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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

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