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Y 4.W 36:108-63
TRADE PREFERENCES FOR HAITI
SUBCOMMITTEE ON TRADE
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SEPTEMBER 22, 2004
Serial No. 108-63
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
E. CLAY SHAW, JR., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
WALLY HERGER, California BENJAMIN L. CARDIN, Maryland
JIM MCCRERY, Louisiana JIM MCDERMOTT, Washington
DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. MCNULTY, New York
JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio XAVIER BECERRA, California
PHIL ENGLISH, Pennsylvania LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona EARL POMEROY, North Dakota
JERRY WELLER, Illinois MAX SANDLIN, Texas
KENNY C. HULSHOF, Missouri STEPHANIE TUBBS JONES, Ohio
SCOTT MCINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia
Allison H. Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
SUBCOMMITTEE ON TRADE
PHILIP M. CRANE, Illinois, Chairman
E. CLAY SHAW, JR., Florida
AMO HOUGHTON, New York
DAVE CAMP, Michigan
JIM RAMSTAD, Minnesota
JENNIFER DUNN, Washington
WALLY HERGER, California
PHIL ENGLISH, Pennsylvania
JIM NUSSLE, Iowa
SANDER M. LEVIN, Michigan
CHARLES B. RANGEL, New York
RICHARD E. NEAL, Massachusetts
WILLIAM J. JEFFERSON, Louisiana
XAVIER BECERRA, California
JOHN S. TANNER, Tennessee
Pursuant to clause 2(eX4) of Rule XI of the Rules of the House, public hearing records
of the Committee on Ways and Means are also published in electronic form. The printed
hearing record remains the official version. Because electronic submissions are used to
prepare both printed and electronic versions of the hearing record, the process of converting
between various electronic formats may introduce unintentional errors or omissions. Such occur-
rences are inherent in the current publication process and should diminish as the process
is further refined.
Advisory of September 22, 2004, announcing the hearing ................................. 2
Graham, Hon. Bob, a U.S. Senator from the State of Florida .......................... 6
DeWine, Hon. Mike, a U.S. Senator from the State of Ohio ............................. 9
Avondale Mills, Inc., Stephen Felker, on behalf of National Council of Textile
Organizations .............................................................. ................................ 21
J.C. Penney Purchasing Corporation, Janet E. Fox ....................................... 28
Perry Manufacturing Company, William K. Woltz, Jr. ...................................... 18
UNITE HERE, Mark Levinson ...................................................................... 32
VWtements Textiles, S.A., Jean Edouard Baker .................................... ....... 25
Yazaki North America, Nigel Thompson ...................................................... 38
SUBMISSIONS FOR THE RECORD
U.S. Association of Importers of Textiles and Apparel, statement ................... 50
Camara Nacional de la Industria Textil, Ciudad, Mexico, statement ................ 52
Haitian Manufacturers Association, Delmas, Haiti, Marie-Claude Bayard,
state ent .............................................................................................................. 53
Haitian Project, Inc., Port-au-Prince, Haiti, Patrick Moynihan, statement ....... 56
National Retail Federation, statement ......................................................... 57
TRADE PREFERENCES FOR HAITI
WEDNESDAY, SEPTEMBER 22, 2004
U.S. HOUSE OF REPRESENTATIVES,
COMMITTEE ON WAYS AND MEANS,
SUBCOMMITTEE ON TRADE,
The Subcommittee met, pursuant to notice, at 2:08 p.m., in room
1100, Longworth House Office Building, Hon. Philip M. Crane
(Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON TRADE
FOR IMMEDIATE RELEASE CONTACT: (202) 225-1721
September 22, 2004
Crane Announces Hearing on
Trade Preferences for Haiti
Congressman Philip M. Crane (R-IL), Chairman, Subcommittee on Trade of the
Committee on Ways and Means, today announced that the Subcommittee will hold
a hearing on possible expansions of trade preferences for Haiti. The hearing will
take place on Wednesday, September 22, 2004, in the main Committee hear-
ing room, 1100 Longworth House Office Building, beginning at 2:00 p.m.
Oral testimony at this hearing will be from public witnesses. Any individual or
organization not scheduled for an oral appearance may submit a written statement
for consideration by the Subcommittee and for inclusion in the printed record of the
Haiti is currently eligible for trade preferences under the Caribbean Basin Eco-
nomic Recovery Act (P.L. 98-67, P.L. 106-200, and P.L. 107-210), which allows it
Export to the United States duty-free knit (and knit-to-shape) apparel made
from regional fabric made with U.S. yarn, subject to a cap for the entire region;
Export to the United States duty-free woven apparel made of U.S. yar and fab-
ric, subject to a cap for the entire region.
On July 16, 2004, the Senate passed by unanimous consent S. 2261, the "Haiti
Economic Recovery Opportunity Act of 2004," to allow Haiti to export to the United
States duty-free apparel made from inputs sourced anywhere in the world, subject
to a cap. The cap for such trade would be initially set at 1.5 percent of U.S. imports
and would gradually increase to 3.5 percent after 7 years. This cap is equivalent
to the third-country fabric benefit established for all sub-Saharan African countries
in the recently-enacted AGOA Acceleration Act (P.L. 108-274).
Other bills to grant additional trade preferences to Haiti have also been intro-
duced in both the House and Senate, including H.R. 1031, the "Haiti Economic Re-
covery Opportunity Act of 2003," H.R. 4889, the "Haiti Economic Recovery Oppor-
tunity Act of 2004," and S. 489, the "Haiti Economic Recovery Opportunity Act of
2003." Some of these bills would allow Haiti to source inputs for qualifying apparel
only from U.S. free trade agreement partners and countries participating in the Af-
rican, Caribbean Basin, and Andean trade preference programs. A cap also would
apply for such trade that would be initially set at 1.5 percent of U.S. imports and
would gradually increase to 3.5 percent after 7 years.
The Committee is currently considering all options to grant temporary additional
trade preferences to Haiti. In addition to the bills already introduced, the Sub-
committee is interested in receiving testimony regarding:
Adjusting the rule of origin (ROO) for apparel from Haiti to allow a value-added
rule of origin.
Differentiating treatment between apparel made of knit and woven fabric.
Allowing a single-transformation ROO for certain apparel from Haiti.
Use of caps for additional benefits.
Providing additional trade preferences for Haiti in products other than textiles
Expanding the cap for certain qualifying apparel under the Caribbean Basin
Economic Recovery Act, as amended.
The Subcommittee welcomes comment from interested parties on these and other
options to provide meaningful trade preferences for Haiti. In announcing the hea;-
ing, Chairman Crane stated, "Haiti is the poorest country in our hemisphere and
is facing enormously challenging times. One of the best ways to lift a country out
of poverty and provide hope to its people is to promote economic activity through
increased trade and investment. I hope to develop a bipartisan bill to provide such
benefits to Haiti in a manner that benefits American businesses and workers as
FOCUS OF THE HEARING:
The hearing will focus on whether to provide additional trade preferences for
Haiti and the impact on trade and development in Haiti and on the U.S. and re-
gional textile and apparel industries.
DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:
Requests to be heard at the hearing must be made by telephone to Michael Mor-
row or Kevin Herms at (202) 225-1721 no later than the close of business Friday,
September 17, 2004. The telephone request should be followed by a formal written
request faxed to Allison Giles, Chief of Staff, Committee on Ways and Means, U.S.
House of Representatives, 1102 Longworth House Office Building, Washington, D.C.
20515, at (202) 225-2610. The staff of the Subcommittee will notify by telephone
those scheduled to appear as soon as possible after the filing deadline. Any ques-
tions concerning a scheduled appearance should be directed to the Subcommittee
staff at (202) 225-6649.
In view of the limited time available to hear witnesses, the Subcommittee
may not be able to accommodate all requests to be heard. Those persons and
organizations not scheduled for an oral appearance are encouraged to submit writ-
ten statements for the record of the hearing in lieu of a personal appearance. All
persons requesting to be heard, whether they are scheduled for oral testimony or
not, will be notified as soon as possible after the filing deadline.
Witnesses scheduled to present oral testimony are required to summarize briefly
their written statements in no more than five minutes. THE FIVE-MINUTE
RULE WILL BE STRICTLY ENFORCED. The full written statement of each
witness will be included in the printed record, in accordance with House
In order to assure the most productive use of the limited amount of time available
to question witnesses, all witnesses scheduled to appear before the Subcommittee
are required to submit 200 copies, along with an IBM compatible 3.5-inch diskette
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1104 Longworth House Office Building, no later than Monday, September
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mittee as noted above.
