Statement of His Excellency Berardo Vega
Ambassador to the United States from the Domnican Republic

Testimony Before the Subcommittee on Trade
of the House Committee on Ways and Means

Hearing on the H.R. 984, the "Caribbean and
Central American Relief and Economic Stabilization Act"

March 23, 1999

Honorable Chairman Crane and distinguished Members of the Subcommittee, Ladies and Gentlemen:

I am pleased to be able to testify before the U. S. Congress on a subject matter so important to my country, but CBI enhancement legislation is also a win-win proposal. It helps our region, but it also helps the U.S. economy and creates U.S. jobs.

Last week Washington's press reported, again, a record U.S trade deficit. Yet, the US has had a trade surplus with the CBI region for the last twelve years (graph No. 1). This U. S. surplus is the eighth biggest in the world, surpassed only by that with seven countries: The Netherlands, Australia, Belgium, Brazil, United Kingdom, Saudi Arabia and Argentina (table No. 1).

The U.S. trade surplus with the CBI region only started to occur in 1986, precisely two years after the Caribbean Basin Initiative (CBI) legislation was passed in Washington. (Graph No. 1).

The more new jobs that are created in CBI countries, the more new jobs that are also created in the U.S., simply because approximately 70% of every dollar that our countries spend on non oil imports, are spent on imports from the U.S.A. CBI countries are the sixth biggest purchasers of U.S. goods worldwide, surpassed only by the two NAFTA countries, Japan, the United Kingdom and Germany (table No. 2). Secretary Barshefsky very correctly pointed out that 360,000 jobs in the U.S. depend on trade with our region.

Allow me to get into some specifics. The CBI region is the 10^th biggest importer, worldwide, of U.S. cars, surpassed only by the two NAFTA countries, Japan, Germany, Saudi Arabia, United Kingdom, Australia, Austria and Belgium (table No. 3).

Our region is the fifth biggest importer of U.S. cereals, surpassed only by Japan, Mexico, Egypt and Korea (table No. 4). Because of the importance of our apparel exports to the U.S., we are the biggest importer of U.S. sewing machines, after Mexico, but recent exports of U.S. sewing machines to our region decreased by 3%, while those to Mexico increased by 44% (table No. 5), because of the trade deviation created as a result of more advantageous import and quota textile regimes granted to Mexico under the NAFTA.

In telecommunication equipment we are the seventh biggest purchaser worldwide, surpassed only by the two NAFTA countries, Japan, United Kingdom, Hong Kong and The Netherlands (table No. 6).

In U.S. exports of fats and vegetable oils, our region is the third biggest consumer (table No. 7).

We purchase more U.S. air conditioners than any country in the world, with the exception of Canada, Mexico and easily explainable Saudi Arabia (table No. 8).

Graph No. 2 shows how Mexico's apparel exports have zoomed after the NAFTA came into effect, while those of the CBI region have slowed down, and, in some cases, decreased, because of the trade deviation caused by the NAFTA. For us to keep purchasing U.S. goods, we need to increase our apparel exports to you.

A WAY OUT FOR HAITI'S ECONOMY

Haiti is probably the country that can more benefit from CBI enhancement. Before its political problems affected its investment climate, its exports of apparel to the U.S. were only US$80 million less than those of its neighbor, the Dominican Republic. Yet, today, Dominican exports of apparel exceed those of Haiti by US$2 billion (Graph No. 3). Thus, CBI enhancement could mean thousands of new jobs in Haiti, helping to stabilize its political situation and reducing today's illegal migratory pressures. Eighty three percent of all of Haiti's exports of goods are today made up of apparel, so any increase means a lot to that nation.

A STRATEGIC ALLIANCE

All WTO nations, including the U.S., are under the obligation to eliminate quotas on textiles six years from now. Together with the very big recent Asian devaluations, this commitment poses a double threat to U.S. producers of cotton, textile fibers, cloth and apparel. The way for the U.S. industry to prepare itself for this challenge, resulting from globalization, is to form a strategic alliance with CBI countries, through CBI enhancement legislation, by sending U.S. made cloth to our region to be cut and converted into apparel which would be shipped back to the U.S. Eighty nine percent of CBI exports of apparel are today made with U.S. components, predominantly U.S. fabric.

Under this mechanism, U.S. production of cloth could compete with Asian apparel imports. Nearly all apparel that comes from Asia is made from Asian cloth. China and Hong Kong, after Mexico, already are the two biggest exporters of apparel to the U.S.A.

Thus, U.S. cloth producers in effect depend on CBI enhancement legislation in order to be able to face globalization a very few years from now.

MORE JOBS MEAN LESS MIGRATION AND LESS DRUGS

Textile assembly is the third biggest source of foreign income in the Dominican Republic (after tourism and money remittances), and 93% of that assembly is made with U.S. component, predominantly U.S. fabric. One hundred forty thousand Dominicans assemble U.S. cloth. Our country is no longer the plantation economy of a few years back. Most of those who convert cloth into apparel are women. Their new and important contribution to family income has been the most stabilizing social phenomena in the last fifteen years in our country. If we can increase this figure, there would be less pressure to migrate, illegally or legally, and less temptation to act as a transit point for illegal drugs from South America into the U.S.A. Ninety percent of the value of all Dominican exports of apparel are made in factories which comply with the voluntary code of conduct with respect to labor practices that U.S. companies for whom they are made require of them. These so called "terms of engagement" are subject to internal and third party monitoring.

More jobs mean more political stability and a better climate for U.S. investments and U.S. tourism. The same applies to the rest of the region. U.S. national security objectives with respect to its southern neighbors would thus be strengthened.

For all these reasons CBI enhancement is a win-win situation for the Caribbean and Central America and also for the U.S.

I thank Chairman Philip M. Crane and Congressmen Charles B. Rangel, Jim Kolbe, William J. Jefferson and Robert T. Matsui for having introduced H.R. 984 and urge quick approval of the same.

Table #1
U.S. BALANCE OF TRADE - BIGGEST SURPLUSES
JANUARY - NOVEMBER
Millions of U.S. Dollars

Source:  Global Trade Information Services, Inc.

Table #2
U.S. Exports
JANUARY - NOVEMBER
Millions of U.S. Dollars

Source:  Global Trade Information Services, Inc.

Table #3
U.S. Exports of VEHICLES
JANUARY - NOVEMBER
Millions of Dollars

Source:  Global Trade Information Services, Inc.

Table #4
U.S. Exports of CEREALS
JANUARY - NOVEMBER
Millions of U.S. Dollars

Source:  Global Trade Information Services, Inc.

Table #5
U.S. Exports of SEWING EQUIPMENT
JANUARY - NOVEMBER
Millions of U.S. Dollars

Source:  Global Trade Information Services, Inc.

Table #6
U.S. Exports of Telecommunication Equipment
JANUARY - NOVEMBER
Millions of Dollars

Source:  Global Trade Information Services, Inc.

Table #7
U.S. Exports of FATS AND VEGETABLE OILS
JANUARY - NOVEMBER
Millions of U.S. Dollars

Source:  Global Trade Information Services, Inc.

Table #8
U.S. Exports of AIR CONDITIONING EQUIPMENT
JANUARY - NOVEMBER
Millions of Dollars