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purchase some machinery to use in his factory. This is an added bonus of the CBI. Recommendations that I would have to strengthen trade with CBI beneficiary nations might sound self-serving, but it is my opinion that wherever possible the aid should be channeled through private business. With the proper control, businesses with their own capitalistic outlook will be motivated to make the best use of the money and this money could be in the form of interest-free loans or grants. If this can be handled on a business to business basis, I feel that the money would flow directly to the workers much faster than if it would be channeled through government agencies.

I spoke to a friend in Costa Rica to get his opinion on the CBI. He feels that the money has been well spent. U.S. companies and the region have benefited, both politically and ecomonically. The transfer of technology to his region is very important. One example he gave me was 95% of the thirty million fishing rods distributed in the United States come from the Orient. This is 100% foreign materials. The materials in the rods he has assembled under Item 807 were of U.S. origin. With Item 807 assembly, the total cost of the product is 70% to 80% material and 20% to 30% labor. Quotas may be applied to full imported products, but should not be on Item 807. Quotas on Item 807 would restrict U.S. companies in their abilities to use this means as an alternative to full import.

I would like to thank the sub-committee for giving me

the opportunity to express my views. I consider it to be a real honor. Thank you very much.

Chairman PICKLE. Thank you, Mr. Davis.

Now Mr. Cameron Clark, president, Production Sharing International, former chairman of the Committee for Production Sharing. Mr. Clark.

STATEMENT OF CAMERON CLARK, JR., PRESIDENT, PRODUCTION SHARING INTERNATIONAL, LTD., ON BEHALF OF THE COMMITTEE FOR PRODUCTION SHARING

Mr. CLARK. Mr. Chairman, my name is Cameron Clark. I appear today on behalf of and as honorary chairman of the Committee for Production Sharing. I also am president of my own firm, Production Sharing International, Ltd., of Fairfield, CT.

The Committee for Production Sharing is a trade association of more than 140 U.S. manufacturers, processors, and associated firms which have joined together to foster the improvement of U.S. competitiveness by combining U.S. technology and content in cooperation with developing countries' labor skills and factor costs.

The Committee for Production Sharing very much appreciates the opportunity to participate in the oversight hearings on the Caribbean Basin Initiative. We would like to summarize our formal statement, which we have submitted previously for the record.

As this subcommittee is aware, the concept of production sharing was formally inserted into the Caribbean Basin Initiative by the Committee on Ways and Means when it amended the President's CBI proposal. Under the amendment, which became a part of the statute, it was provided that in meeting the duty-free eligibility requirements of 35 percent local content, up to 15 percent of appraised value of the product imported duty free from CBI beneficiary countries is permitted to be U.S. component costs or value.

We believe the Caribbean Basin Initiative was on the right course when it was proposed by President Reagan and adopted by the 98th Congress. The program remains on the right track in terms of the U.S. interests in the region.

Simply stated, the United States has an overriding national security interest in assisting and encouraging nations in the Caribbean Basin to obtain as great a degree of economic development as their resources and talents will permit.

Two important issues bearing on our national security interests come to mind. First is the essential importance of the political stability and economic growth of these countries in the context of the confrontation between East and West being played out in Central America and the Caribbean.

The second is the overriding economic and social challenge that current trends in migration from Central America and the Caribbean pose for the United States.

The original proposal to provide economic recovery and development opportunities to the Caribbean Basin contained a three-part program: aid, trade, and investment. At the core of the program was reliance on the private sector in the United States and in the beneficiary countries to provide the needed investments and entrepreneurial leadership.

As a result of the activities of the U.S. Government and private entrepreneurs, the countries of the Caribbean and Central America

have gained a better appreciation of the potentials under CBI. However, there has been early disappointment with the number and levels of investment by U.S. firms.

Probably both the beneficiary countries and the CBI supporters have expected too much in terms of early response from the business communities in the United States and the countries of Central America and the Caribbean.

More recently, however, the flow of investment has increased. For example, the San Cristobal industrial free zone in the Dominican Republic is financed by local capital. Also, the Cartorga industrial free zone in Costa Rica is being developed by private funds. These are some of the developments with which I am personally familiar. While not great in magnitude, I believe they do serve as a cause for some optimism for the future of the Caribbean Basin if appropriate steps are taken to encourage more activity in the private sector.