Chairman CRANE. Good afternoon. This is a hearing of the Com-
mittee on Ways and Means Subcommittee on Trade to explore op-
tions to expand trade preferences for Haiti. Haiti is the poorest
country in our hemisphere and the country is facing enormously
challenging times. Political and economic instability has exacer-
bated Haiti's lack of development and investment and worsened the
already-extreme poverty levels. One of the best ways to lift the
country out of poverty and provide hope to its people is to promote
economic activity through increased trade and investment. Several
bills have been introduced to grant additional trade benefits to
Haiti, and Congressman Shaw in particular has been an active ad-
vocate for Haiti.
Haiti is quite dependent on the United States for its trade. In
2003, over 90 percent of all Haitian exports went to the United
States, and apparel accounted for nearly 90 percent of those ex-
ports. At the same time, imports from Haiti barely register in U.S.
domestic markets. Haiti's textile and apparel shipments to the
United States last year amounted to less than one-half of 1 percent
of U.S. market share.
My goals today are to explore practical options to help Haiti be-
come more competitive in textile and apparel production and also
to find ways to assist Haiti in diversifying its exports into other in-
dustries outside of textiles and apparel. The Subcommittee will ex-
plore options to provide meaningful and practical benefits to Haiti
and also to promote regional integration that benefits U.S., Hai-
tian, and regional producers. I hope that the discussion today will
focus on the merits and disadvantages of various proposals and the
witnesses will avoid staking out all-or-nothing positions. Now, I
would like to yield to our Ranking Member on the Subcommittee,
Mr. Levin, for any remarks he would like to make.
Mr. LEVIN. Thank you, Mr. Crane. I am very glad we are hold-
ing this hearing. Clearly, we need to address the challenges facing
Haiti. They are a neighbor of ours and what happens there by defi-
nition affects the people who reside there. It also affects us. As we
look at this issue, and quite a bit relates to textile and apparel, but
beyond, I think we need to look at the context directly affecting
Haiti and also the broader context that affects trade.
Point one in that regard, in terms of apparel and textiles, we
know at the end of the year that the quotas are going to be elimi-
nated. This is going to have a major impact throughout this hemi-
sphere and beyond. So, if we look at the issue of how we can assist
Haiti, I think we have to keep that in mind and also realize that
when the quotas come off, there is going to be in particular a major
influx of products from China and perhaps other countries within
Asia, but primarily China.
Second, as we look at this issue in terms of its broader context,
we need to keep in mind the present Caribbean Basin Initiative
(CBI) (Trade and Development Act of 2000, P.L. 106-200) pref-
erences because obviously a change as to one country can impact
other countries, especially those that are neighboring. I would like
us-I would hope that we would keep this broader context in mind
as we understand the urgency-urgency-of the challenges facing
The third point in this regard is I think we should also remem-
ber there are other countries which are going to be impacted by the
end of the quotas and some of them have no preferences whatever
in terms of access to the United States and they include Afghani-
stan and Nepal, which have small exports here in the apparel and
textile field. There are countries which do and that is Cambodia
The next point I would like to make in terms of the context, and
the Chairman related to the poverty that is in Haiti. If we are
going to assist countries to pull themselves out of poverty, it is crit-
ical that they do so and help to do so in ways that the people them-
selves pull themselves out of poverty, that poverty diminishes for
the entire nation, but in particular for people who are in poverty.
In that regard, I have been reviewing some of the documents
that relate to the role of workers within Haiti, including those in
the apparel and textile industry and we need to, if we are going
to take steps here, and I hope we do, be sure that we do so in ways
that will really be beneficial to those who are working who are, in
most cases, impoverished.
Today, the dynamic within Haiti is such that workers are often
threatened, sometimes beaten from information we have. When you
use that kind of violence, it is often done with impunity, in part
because of the weak legal structure there. So, we are going to hear
some testimony, as I understand it today, that will address this
issue and I hope we will take it seriously. Where we have, for ex-
ample, when it came to Cambodia some years ago, improvement
was undertaken and it has meant a lot to the people there.
One last point I would like to make in terms of the broader con-
text is this. We haven't really had much consideration within this
place as to the impact of the elimination of quotas and we really,
I think, have been mistaken in not doing so. Mr. Rangel and others
and I introduced legislation about a week ago that would require
this Administration to undertake some action that would relate to
the dynamics of the removal of the quotas. This will have an im-
pact on workers and businesses in this country and in the neigh-
boring countries within the Caribbean because we have, and I
think that is a good idea, an integrated apparel and textile market
in the Caribbean area.
So, in a way, Haiti needs to be looked at it by itself because of
the urgent needs, but also, if we are going to be effective in ad-
dressing those needs, we are going to have to keep in mind the
broader context, and the points, if I might say so, that I have sug-
gested. Thank you very much, and I look forward to the testimony
of, I think, two of our most distinguished colleagues across-I won't
say "the most" because I will get in trouble with somebody, but two
of our most distinguished colleagues across the rotunda. Thank
Senator DEWINE. You will get in trouble with your brother.
Mr. LEVIN. That is what I meant, my brother.
Chairman CRANE. With that, I would like to welcome Senator
Graham and Senator DeWine to present their testimony before the
STATEMENT OF THE HONORABLE BOB GRAHAM, A U.S.
SENATOR FROM THE STATE OF FLORIDA
Senator GRAHAM. Mr. Chairman, Senator DeWine and I appre-
ciate the opportunity to discuss this important issue, an issue
which has become even more urgent in light of the events of the
past few days. In deference to your time, I will speak to the con-
text, the situation in Haiti that we think calls for the United
States' attention and action and then Senator DeWine will discuss
the specifics of why we think the legislation that has passed the
Senate and is before you today is an appropriate remedy, or at
least the beginnings of a remedy to some of the most difficult
issues in Haiti. I will, if permissible, summarize my statement and
submit the full statement for the record.
Mr. Chairman, we have had a recurring series of engagements.
in Haiti in the last 15 years. In the 1990s, a crumbling economy
and political instability drove many Haitians into the ocean to the
State that Congressman Shaw and I represent. We became the re-
cipient of thousands of people arriving in impoverished conditions
on leaky and unsafe boats, only more fortunate than those who had
perished at sea.
The situation continued to deteriorate. In 1994, the United
States committed 20,000 troops to an intervention in Haiti. Unfor-
tunately, in my opinion, we did not make an adequate commitment
to helping Haitians rebuild, and 10 years later, in 2004, we had to
send more troops as the Haitian government found itself over-
whelmed by chaos, unrest, and gang violence. I am concerned that
if we don't get it right this time and ensure that Haiti has the ca-
pacity to stabilize, we will find ourselves in another 10 years with
another intervention into Haiti.
The consequences of a weak and unstable Haiti can be seen both
inside its borders and among its neighbors. Haiti is one of the poor-
est countries of the world and its people are tragically malnour-
ished. The serious internal problems in Haiti have made it ill-pre-
pared to deal with short-term crises and natural disasters. I just
draw your attention to the current news reports, which indicate
that at least 700 people have been lost in Haiti as a result of the
recent floods and that there are another 1,000 missing with the sad
expectation that many of those will be added to the list of fatalities.
Haiti's grinding poverty also has contributed to its chronic polit-
ical instability, which causes large numbers of refugees to attempt
to enter the United States and other Caribbean countries. Particu-
larly affected by that have been the Bahamas and the Dominican
Republic, both countries which could face political destabilization if
there was another substantial wave of refugees from Haiti.
It is a reality that the future of Haiti does not lie in the United
States nor does it lie in any of its neighbors, but rather it lies in
the Haitian people. Despite incredible hardships, the Haitian peo-
ple have continued to persevere. Again, referencing Congressman
Shaw, we both had the opportunity to see the many Haitians who
come to our State and their enormous courage and resilience and
desire for self-improvement. If you go to a local community college
in South Florida, you will see a very large percentage of the stu-
dents being Haitians who are there to try to make their lives bet-
That is why Senator DeWine and I are before you today to speak
about the Haiti Economic Recovery Opportunity Act of 2004
(HERO) (S. 2261). This legislation will modify our trade laws to
allow Haitian manufacturers to ship apparel into the United States
duty-free and to give them flexibility about the types of fabrics that
they use. This will, of course, benefit American consumers, but the
principal impact will be to give hope to the people in Haiti.
Senator DeWine will outline the details of the act, which draw
heavily upon the African Growth and Opportunity Act (AGOA)
(Trade and Development Act of 2000, P.L. 106-200), which was
passed recently by this Committee and by the Congress. Senator
DeWine and I have worked with our colleagues to pass this legisla-
tion, which gives Haitians the economic opportunity that they so
desperately need and desire. We do not wish to stand by and watch
while a country of 8 million people wrestles with horrible poverty
and instability just a few hundreds of miles off our shore. We feel
that we have an obligation to help. We believe the HERO Act is
one way that we can help the people of Haiti and it will also be
good for the people of the United States.
