are talking about.

We believe that at this time of their development it is not appropriate for one to think of a two-way free trade area, such as we have negotiated with Israel and may be negotiating with Canada,

but perhaps the types of concessions the Caribbeans have made in relationship to private sector investment relation to protection of interlateral property rights would be extremely positive.

The 10 proposals that we have on the table that we would like to suggest are as follows:

One, we believe that the coverage should be expanded to CBI, if not to include all products, to include almost all products. I think enough other witnesses have preceded me and have pointed out the fact that "despite concerns that some import-sensitive products were going to receive duty-free treatment under the CBI, there was no import surges or export surges in these products," and I would suspect that the same thing would happen if we expanded it to include all the products. Our suggestion is that this be considered again in the same way as Israel, which did also receive "duty-free treatment," although phased in for all of its imports.

Rules of origin is another subject that were covered and I think a few members of the panel are more expert than I am.

I have two comments on the rule-of-origin waiver:

First, I think when one looks at rules of origin, one must realize that you are trying to accomplish two objectives. On one you want to assure real production in the CBI. On the other hand, you also want to assure they are not simple passthrough operations. You have given Customs a thankless job, because people come and want either one particular objective or another.

Our proposal first is to consider, perhaps through separate legislation, ways of dealing with specific products where there are CBI inputs. For example, Congressman Schulze just was talking about orange juice. And in point of fact, you do not want to encourage processing in the CBI of Brazilian oranges or oranges from any other source. You'd like to do that in that area. And perhaps these are the types of issues that deserve some special legislative approach.

Second, when it comes to substantial transformation, I am not in favor of changing the rule per se. My feeling is that whatever rule you come up with, you are going to have problems.

What I suggest is some kind of a waiver procedure, perhaps after the CBI, after the Customs had made their decision, perhaps the USITC or some other independent body would say, no, we think that this particular investment, even though to this very day may not accomplish substantial transformation, will eventually lead to more production in the Caribbean. Perhaps it will lead to more backward-connected types of industry and, therefore, of course, it does deserve a CBI treatment. We think a waiver authority makes

sense.

Extend the duration of the CBI, we suggest, for 25 years. Our feeling is that it's clear that 8 years are not going to be enough, or the 10 remaining years are not going to be enough. Let's give the security for those long-term investments and let us indicate our long-term commitment to this kind of a program early on, so we do not end up with 4 or 5 or 2 or 3 years from now people saying, oh, will this be enough time to assure the profitability of my investment.

We have a real hodgepodge when it comes to

Chairman PICKLE. Mr. Lande, your time has expired, I regret to say. I notice, though, that you are reading the 10 points on page 2, and you just finished the point that the CBI ought to be 25 years instead of 12. I am going to ask that your recommendations, all 10 of them, be included in the record. Then, after we go along, we can come back to your testimony further.

Mr. LANDE. I am sorry for exceeding the time.

Chairman PICKLE. It's difficult to allow you enough time, and I regret that, but let's proceed.

[The prepared statement follows:]

Testimony of Stephen Lande

Vice President

Manchester Associates

SUMMARY

The 14 percent increase in U.S. imports of non-traditional products from the CBI between 1983 and 1985 is tangible proof that the CBI is working. Specific increases included steel wire and rods, benzenoid drugs, ethanol produced from Caribbean feedstocks, cigarette tobacco, fresh pineapple and citrus and pineapple concentrates, beef, and rum. Although imports in many of these categories from other sources grew at a faster pace, it is clear that CBI stimulated imports from the region. More importantly, the seeds for future growth in such exports as seasonal and tropical fruits and vegetables, secondary wood products and light manufactures and assemblies can be expected as a result of investments now coming on stream or in the planning stage.

Despite the steady progress under the CBI, we believe that the Ways and Means Committee should once again take the lead in assuring an effective CBI. We suggest a package of measures be developed. Using the non-MFN tariff and the non-tariff authority of Section 102, it might be possible to bring back agreements with CBI countries providing for an increase in benefits to them. If the requirements are met, these agreements could be subject to fast track approval which assures no amendments and timely consideration and vote.

A review of the commitments made by CBI countries to satisfy eligibility requirements demonstrates that as a group, they have provided significant concessions. Concessions for the better protection of intellectual property rights and for investment guarantees are the very concessions that the U.S. will be willing to pay other countries for in the next round of MTNs.