What has failed to happen, obviously, is the type of investment push originally anticipated when the CBI was first proposed. Even here, however, the investment tax credit for projects in beneficiary countries would not have been sufficient incentive to encourage foreign investment.

The maintenance of section 936, with the ability of the Puerto Rican Government to make 936 funds available for investment projects in qualifying countries in the Caribbean, will be most important. I congratulate the Ways and Means Committee for having reserved this possibility under the tax provisions.

Despite the important role that Puerto Rico can play in furthering the development of the region, it must be recognized that its leadership and its efforts will not be accepted or appropriate in some instances, nor are 936 resources sufficient to meet the variety and magnitude of investment needs.

Therefore, a selective extension of the section 936 concept should be made to specific countries of deepest concern.

Finally, the Committee on Production Sharing enthusiastically welcomes the decision announced by President Reagan providing greater and more assured access for clothing exports from the Caribbean Basin countries. The Committee on Production Sharing has long sought the explicit recognition of American content in imports of apparel and other articles of textile material in assessing textile and apparel country-by-country restraint levels on the same basis as such American content is recognized as duty free in assessing the duties under item 807.

We congratulate the Oversight Committee for its oversight initiative on CBI. If the Committee on Production Sharing could be of assistance in the future, we stand ready to assist you.

[The prepared statement follows:]

STATEMENT BY CAMERON CLARK, JR., FORMER CHAIRMAN OF THE
COMMITTEE FOR PRODUCTION SHARING

BEFORE THE SUBCOMMITTEE ON OVERSIGHT, COMMITTEE ON WAYS AND MEANS
February 27, 1986

Mr. Chairman, my name is Cameron Clark. I appear today on behalf of, and as Honorary Chairman of, the Committee for Production Sharing. I also am President of my own firm, Production Sharing International, Ltd. of Fairfield, Connecticut. The Committee for Production Sharing is a trade association of more than 140 U.S. manufacturers, processors, and associated firms which have joined together to foster the improvement of United States competitiveness by combining U.S. technology and content in cooperation with developing country labor skills and factor costs.

Inc.

The Committee was formerly known as the Committee for 806.30 and 807, Prior to its reorganization into the Committee for Production Sharing, the Committee for 806.30 and 807., Inc., of which I was chairman, devoted itself to supporting the concept and use of U.S. tariff items 806.30 and 807.00, which encourage production sharing operations between the United States and other countries, and in particular, the United States and developing

countries.

These tariff items, 806.30 and 807.00, dealing with U.S. articles, materials and components, exported abroad and returned, permit U.S. producers to share production processes with foreign processing and assembly facilities and improve their competitive capabilities. Under these tariff provisions American manufacturers can send U.S. metal articles abroad for further processing (in the case of item 806.30) and send U.S. components of various types of manufacturered products abroad for assembly (in the case of item 807.00) and return them to the United States for further processing or aanufacture, for domestic or export sale.

Production sharing is encouraged by the fact that under these tariff items the U.S. duty is computed on the basis of the value of the imported article net of the value of the costs of the U.S. materials or components contained in the

articles.

The Committee for Production Sharing very much appreciates the opportunity to participate in the oversight hearings on the Caribbean Basin Initiative. As this Subcommittee is aware, the concept of production sharing was formally inserted into the Caribbean Basin Initiative by the Committee on Ways and Means when it amended the President's CBI proposal. Under the amendment, which became a part of the statute, it was provided that in meeting the duty free eligibility requirement of 35 percent local content, up to 15 percent of the appaised value of the product imported duty-free from a CBI beneficiary country is permitted to be United States component costs or value. This U.S. content feature of the CBI encourages a different use of U.S. content than the offshore assembly operations peraitted unde tariff item 807.00. Under the CBI the materials not a product or growth of the beneficiary country must be "substantially transformed" into a "new and different article of commerce", rather than just assembled, to qualify for the duty free treatment as a product of the beneficiary country. cases this calls for a greater degree of manufacturing operations than under tariff item 807.00.

In many

Thus, the Committee for Production Sharing supports the use of various types of "preferential tariff treatment" of imports from developing countries which utilize U.S. materials and components and helps to improve the competitiveness of American producers by lowering production and end-ite

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