[The prepared statement of Senator Graham follows:]
Statement of The Honorable Bob Graham, United States Senator from the
State of Florida
As a longtime neighbor of Haiti, I have witnessed firsthand the effects that grind-
ing poverty and political instability have had on the Haitian people. I have also seen
the impact that Haiti's troubles have had on its neighbors, including the United
In the early 1990s, a crumbling economy and political instability drove large num-
bers of Haitians to risk their lives in leaky boats, as they attempted to cross hun-
dreds of miles of ocean to reach Florida. The situation continued to deteriorate, and
in 1994 the United States was forced to intervene. Unfortunately, we did not make
a commitment to helping Haitians rebuild, and in 2004 we had to send troops once
more, as the Haitian government found itself overwhelmed by unrest and gang vio-
lence. We must be sure to get it right this time, and ensure that Haiti is able to
stabilize, or we will find ourselves going back in 2014.
The consequences of a weak and unstable Haiti can be seen both inside Haiti's
borders, and among its neighbors. Haiti is among the poorest countries in the world,
and its people are tragically malnourished. The World Health Organization reports
that the average daily caloric intake for Haitians is the lowest in the western hemi-
sphere and compares with the most impoverished countries of Africa.
These serious systemic problems make Haiti especially ill-prepared to deal with
short-term catastrophes and natural disasters. Earlier this week Haiti was hit by
a tropical storm that killed over seven hundred people, and the United Nations pre-
dicts that this number will continue to rise as many people now listed as missing
are found. Many of these people were killed when their poorly constructed homes
were destroyed by flood waters or mudslides. Even with the help of the United Na-
tions peacekeeping force currently in the country, overtaxed Haitian emergency
workers are hard pressed to cope with the large numbers of people who have been
injured or left homeless. According to an article in yesterday's Washington Post, the
main hospital in the large northwestern city of Gonaives faces severe shortages of
food, water and antibiotics. Health care services are undoubtedly even worse in
rural areas, and we can expect this to contribute to the rising death toll in the days
Haiti's grinding poverty also contributes to it's chronic political instability, which
causes large numbers of refugees to attempt to enter the United States or other
Caribbean countries. Here in the United States we have been challenged to respond
to immigration crises stemming from Haiti, and this challenge has been even harder
for some of Haiti's other neighbors. Our friends in the Dominican Republic and the
Bahamas have struggled to deal with large numbers of Haitian entrants, and an-
other large-scale migration crisis could destabilize either of these countries.
There is one hope for the future of Haiti, however, and it lies, as you might ex-
pect, with the Haitian people. Despite incredible hardship, the Haitian people have
continued to persevere. Over the past three decades, tens of thousands of Haitian
refugees have come to live in my home state of Florida, and I have been continually
impressed by their strong work ethic and their determination to build better lives
for themselves and for their children. If we give the Haitians the opportunity to
begin rebuilding their shattered economy, they have the potential to get their coun-
try back on its feet.
This is why I have crossed the Hill today to come speak to you about the HERO,
or Haiti Economic Recovery Opportunity Act. This legislation will modify our trade
laws to allow Haitian manufacturers to ship apparel into the United States duty-
free, and give them flexibility about the type of fabrics they may use. This will of
course benefit American consumers, but the real impact will be felt in Haiti, where
apparel manufacturing is one of the few functioning industries.
A similar provision exists in the African Growth and Opportunity Act, or AGOA,
which has helped expand economic opportunity to the least developed countries in
Africa. By giving this same opportunity to Haiti we can help the least developed
country in our own hemisphere and give Haitians an opportunity to begin rebuilding
their shattered economy. Haiti must not be a place where the only jobs available
are with gangs and drug traffickers, and by creating inducements for foreign invest-
ment, we can make it possible for hard-working Haitians to earn an honest living.
Over in the Senate, Senator DeWine and I worked with our colleagues to pass
a bill that gives Haitians the economic opportunity they so desperately need. We
do not wish to stand by and watch while a country of eight million people wrestles
with horrible poverty and instability several hundred miles off our coast. We feel
that we have an obligation to help, and we believe the HERO Act is one way that
we can help the people of Haiti, and that it will also be good for the people of the
STATEMENT OF THE HONORABLE MIKE DEWINE, A U.S.
SENATOR FROM THE STATE OF OHIO
Senator DEWINE. Mr. Chairman, I want to thank you for hold-
ing this hearing and thank the Committee. It has been a real
pleasure to work with Congressman E. Clay Shaw and with Sen-
ator Graham on this legislation. This bill, as the Senator said, is
really straightforward. It is modeled after the successful AGOA and
it would grant duty-free entry to apparel articles assembled in
Haiti contingent upon Presidential certification that the new Hai-
tian government is, in fact, making significant political, economic,
and social reforms. The bill caps the amount of duty-free exports
from Haiti at 1.5 percent of the total amount of U.S. apparel im-
ports, and the cap will ultimately grow to the modest amount of 3.5
percent over a 7-year period of time.
Simply put, Mr. Chairman, this bill would allow Haiti to use, for
example, approved fabric and American buttons, sew it all to-
gether, and then ship it to the United States duty-free. As my col-
league has said, Mr. Chairman and Members of the Committee,
there is a reason for doing this for Haiti. Some people may ask,
why Haiti and why this bill? I think the answer is very clear, be-
sides the obvious humanitarian reasons. The answer is it is in our
National interest to do it. Senator Graham has pointed out, and I
know this Committee knows very well the tragedy that is Haiti.
The Senator has pointed out that twice in the last decade, we have
had troops down there. Every time we commit troops, there is a
terrible cost, potential loss of life.
I have visited Haiti now, I think, 14 times in the last decade. The
poverty of Haiti, as you know, just can't be described. It is com-
parable to the poorest of the poor countries in Africa. My wife and
I have watched as children have died in front of us. It is an ecologi-
cal disaster. The flooding that is going on in Haiti today that is
very much under-reported because there is very little communica-
tion that is going to show thousands of people who have died, just
because the country is an ecological disaster.
We are liable to see boat people again if the situation does not
get better. It is only an hour and a half from Miami. It is in our
backyard. It is our neighbor. If you compare the poverty of Haiti
versus the poverty of any other country in the Western Hemi-
sphere, the poverty is double. It is twice as poor, if you could put
it that way, of any other country in the hemisphere.
So, it is, I would maintain, and Congressman Levin has made a
very good case that we have to look at this holistically, and I agree.
I would also say, as we look at it holistically, Haiti is a special
case, and I think it is a special case not only from a humanitarian
point of view, but in our national interest. Haiti is in our backyard.
We don't want troops down there again. There is a fledgling gov-
ernment that, frankly, we have an interest in seeing that it does,
in fact, survive and not go into turmoil and chaos again.
What does this bill do? I take the Chairman's admonition very
seriously that we should not be wed to one bill, and I hear him.
What would the bill that we have been able to pass in the Senate
do? It would create a lot of jobs in Haiti. I don't think any of the
experts you are going to hear testify after us, and they are the ex-
perts, will deny that. It would create a lot of jobs. I think if this
bill does not pass, with the new change in the rules governing
quotas, we will see a lot of the few jobs that are left in Haiti, the
few assembly jobs that are left, you will see them very quickly
leave. Haiti at one time had 70,000 to 90,000 assembly jobs before
the embargo. Today, it is probably-no one knows for sure-it is
probably in the neighborhood of 30,000. With this bill, these jobs
would take off. Without this bill and no change in the status quo,
these jobs, the 30,000 that they have now will just collapse because
of the change in the law.
What will this bill do? If the bill does not pass, these jobs are
going to go somewhere else and they are not going to stay in the
region. I think most experts will tell you they will go to the Far
East. They will go a long, long way away. These are not U.S. jobs,
and I think we ought to just hit that issue right up front. I come
from a State that has lost a lot of other type manufacturing jobs
and I wouldn't be here today if I thought the passage of this bill
would cost U.S. jobs. In fact, I think it will have a benefit for U.S.
jobs. Let me tell you why. These jobs are either going to be in Haiti
or they are going to be thousands and thousands of miles away. If
they are in Haiti, we have the possibility at least that some of that
product-a button, a zipper, something that is a value-added-will
have to come out of the United States. If they are made thousands
and thousands of miles away, that will not be the case.
Second, anybody who has been in Haiti knows the vast majority
of money that is made in Haiti ultimately gets spent in the United
States. They import most of their food. They import most of their
products. Most everything comes from the United States. So, even-
tually, we are going to benefit from the prosperity of Haiti or just
the ability of the Haitians to live. We will benefit from that. It will
also, finally, help stabilize this country that is in our own back-
yard, and for foreign policy reasons, for our own national interest,
we have an interest in seeing that happen.
