Governor Hernandez-Colon twinning concept and the use of section 936 funds was completely precapted by President Reagan's speech in Brenada. Mr. Chairman, the CBI may not have quite achieved the "take off" mode described in economic development theory. However, I am impressed with the recent events concerning investment possibilities. In fact there are already concrete plans being completed to take advantage of the Puerto Rican twin-plant initiative in a sizable venture in the Dominican Republic. Puerto Rico and its leaders are in a position to provide real leadership in what could be for Puerto Rico it owr. Operation Bootstrap II. They have the available funds and the knowledge to get the job done. Their past development successes have been a model for many other nations in the world. It is a matter of U.S. interest to encourage and support their potential leadership role in the Caribbean and Central America. I feel so strongly about both the soundness and potential of the role Puerto Rico can play in the Caribbean Basin Initiative that I aust risk being redundant and urge this Subcommittee to support the House provisions on section 936 in the Tax Reform bill. It is logical that Puerto Rico should be allowed and encouraged in it potoential role as leader and as a catalyst in Caribbean Basin economic development. I further urge you to support the administration in its identical efforts to carry out the "compromise proposal", and to lend your support to the effective implementation by the Puerto Rican Government of Governor Hernandez-Colon's "twin-plant" initiative. Despite the important role that Puerto Rico can play in furthering development in this region, it must be recognized that its leadership and its efforts will not be accepted or appropriate in some instances, nor are its 936 resources sufficient to meet the variety and magnitude of investment needs. Therefore, selective extensions of the section 936 concept should be made to specific areas of deepest concern. section 936 type investment incentives in countries with the largest concentration of people, and where perceived risk problems require priority attention would quicken the pace of economic development and a balanced progress for the whole area. Such countries are: El Salvador, Honduras, Guatemala, Costa Rica, Haiti, Jamaica, and the Dominican Republic. The degree of incentives can vary from country to country depending on perceived political risks and other qualitative assessments. The United States government should work with the appropriate international financial institutions to provide additional capital support to the region's private sector. Such funding should support loans for private sector ventures related to nontraditional trade, such as the Caratoga Industrial Free Zone in Costa Rica and the San Cristobal Free Zone in the Dominican Republic. I personally recommend that the availability of these funds should be keyed to participating private sector gguity. Teras of such loans should be based on U.S. interest rates and not on the rates of the particular countries of the region and should have favorable upfront provisions. Based on my own personal experience, I am convinced that the potentials of the Caribbean Basin under policies of a mature Caribbean Basin Initiative can be depicted by the following estimated potentials in the next five or six years: My company estimates that the impact of this is That an estimated 250,000 new industrial jobs can be created Each of these job will mean new foreign exchange of $5,000, Experience has shown that these types of industrial jobs require With each factory job an additional auxiliary job will be created. These are my own personal estimates of the potentials which are available under the CBI. They obviously depend upon the availability of the Puerto Rican twin-plant section 936 initiative and additional international funds to support the private sector ventures in nontraditional areas of trade. Finally, the Committee for Production Sharing enthuastically welcomes the decision announced by President Reagan providing greater and more assured access for clothing exports from Caribbean Basin Countries. The Committee for Production Sharing has long sought the explicit recognition of the American content in imports of apparel and other articles of textile material in assessing the textile and apparel country-by-country restraint levels on the same basis as such American content is recognized as duty-free in assessing duties on imports under 807.00. This timely action by the President on Caribbean Basin clothing exports to the United States effectively joins the production sharing base which has developed under items 806.30 and 807.00 with the production sharing concept of the free trade area established by enactment of the Caribbean Basin We congratulate the Oversight Subcommittee for its oversight initiative on the CBI. Should you find that the Committee on Production Sharing could be of assistance in the future we would be pleased to respond. Thank you for this opportunity to participate in your efforts. 1 Chairman PICKLE. Thank you, Mr. Clark. Next I have Stanley Nehmer, president of the Economic Consulting Services, Inc., representing Leather Products Coalition. Mr. Nehmer, please proceed. STATEMENT OF STANLEY NEHMER, PRESIDENT, ECONOMIC CONSULTING SERVICES, INC., ON BEHALF OF THE LEATHER PRODUCTS COALITION, ACCOMPANIED BY FAWN K. EVENSON, VICE PRESIDENT, NATIONAL AFFAIRS, FOOTWEAR INDUSTRIES OF AMERICA Mr. NEHMER. Thank you, Mr. Chairman. I am Stanley Nehmer, president of Economic Consulting Services, Inc., and we are consultants to the Leather Products Coalition. I am here with Fawn Evenson, vice president for national affairs of Footwear Industries of America. Our statement, which we have previously submitted, is on behalf of several industry trade associations and labor unions, the list of which is part of our testimony. We appreciate the opportunity to be here today to talk about the products with which we are concerned, namely, footwear, luggage, personal leather goods, work gloves, handbags, and leather wearing apparel. The Congress and the administration were convinced a few years ago that it would be a devastating blow to our industries and workers if our products were to be given duty-free treatment under the CBI. The arguments against this are even stronger today. Conditions in our respective industries are far worse than they were when the administration first proposed the CBI in early 1982. During 1985, the unemployment rate in the leather-related products sector was a whopping 12 percent, and the unemployment rate for the nonrubber footwear industry was even higher, at 15 percent. We have attached to our testimony some indicators of the health of these industries, and I will just point out a couple of very important facts. Between 1982 and 1985, Mr. Chairman, 31,000 jobs were lost in the nonrubber footwear industry, 5,000 jobs were lost in the rubber footwear industry, almost 1,000 jobs were lost in the luggage industry, 5,000 jobs were lost in the personal leather goods and handbag industries. Few other manufacturing sectors in our country suffer from such high import penetration levels as do the industries about which we are speaking today. The latest available data show the import penetration for nonrubber footwear at 77 percent, luggage at 60 percent, personal leather goods at 38 percent, handbags at 85 percent, leather work gloves at 67 percent, and leather apparel at 66 per cent. These steadily worsening conditions are precisely why we have asked for time to testify before the subcommittee. While our products are exempted from duty-free treatment in the CBI Program, we do not want to see this exemption reversed. All of these industries are concerned about the CBI Program being reopened. Indeed, the nonrubber footwear industry has |