Finally, anybody who has been in Haiti, and I know Members of
the Committee have been in Haiti, but this is something we ought
to do for humanitarian reasons. We have some obligation, I think,
to help people who want to work, to help people who want nothing
more for their families than you and I want for our families, and
that is to get them enough to eat everyday and possibly even to
I have seen, my wife and I have seen, been into these assembly
factories. I haven't seen them all, Congressman. I haven't been in
all of them, but I have been in some of them, and I will tell you
that there are people who are lined up who want these jobs. Hai-
tians are hard-working people. They want what we want. I think
this bill will go a long way to give them that opportunity. I thank
[The prepared statement of Senator DeWine follows:]
Statement of The Honorable Mike DeWine, United States Senator from the
State of Ohio
Mr. Chairman, thank you for this opportunity to testify before the Committee in
support of expanded trade preferences for Haiti, and specifically in support of the
Haiti Economic Recovery Opportunity Act. I want to echo Senator Graham's com-
I have visited Haiti 14 times over the last decade and have seen-up-close-the
poverty and the potential of this nation and its people. Haiti needs our compassion.
Haiti needs our support. Haiti needs this bill. Why? Because Haitians are dying ev-
eryday from diseases and abysmal living conditions-conditions that they could im-
prove if they had jobs and money for doctors and medicine.
Senator Graham and I have sponsored this bill because Haiti is the poorest coun-
try in our hemisphere-it lies in our own backyard-and deserves the same pref-
erences we gave the poorest countries in Africa, many of which have higher per cap-
ita incomes than the people of Haiti.
Mr. Chairman, our bill is straight forward. It is modeled after the successful Afri-
can Growth and Opportunity Act. It would grant duty-free entry to apparel articles
assembled in Haiti contingent upon Presidential certification that the new Haitian
government is making significant political, economic, and social reforms. The bill
caps the amount of duty-free exports from Haiti at 1.5 percent of the total amount
of U.S. apparel imports, and the cap grows to the modest amount of 3.5 percent over
seven years. Siriply put, Mr. Chairman, this bill will allow Haiti to use, for exam-
ple, Peruvian fabric and American buttons, sew it all together, and then ship it to
the U.S. duty free.
There is one specific aspect of this bill that I want to emphasize, and that is the
importance of providing a third country fabric preference for Haiti. Third country
fabric preference is a fancy way of saying that Haiti can use materials from any-
where in the world and still receive duty-free treatment. As you will hear from wit-
nesses today, economic analysis clearly shows that third country fabric preferences
are the only way to truly stimulate the least developed countries of the world. This
was true in Africa, and it is true for this bill.
Mr. Chairman, there is a mistaken notion that this bill, and third country fabric
preferences, specifically, would cost U.S. jobs. This simply is not the case. Like
many of you, I represent a state where the manufacturing sector is hurting, and
I would not ask any of you to choose between U.S. jobs and jobs in Haiti. With the
HERO bill, we can have both.
Mr. Chairman, in 2005, the quotas that currently keep countries in the Far East,
and especially China, from flooding the global textile market with cheap products
will be removed. This will devastate the apparel industry in our hemisphere. Some
lucky countries will have the benefits of the Central American Free Trade Agree-
ment, but everyone else, including Haiti, will lose their industries as companies go
to the Far East.
This does not have to happen. If HERO becomes law, the assembly industry in
Haiti would stay and expand, thereby increasing Haiti's demand for U.S. products.
This would mean a greater demand for U.S. goods, such as elastic and thread from
North Carolina companies; and bags, boxes, and trim from Florida. But, if HERO
does not become law, the industry will leave Haiti, and those U.S. companies that
export these components to Haiti will be short yet another customer.
It is important to note that HERO's impact would extend beyond the U.S. textile
and apparel industry. The trade figures show that Haitians buy American goods.
For every dollar worth of goods the United States buys from Haiti,these poor impov-
erished people buy two dollars worth of American products. Think about it-that is
a one hundred percent return on investment. Now, think about what that return
would be if the Haitian people have more money in their pockets to spend on U.S.
goods. This is a prudent investment for the United States. This bill is good for Haiti,
and this bill is good for the United States.
Mr. Chairman, while certainly, there are other things we could do to help Haiti,
at this late date in the Congress, there is only one bill that has a chance of passing
and providing the assistance that Haiti so desperately needs. If the HERO bill does
not pass both houses by the end of the year, it will be too late. In 2005, once the
quotas are removed, what little industry remains in Haiti will leave, and it will not
come back. That means 30,000 more Haitians will be unemployed, and what little
is left of Haiti's economy will crumble. The jobs in the United States that depended
on Haiti's apparel industry will be forfeited, and all because we failed to act when
we had the opportunity.
In closing, I d like to focus on the bigger picture. We are here because just an hour
and a half flight off the Florida coast lies a country-the least developed in our
hemisphere-where 80 percent of the people live in abject poverty, and almost as
many are unemployed, living lives with little hope and opportunity.
I have been there 14 times. I have watched desperate mothers feed their children
mud, because they didn't have a job, and didn't have the money to buy food. I have
seen and held sick, malnourished, dying children in my arms. On behalf of the par-
ents of these children-and especially for the children, themselves-I am here today
urging you to do everything in your power to pass this bill. It is simply the right
thing to do.
Chairman CRANE. Let me express my appreciation to both of
you for your testimony, but most especially for your involvement in
what to me is a very important issue right now. I commend the
Senate for the action that it has taken already and I am hopeful
that we can act on this and have it resolved in the House and the
Senate before this session breaks up. Does anyone else want to
make a comment to our distinguished guests?
Mr. LEVIN. Just briefly. Mr. Shaw, you can go ahead if you want
Mr. SHAW. Go ahead.
Mr. LEVIN. I don't really have any questions. I do hope we can
work together actively on this, and I think it may be more bene-
ficial instead of a lot of back and forth here. I am not sure we can
write a final product. Maybe we could, but I am not sure we can,
today. Anyway, we shouldn't be facing each other like this but
around the table, I think. So, I hope we will be able to do that. The
time is really short, but we ought to utilize whatever time we have
to see if we can produce a product that addresses these needs and
makes good trade sense. I look forward to that.
Senator DEWINE. I appreciate that very much.
Chairman CRANE. Thank you. Mr. Shaw?
Mr. SHAW. Thank you, Mr. Chairman, and I ask unanimous
consent to insert an additional statement into the record.
Chairman CRANE. Without objection.
[The information was not received at the time of printing.]
Mr. SHAW. I also ask unanimous consent to insert a letter that
I received from Florida Governor Jeb Bush. Governor Bush has
been very active in seeking aid for Haiti and the Haitian people.
As a matter of fact, he is in the Capitol today-I just left him-
and he asked specifically how the HERO legislation was going. I
told him I would let him know after this hearing, but from what
I hear already, I think it is going very well.
[The information was not received at the time of printing.]
I also ask that a letter from the U.S. Conference of Catholic
Bishops in support of the trade preferences for Haiti be included,
[The information was not received at the time of printing.]
Finally, at each Member's desk you will find a copy of a Decem-
ber 7, 2003, feature on Haiti conducted by the South Florida Sun
Sentinel. I think it is one of the most graphic snapshots of what
was happening down there, and I can tell you it has not gotten any.
I want to commend both of my friends, Bob Graham and Mike
DeWine. Bob, we are certainly going to miss you, and I have an
idea that you are not going to complete retirement. You certainly
deserve all of the best in sending you off. I know both of your dedi-
cation to the problems in Haiti and trying to work them out. Mike,
what you have done with kids down there is legendary. I would
like the Committee to know that Mike has called me at home on
the weekend and wanted to know how this legislation is getting
around. I wanted to ask him how he got my telephone number,
In any event, he has been steadfast in working through this leg-
islation, and what you all did in carrying it through the Senate, I
think is phenomenal. Bob, you and your wife, Adele, who I went
to high school with at Miami Edison, have been very active in
bringing Haitian art back in order to support the high school that
Adele and I went to that now is probably 95 percent Haitian and
really a failing school, which it is very difficult not to be a failing
school when you are a school of immigrants, as Miami Edison is
today. The proceeds from the sale or the auction of these items goes
to hire the good students as tutors to help the others along, which
I think is just a marvelous program. Actually, I have tried to dupli-
cate that up in some of the areas in Palm Beach County where we
have a heavy Haitian population.
The Haitian people are a very gentle people. They are hard-
working people. They are caring people. They are religious people.
They certainly deserve a better slice of life than what they have
gotten. I have said it before and I will say it again. You cannot
have a democracy where there is no economy, and there is no econ-
omy in Haiti. There is 70-percent unemployment. You have got a
textile industry that used to be very active that is all but dried up.
They need to be spurred on. This legislation, and there are two
bills that are the subject of this hearing. One is identical to the
Senate bill and the other is a little more restrictive as to where
some of the supplies come from for putting the apparel together.
I join the Chairman in expressing the wish that we would be ex-
peditious in handling this through. We always blame the Senate
for being slow. I would hate to lose this opportunity not to at least
match their speed and seeing that something happens with this
legislation and that it gets to the President's desk before the end
of this Congress. It is important to us, and I think both you gentle-
men have expressed it very well in your testimony that this is for
our benefit as well as the Haitians, and it is a win-win. The trag-
edy, as Bob Graham expressed, of Hurricane Jeanne and the tre-
mendous loss of life really brings home how desperate this country
is, how desperate these people are, and how desperately they need
our help. As Mr. Levin said, the best thing we can do for them is
to supply jobs, and these are not exploiting American jobs. It is
good for Haiti. It is good for the United States. It will make this
Congress look very good to go ahead and pass this very quickly,
and I yield back the balance of my time.
Mr. HOUGHTON. Mr. Chairman?
Chairman CRANE. Yes, Mr. Houghton? Mr. Houghton, and then
Mr. BECERRA. I will yield to Mr. Houghton.
Mr. HOUGHTON. Thank you. I can't disagree with what Mr.
Shaw says, what the Senators say, Mr. Levin. It is a great idea to
be able to help the Haitian people through getting duty-free entry
through textiles. Before you have duty-free entry, you have got to
have an investment. Somebody has got to put up a plant.
One of the things I worry about, and I am sure you gentlemen
know a heck of a lot more than I do-although I have just finished
reading that wonderful book about Paul Farmer, Mountains Be-
yond Mountains-there has to be an idea that your investment is
not going to be jeopardized, and I don't know what happens to the
election. I don't know whether there is going to be a coup. I have
no idea. Is there any way to make sure that the incentive for peo-
ple over and above the duty-free entry is going to be there to put
that investment in so you can create those jobs?
Senator GRAHAM. As Senator DeWine said in his explanation of
the legislation, it has a condition before these benefits go into ef-
fect, and that condition is essentially that the President of the
United States must certify that the country is stable and is making
progress. I agree with you that that stability is a key to long-term
success, but it is a little bit like the chicken and the egg. If you
create the market for products such as this will for apparel, then
you hopefully will create the investment necessary to fill that mar-
ket. I think this bill is well balanced in its recognition of the neces-
sity of a stable environment and then the incentive to use that sta-
ble environment to create jobs.
Senator DEWINE. Mr. Chairman, if I could just add to that, I
totally agree. I think we have to move on several different tracks.
The bill that we just marked up in the U.S. Senate Committee on
Appropriations contains money to work on the judicial system and
to work on the police, both of them long-term problems for Haiti.
They are not going to be solved overnight and we have to work on
them. The Haitians have to work on these problems.
You are absolutely correct, but I think we also have to move
along economically at the same time, and frankly, there are busi-
nesses who look at Haiti because of the comparative advantages of
labor and for other reasons and they will make those decisions. I
truly believe with the passage of this bill, they will make decisions
to move forward and to expand in Haiti. They have done it in the
Mr. HOUGHTON. Thank you very much.
Chairman CRANE. Thank you. Mr. Becerra?
Mr. BECERRA. Thank you, Mr. Chairman, and thank you, as
well, for quickly bringing this matter to a hearing so that we could
hear not only from our colleagues on the Senate side, but from
those who are interested in trying to help move this issue along
faster for the people of Haiti. I want to extend to the two Senators
not only a welcome, but our appreciation for your efforts, not just
now on this issue today but in the past. You have been leaders on
the issues affecting Haiti and I think that the Haitian people prob-
ably recognize very well that there are two champions here sitting
before us trying to help once again. So, I thank you for the work
that you have done in the past.
I would love to hear a comment that you might have as we get
ready to hear testimony from some of the panelists who will be
coming before us. Perhaps you can give us some thoughts. There
will be testimony from a representative from the Union of
Needletrades, Textiles, and Industrial Employees, and Hotel Em-
ployees and Restaurant Employees International Union (UNITE
HERE), the textile union here in the United States, talking about
how, because we know that Haiti has had some problems in the
past with its labor laws-in fact, my understanding is that their
labor code still extends back from the days of the Duvalier dictator-
ship-that there have been difficulties.
They will be proposing, if they haven't already proposed in the
past, that we do something here to try to help ensure that the ben-
efits of this expanded trade with the United States, which should,
I hope, help, along with what I believe the gentleman and our
friend from New York was saying, that we have further invest-
ment, but it should help the Haitian people if we are able to extend
these benefits to Haiti. If you have a regime in place which doesn't
really allow those benefits to get down to those workers who are
producing the fabric and the apparel and garments, then we ulti-
mately still lose out in helping the Haitian people.
So, I wondered if you could comment. I don't know if you had a
chance to see the testimony of the gentleman from UNITE who will
be speaking, Mr. Levinson, but what he in essence proposes that
we consider doing-let me make sure I don't misquote him-a cou-
ple of things. One, we initiate a labor program in Haiti that would
be run by the International Labor Organization (ILO). That would
be as a condition for this additional trade benefit that would, in es-
sence, allow there to be a presence of some type of ILO program.
It wouldn't be-any extended benefits wouldn't be connected to
whatever the content of these reports would be, but it would, in es-
sence, put in place a program that would give Haiti additional in-
centive to try to move forward and would complement some of the
provisions that are already in the HERO Act to try to move Haiti
along in progressing with its labor laws. Is there any comment on
The second point, which would be to propose having a workers'
rights ombudsman that would be distinct from the government,
therefore hopefully not influenced by the government, to help us
process through some of the issues that are affecting the labor laws
and folks who work within the regime of the labor laws in Haiti.
Senator DEWINE. Congressman, I have not had a chance to look
at that testimony. I will look at it and I will react. I can only tell
you what my personal experience has been in Haiti, and this was
both under-primarily under the Aristide government, but also
since the Aristide government, as well, and that is looking, going
actually into some of these assembly plants.
What I saw and what my wife saw on another occasion were con-
ditions that were humane conditions and situations where people
did, in fact, want to work, and where the wage that was paid was
a much higher wage than certainly the average wage in Haiti, and
situations where people, when you talk to the people, they were
supporting many other people in their family.
So, I think we always have to watch that. I think one of the
things that you might want to question some of the other addi-
tional witnesses who you are going to hear from today about their
plans to go into Haiti and what their plans on how they will oper-
ate. The big companies that we look at, for example, J.C. Penney,
they have certain codes of who they buy from, and if these compa-
nies don't live up to that, they cut them off. That is one way of po-
licing. It is not the exclusive way, shouldn't be the only way, but
that certainly is one way.
My personal experience of what I have seen in the last few years
in Haiti is there has been something that I thought, I think if you
were there or anybody else on the panel was there, you would say,
yes, that is good. That is okay. These people are doing much better
than they would have been doing if they didn't have a job, and a
lot of people want this job.
Senator GRAHAM. I would have two comments. One is Haiti is
a member of, and I believe has ratified the core conventions of, the
ILO. One approach might be to assist Haiti in what is missing in
most place with the ILO conventions and that is enforcement of the
standards to which the county has already committed itself. I
would note that this is not an issue that is singular to Haiti. This
is probably an issue in many countries in the Caribbean Basin area
as well as elsewhere.
Second, I have been going to Haiti on a regular basis since the
early 1980s and one of the things that they had in place before the
bad times started about 15 years ago was an ingenious system
where people would start working in the plant that required the
least skills, because in many ways, that plant was the most effec-
tive school that these people had ever attended.
Those who showed the capability and dedication and a good work
ethic then would move to the plant next door, which had a slightly
higher skill requirement and compensation. They might move from
apparel to sewing what at one time was almost a Haitian exclusive,
American baseballs. Then they would move up to a third or fourth
or fifth rank so that the employment structure served almost as a
form of acceptance, graduation, and moving forward. I would hope
that with this kind of legislation, that something analogous to that
might be reestablished to give Haitians not only the opportunity for
the first job, but to see the opportunity for a more skilled job with
higher income for their family.
Mr. BECERRA. Thank you. Thank you, Mr. Chairman.
Chairman CRANE. Thank you. Thank you very much, Senators,
Mr. LEVIN. Mr. Chairman?
Chairman CRANE. Yes?
Mr. LEVIN. I might just add, as long as we are on this subject,
and we will talk about it subsequently, but I just urge everybody
to take a look at the most recent U.S. Department of State report
on human rights practices in Haiti. It contains language like, "fre-
quent verbal abuse and intimidation of workers and organizers
were problems in the assembly sector. Female workers in the as-
sembly sector reported that some employers sexually harassed fe-
male workers with impunity. Workers had access to labor courts
set up to resolve common labor-management disputes. However,
the court's judgments were not enforced."
So, I hope we can address these issues and move on with legisla-
tion. I don't think we can do so if we simply ignore the issue alto-
gether. The certification processes in the bill relate to several areas
but don't touch this one. I am not suggesting that we expect Haiti
to become overnight in full compliance in practice with everything
they have signed onto, but I do think, as we have said, unless there
is some assurance that the people who work will benefit or the pov-
erty of Haiti will remain as deep as it is today, and none of us
wants that, none of us. Thank you.
Chairman CRANE. Thank you. Yes, Mr. Rangel?
Mr. RANGEL. I will be brief, and thank you for this opportunity.
I can't let this go by without thanking you two for the leadership
that you provided in this and other areas, especially as it affects
the Caribbean. As relates to Haiti, I cannot think of any country-
maybe Sudan-that would get more international sympathy be-
cause of the political problems that they have faced for decades, the
economic problems they face today, and then, of course, the tragic
effects of the hurricane. This might give us an opportunity, if we
think about it, to try to bring our parties together.
It has been difficult to mention labor standards without people
asking, which side are you on? I think what Mr. Levin was talking
about is that as Americans, we have to have some standard. We
have to be able to say, not to please our labor unions but to please
ourselves, that we can't just have a drive as to who can hire human
beings for the least amount of money. My background in history
means you can go to slavery if that is the standard that you are
looking for, how cheap is the labor. Again, as Mr. Levin said, we
are not thinking about asking them to meet American standards.
Like most other things that we enjoy as Americans, that is the
dream. That is an aspiration. That is a goal.
I am certain nobody should be overly impressed with the ILO
standards. That is a minimum. Then if I heard him correctly, he
is saying, and they don't have to have that. Just show us what we
can do so that no matter what level you are working on, that you
would know that if you are a democracy in your country, you can
aspire to be the boss of that shop, that there is no cap on your
thinking. If you don't have anything there except the Chief Execu-
tive Officer (CEO) determining, how cheap can I get the labor, I
don't think we should feel proud of being Americans and forcing
people into this, because in our own great Nation, the things that
we take for granted were not given to us by management but
fought for by labor.
So, I don't know what the situation is over there in the other
body, but we here hope that we can take this, where we have an
overwhelming support for the objective, and begin just to talk
about what do you mean by ILO standards, because it is not nearly
as fearful as I think some people would want to believe that it is.
I just thank you for your effort and look forward as always in work-
ing with you on this and other issues.
Chairman CRANE. Let me conclude by again expressing appre-
ciation to both of you for your leadership and your involvement in
this very important issue. We hope we can act with dispatch.
Senator DEWINE. Thank you, Mr. Chairman.
Senator GRAHAM. Thank you.
Chairman CRANE. Thank you. Now I would like to call our next
panel, William Woltz, President and CEO, Perry Manufacturing
Company, Mount Airy, North Carolina; Stephen Felker, President,
Chairman, and CEO, Avondale Mills, Monroe, Georgia, on behalf of
the National Council of Textile Organizations; Jean Edouard
Baker, President, V&tements Textiles, Port-Au-Prince, Haiti; Janet
Fox, International Merchandising Director and Vice President, J.C.
Penney Purchasing Corporation, Piano, Texas; Mark Levinson,
Chief Economist, UNITE HERE; and Nigel Thompson, Executive
Vice President of Planning and Development, Yazaki North Amer-
ica, Canton, Michigan.
If you will all please take your seats, and after you are seated,
in front of each seat there is a little light that gives you an indica-
tion of the time. We try and restrict presentations to 5 minutes and
anything beyond that will be made a part of the permanent record.
That light will go green, and then yellow as the warning signal,
and then turn red after 5 minutes. So, if you can, please try and
keep your presentations to 5 minutes or less. With that, we will
start out with Mr. Woltz.
STATEMENT OF WILLIAM K. WOLTZ, JR., PRESIDENT AND
CHIEF EXECUTIVE OFFICER, PERRY MANUFACTURING COM-
PANY, MOUNT AIRY, NORTH CAROLINA
Mr. WOLTZ. Thank you very much for the opportunity to ad-
dress this body. I am William K. Woltz, Jr., President of Perry
Manufacturing, one of the premier private label manufacturers in
the United States. I am pleased to be here to testify in support of
legislation that will provide enhanced benefits for the people of
Headquartered in Mount Airy, North Carolina, Perry Manufac-
turing has been in business for over 50 years and has operated in
a half-dozen countries. Perry Manufacturing owns and operates its
own factories that produce for some of the largest retailers and
brands sold in the United States and around the world. We know
how to build and run successful sewing operations, operations that
are a source of pride to us and to our customers. Our customers
are proud to have their merchandise sewn in factories that have
such a good work environment. Wherever we operate, we are the
best place to work and we are able to attract and keep the highest
quality workforce. We employ 550 people in Haiti and have a build-
ing under construction to add another 1,000 people. Haiti is a very
difficult and poor country to operate in. For years, Haiti has had
a limited duty-free benefit for garments sewn from U.S. fabric
without any resulting expansion of its apparel industry, proving
that the existing restricted benefit has been meaningless for the
communities in that impoverished state.
So, why did Perry decide to stay in Haiti and possibly expand its
operations? It is because of the possibility of favorable trade legisla-
tion like HERO that will allow Haitian apparel to compete on a
duty-free basis in the United States. The fashion industry is the
overwhelming majority of the apparel industry, and when the fash-
ion industry establishes itself in a country, it has staying power
there. It doesn't leap from low-cost country to low-cost country. The .
fashion industry builds and requires skills in its labor force. Be-
cause of its ability to change styles, use different kinds of fabrica-
tions, knits and wovens, fashion builds a sewing supply chain that
employs a tremendous amount of people.
Without the use of third-party inputs, without the ability to buy
fabric wherever in the world it is most competitive, there will be
no fashion apparel industry in Haiti, and without enhanced trade
benefits, when global quotas are lifted on January 1, 2005, Haiti
will be in a disadvantaged position vis-a-vis its Asian competitors
and can never become the apparel manufacturing player that it
now has the opportunity to become, and as a matter of fact, that
it once was. Right now, Haiti has a golden opportunity and the
prospect of a bright future. With legislation like HERO, the United
States could act to transform this poverty-stricken island into an
apparel manufacturing player. In order to compete for investments,
Haiti must at least have as good a deal as Africa, AGOA, in order
to have a chance to compete.
With HERO, Haitian factories can be world competitors and will
have the ability to use the fabrics that are required by fashion and
the ability to source these fabrics in the most competitive manner.
With HERO, Haiti becomes an attractive market, and as it gains
the ability to build a thriving apparel industry, the ripple effect
will be tremendous in Haiti. Hundreds and hundreds of jobs are
created in a ripple around apparel plants, from feeding the workers
to transporting the workers to packaging to recapping tires. The
list goes on and on. The benefits extend to the United States and
U.S. industry, as well. Haiti can become an apparel center that will
buy most of its supplies, packaging, trim, and some of its fabric
from its neighbor, the United States. Haiti can become an apparel
center whose wages will be for the most part spent buying products
from the United States.
I believe that there is another key point. As long as the sewing
factories are in this hemisphere, the U.S. textile industry has a
chance to sell to these factories. When these factories leave this
hemisphere, the U.S. textile industry will have no chance to sell to
these factories. The HERO does not preclude the use of U.S. fabric.
As a matter of fact, I prefer to buy U.S. fabric. I get 60-day terms
when I buy U.S. fabric. When I buy foreign fabric, I have to pay
with a letter of credit.
We are in a very competitive market in the fashion apparel busi-
ness where our retail customers are committed to delivering high-
er-quality merchandise at lower prices to the American consumer.
In order to be a supplier to the major retailers and major brands,
Perry Manufacturing has no choice but to be in that value-quality
equation. Without the ability to use fabric from anywhere in the
world, Haiti will not be a part of that supply chain. Absent HERO,
the factories that are now running or under construction in Haiti
may or may not stay open or be completed, and I speak as a busi-
nessman that is faced with this very real calculation. The sewing
industry will always go where it can be competitive. With HERO,
that place can be Haiti.
In closing, I would like to say there is a great opportunity for the
United States, and Florida in particular, to supply all of the mate-
rial used to build and create and operate this industry. The HERO
bill would create a viable industrial complex just off the coast of
the United States that will help keep Haitians in Haiti where they
will have opportunity, create additional markets for American pro-
ducers of everything from cornflakes to batteries, and bring hope
and opportunity to this impoverished island. Thank you very much.
I will be pleased to answer any questions that you might have.
[The prepared statement of Mr. Woltz follows:]
Statement of William K. Woltz, Jr., President and Chief Executive Officer,
Perry Manufacturing Company, Mount Airy, North Carolina
Good afternoon! I am William K. Woltz, Jr., President of Perry Manufacturing,
one of the premier private label manufacturers in the United States, and I am
pleased to be here to testify in support of legislation that will provide enhanced ben-
efits for the people of Haiti.
Headquartered in Mt. Airy, N.C., Perry Manufacturing has been in business for
over 50 years and has operated in a half dozen countries. Perry Manufacturing owns
and operates its own factories that produce for some of the largest retailers and
Brands sold in the U.S. and around the world. We know how to build and run suc-
cessful sewing operations, operations that are a source of pride to us and to our cus-
tomers-our customers are proud to have their merchandise sewn in factories that
have such a good work environment. Wherever we operate we are the best place
to work, we are able to attract and keep the highest quality workforce.
Perry's Investment in Haiti
We employ 550 people in Haiti and have a building under construction to add an-
other thousand people, but Haiti is a very difficult and poor country to operate in.
For years, Haiti has had a limited duty-free benefit for garments sewn from U.S.
fabric without any resulting expansion of its apparel industry, proving that the ex-
isting restrictive benefit has been meaningless for the communities in the impover-
So why did Perry decide to stay in Haiti and possibly expand its operations? It
is because of favorable trade legislation like HERO that will allow Haitian apparel
to compete on a duty-free basis in the U.S. market.
The Global Fashion Industry
The fashion industry is the overwhelming majority of the apparel industry and
when the fashion industry establishes itself in a country, it has staying power
there-it doesn't leap from low-cost country to low-cost country.
The fashion industry builds and requires skills in its labor force. Because of its
ability to change styles, use different kinds of fabrications, knits and woven fabrics,
fashion builds a sewing supply chain that employs a tremendous amount of people.
But without the use of third-party inputs, without the ability to buy fabric wherever
in the world it is most competitive, there will be no fashion apparel industry in
Haiti. And without enhanced trade benefits, when the global quotas are lifted on
January 1, 2005, Haiti will be in a disadvantaged position vis-a-vis Asian suppliers,
and can never become the apparel manufacturing player that it now has the oppor-
tunity to become and that it once was.
Haiti's Golden Opportunity
Right now Haiti has a golden opportunity, and the prospect of a bright future.
With legislation like HERO, the United States could act to transform this poverty
stricken island into an apparel manufacturing player. But in order to compete for
investments, Haiti must at least have as good a deal as Africa (AGOA) to have a
chance to compete.
With HERO, Haitian factories can be world competitive, and will have to have the
ability to use the fabrics that are required by fashion and the ability to source these
fabrics in the most competitive manner. With HERO, Haiti becomes an attractive
market, as it gains the ability to build a thriving apparel industry. The ripple effect
will be tremendous in Haiti; hundreds and hundreds of jobs are created in a ripple
around apparel plants from feeding the workers to transporting, packaging, to re-
capping tires-the list just goes on and on.
Implications for the U.S. Textile Industry
The benefits extend to the U.S. industry as well. Haiti can become an apparel cen-
ter that will buy most of its supplies, packaging, trim and some of its fabric from
its neighbor, the United States. Haiti can become an apparel center whose wages
will be for the most part spent buying products from the United States.
And I believe that there is another key point: As long as the sewing factories are
in this hemisphere, the U.S. textile industry has a market to sell into. If these fac-
tories leave this hemisphere, the U.S. textile industry will have to rely on selling
to factories in Asia or Africa where it will be impossible for them to compete. In-
deed, HERO does not preclude the use of U.S. fabrics. In fact, I prefer to buy fabric
from the United States. For one thing, I get terms in the United States. Here we
have a competitive market where retailers are committed to delivering higher qual-
ity merchandise at lower prices to the American consumer. In order to be a supplier
to the major retailers and major brands, Perry has no choice but to be in that value/
quality equation. Without the ability to use fabric from anywhere in the world, Haiti
will not be a part of that supply chain. Absent HERO, the factories that are now
running or under construction in Haiti may or may not stay open or be completed.
And I speak as a businessman faced with this very real calculation. The sewing in-
dustry must go where it can be competitive. With HERO that place can be Haiti.
In closing I'd like to say it is a great opportunity for the United States and Florida
in particular to supply all of the material used to create and operate this industry.
The HERO bill would create a viable industrial complex just off the coast of the
United States that would keep Haitians in Haiti where there will be opportunity,
create additional markets for United States producers of everything from Cornflakes
to batteries, and bring hope and opportunity to this impoverished country.
I would be pleased to answer any questions that you might have.
Chairman CRANE. Thank you. Mr. Felker?
STATEMENT OF STEPHEN FELKER, PRESIDENT, CHAIRMAN,
AND CHIEF EXECUTIVE OFFICER, AVONDALE MILLS, INC.,
MONROE, GEORGIA, ON BEHALF OF THE NATIONAL COUN-
CIL OF TEXTILE ORGANIZATIONS
Mr. FELKER. Chairman Crane, Congressman Levin, Members of
the Subcommittee, thank you very much for the opportunity to ap-
pear before you today. My name is Stephen Felker. I am Chairman,
President, and CEO of Avondale Mills, a privately-held diversified
textile manufacturer with headquarters in Monroe, Georgia. We
employ some 5,000 workers in North and South Carolina, Georgia,
and Alabama, where we spin, weave, dye, and finish textiles made
primarily of cotton. Our products are used in the apparel, home
furnishing, and industrial end uses. I am also a member of the Na-
tional Council of Textile Organizations and a Vice President of the
National Cotton Council.
The U.S. textile industry has experienced a wave of plant clos-
ings and job losses. In the last 6 years, we have lost some 220,000
textile jobs, fully 33 percent of our entire workforce. We lost 50,000
jobs in 2003 alone. With this in mind, our industry is fearful that
the Senate-passed HERO would only lead to more job losses. We
are pleased that the Committee is willing to consider alternative
approaches to providing assistance to Haiti.
Under the Caribbean Basin Trade Partnership Act (CBTPA)
(P.L. 106-200), which granted duty-free treatment to garments
made in the region of U.S. yarns and fabrics, the U.S. textile indus-
try has developed mutually beneficial trading partnerships with
apparel makers in many Caribbean countries. Haiti has been a
part of the success. In 2002, the value of U.S. textile exports to
Haiti had risen 176 percent over the 3 previous years. In fact, 70
percent of Haiti's garment exports to the United States are made
from U.S. components.
We note, however, that U.S. exports to all CBTPA countries
slowed in 2003 from the 220-percent growth rate over the previous
3 years to only 6-percent growth. The CBTPA apparel trade, in-
cluding with Haiti, is off this year, as my written statement details.
This we attribute in large part to increase in imports of Chinese
apparel, imports that are, frankly, representative of the damage
being done around the world due to China's enormous disruptive
currency manipulation, its enormous subsidies, illegal tax rebates,
and use of non-performing loans to gain competitive advantage.
Now, how does Congress achieve a win-win solution that benefits
the workers of the United States and is consistent with the fun-
damentals of CBTPA? Well, the one thing that Congress must not
do is enact the Senate-passed bill. It will, frankly, mostly benefit
Chinese and other Asian producers of yarn and fabric. The U.S.
textile industry and our workers will be the losers, as will apparel
producers in other CBTPA countries.
Make no mistake, the Senate-passed bill creates an enormous
and irresistible incentive for apparel makers to shut down their op-
erations elsewhere in the Caribbean and Central America and
move to Haiti, where they can freely utilize Chinese fabrics and
Chinese yarns and still get the same zero-duty access to the valu-
able U.S. market. Importers and retailers will quickly shift their
orders to Haiti and the price will be paid by U.S. textile workers
and by apparel workers in other CBTPA countries. From a U.S.
perspective, we will not only lose our export market in Haiti, but
also much of our export market in other Caribbean and Central
The second problem is that the bill encourages transshipment
through Haiti. Haiti clearly lacks effective legal and enforcement
systems, Chinese manufacturers will be able to easily transship ap-
parel directly through Haiti in order to take advantage of zero-duty
Now, let us focus on a solution. The number one challenge of con-
ducting business in the entire region is this lack of working capital.
We urge Congress to consider legislation that makes financial and
operational services of U.S. export credit and financing agencies
available to U.S. textile and apparel companies. The Overseas Pri-
vate Investment Corporation, the Export-Import Bank of the
United States, the Trade Development Agency can be brought into
this effort. Our industry has had difficulty obtaining effective U.S.
Government financing of exports and overseas activities that utilize
U.S. inputs. Congress has already authorized preferential treat-
ment for garment imports from Haiti utilizing U.S. inputs through
Congress could further assist Haiti in fully recognizing the bene-
fits of this program by helping finance their working capital
through the guarantee of receivables of U.S. companies selling
there. Such a program in Haiti could serve as a pilot program for
similar initiatives in other Caribbean and Central American na-
tions and would be very beneficial in helping the partnerships our
industry has established there as we face together the challenges
of predatory Chinese market share strategies in the years to come.
In closing, Mr. Chairman, I do believe that there are concrete steps
that can be taken to help Haiti, actions which will produce a win-
win situation for Haiti, U.S. textile companies, our workers, and
our customers in the apparel industry throughout other CBTPA na-
tions. Thank you.
[The prepared statement of Mr. Felker follows:]
Statement of Stephen Felker, President, Chairman, and Chief Executive Of-
ficer, Avondale Mills, Inc., Monroe, Georgia, on behalf of National Council
of Textile Organizations
Chairman Crane, Congressman Levin, members of the Subcommittee.
Thank you for this opportunity to appear before you today.
My name is Stephen Felker. I am chairman, president and CEO of Avondale
Mills, Inc., a privately held, diversified textile manufacturer with headquarters in
Monroe, Georgia. We employ some 5,000 workers in facilities in North Carolina,
South Carolina, Georgia and Alabama, where we spin, weave, dye and finish textiles
made primarily from cotton raw materials. Our products are used in apparel, home
furnishings and industrial end manufacturing. I am also a member of the board of
directors of the National Council of Textile Organizations and a vice president with
the National Cotton Council.
Since the late 1990s, the United States textile industry has experienced an un-
precedented wave of plant closings and job losses. In the last six years, we have lost
some 220,000 textile jobs, fully 33 percent of our entire workforce. We lost 50,000
jobs in 2003 alone. With this in mind, our industry is fearful that the Senate-passed
S. 2261 would only lead to more job losses in our industry, and we are pleased that
the Committee is willing to consider alternative approaches to providing economic
assistance to Haiti.
Under the Caribbean Basin Trade Partnership Act (CBTPA), which granted duty-
free treatment to garments made in the region of U.S. yarns and fabrics, the U.S.
textile industry has developed mutually beneficial trading partnerships with apparel
makers in many Caribbean countries. U.S. textile exports to the CBPTA countries
soared by 220 percent in the three years beginning in 2000 when the law was en-
Haiti, as a CBTPA beneficiary country, has been part of this success. In 2002, the
value of U.S. textile exports to Haiti had risen approximately 176 percent in the
three years since 1999. In fact, 70 percent of Haiti's garment exports to the U.S.
are made from U.S. components.
We note, however, that total U.S. exports to all CBTPA countries slowed in 2003
from the 220 percent growth rate over the previous three years to only six percent
growth, and CBTPA apparel exports to the U.S. are down four percent so far this
year. Moreover, U.S. textile exports to Haiti actually fell by 12 percent in 2003, and
Haitian apparel imports to the U.S. are subsequently down by nearly 14 percent
this year. These figures we attribute in large part to increases in imports of decon-
trolled Chinese apparel-imports that are frankly representative of the damage
being done around the world due to China's enormously disruptive currency manip-
ulation, its enormous subsidies, illegal tax rebates and use of non-performing loans
to gain competitive advantage.
China has taken 72 percent of the U.S. market in products that had their quotas
removed two and a half years ago. It trounced all competitors, including Haiti and
Sub-Saharan Africa, which was already receiving the benefits similar to those avail-
able in the Senate-passed Haiti bill. I would note that imports from Haiti in those
product categories fell 53 percent, from 8.6 million square meters to 4.0 million
square meters in 30 months time. Imports from China during the same period of
time increased 1 BILLION square meters. Thus, a solution for Haiti-and apparel
exporters throughout Mexico, the Caribbean and the Andean region-must include
the use of safeguards against China and strong action on unfair trade practices.
But relevant to today's discussion is-How does the Congress achieve a win-win
solution that benefits textile manufacturers in the U.S. and apparel makers in
Haiti, which is consistent with the fundamental basis of CBTPA? Well the one thing
the Congress must not do is enact the Senate-passed bill-this might help some ap-
parel makers in Haiti, but it will frankly benefit mostly Chinese and other Asian
producers of yarn and fabric. And the U.S. textile industry and our workers will be
the losers, as will apparel producers in other CBTPA countries.
Make no mistake-the Senate-passed bill creates an enormous and irresistible in-
centive for apparel makers to shut down their operations elsewhere in the Carib-
bean and Central America, and move to Haiti, where they can freely utilize Chinese
fabrics made of Chinese yarn and still get the same zero-duty access to the valuable
U.S. market. All of this, plus Haiti's already incredibly low labor costs, would give
Haiti an advantage that no country in the region can beat. Importers and retailers
will quickly shift their orders to Haiti, and the price will be paid by U.S. textile pro-
ducers and our workers and by apparel workers in the other CBTPA countries.
From a U.S. perspective, we will thus not only lose our export market in Haiti, but
much of our export market in other Caribbean and Central American countries.
The second problem is that the bill encourages transshipment through Haiti. Be-
cause Haiti clearly lacks an effective legal or enforcement system, Chinese manufac-
turers would be able to easily transship apparel directly through Haiti in order to
take advantage of zero duty benefits. It is much more difficult to catch trans-
shipments when U.S. yars and fabrics are not required-in fact, Customs' ability
to do so was severely criticized in a GAO report last year. If this bill is passed, a
significant portion of the benefits will go to unscrupulous Chinese manufacturers
who manipulate the system and utilize unfair trade practices to gain an enormous
Let me quantify this for the Committee-if enacted, this bill would ultimately
mean that nearly $2 BILLION in apparel exports will shift from other Caribbean
and Central American countries to Haiti. This is twice the size of current exports
from Costa Rica and forty percent more than what Guatemala even produces. And
over time, our industry expects U.S. mills to lose almost $1 BILLION in export or-
ders currently going to the region, and tens of thousands of U.S. jobs will be lost
I also want to point out that the Senate bill provides for duty-free benefits retro-
active to October 1, 2003. In other words, millions of dollars worth of tax rebates
will be provided not to Haiti but to importers for goods that have entered the coun-
try in the past 12 months. Haitian apparel makers and their workers will not ben-
efit at all from these rebates. Only the importers' bottom line will realize the profits
of this provision and at the expense of U.S. taxpayers who are left footing the bill.
Rather than a single-minded approach that will benefit Chinese textile producers
at the expense of textile producers and workers in the U.S. and other Caribbean
countries, I want to suggest a more broad-based approach. Recent studies by NCTO,
by the International Trade Commission and by the World Trade Organization, all
conclude that China will dominate global textile and apparel trade if quotas are per-
mitted to expire at the end of this year as currently scheduled. As such, it makes
no sense to put all the Haitian eggs in a textile and apparel basket.
Instead, we would urge that Congress commit to providing the support Haiti
needs to diversify its economy. Because our expertise is in the textile arena, we are
not prepared to recommend specific steps or economic interests to pursue, but rather
would simply encourage you to move in this direction. A one-shot approach to Haiti's
economic problems is far too risky to provide that nation with the assistance it
needs for a sustainable economic recovery.
At the same time, we would encourage Congress to provide Haiti with such form
of support as you might deem appropriate to help that country become more stable.
Clearly, the unrest in Haiti is a disincentive to any business thinking about re-locat-
ing to that country, and we would urge that a comprehensive Haitian approach in-
clude steps to help promote political and social stability there as well. In the ab-
sence of these fundamental tenets, an environment to support sustained economic
development will never materialize.
With regard to the textile and apparel sector, we urge Congress to consider legis-
lation that ensures the financial and operational services from U.S. export credit
and financing agencies are available to U.S. textile and apparel companies that
choose to do business in Haiti. Traditionally, the Overseas Private Investment Cor-
poration (OPIC), the Export Import (ExIm) Bank, and the Trade Development Agen-
cy (TDA) have avoided sensitive industries, including U.S. textile and apparel firms
and their suppliers. As a result, our industry has had difficulty seeking U.S. Gov-
ernment financing of our exports and overseas activities that utilize U.S. inputs.
Since Congress has already authorized preferential access for garment imports from
Haiti utilizing U.S. inputs through the CBTPA, Congress could further assist Haiti
in fully realizing the benefits of this program by supporting U.S. export and invest-
ment financing for the U.S. inputs that go into those imports.
Such a program in Haiti could serve as a pilot program for similar initiatives in
other Caribbean and Central American nations and would be very beneficial in help-
ing the partnerships our industry has established there try to withstand the chal-
lenges they will certainly face from Chinese imports in the years to come. Addition-
ally, since many other countries already provide favorable export financing in sup-
port of their textile and apparel products, we maintain it would be appropriate, and
mutually beneficial to both the U.S. and Haiti, for our government to provide simi-
lar tools in support of U.S. textile and apparel industries and their workers, as well
as workers in Haiti.
In closing, Mr. Chairman, I do believe there are concrete steps that can be taken
to help Haiti, actions which will produce a win-win situation for Haiti, U.S. textile
companies, our workers, and our customers in the apparel industry throughout the
other CBTPA countries.
Chairman CRANE. Thank you, Mr. Felker. Mr. Baker?
STATEMENT OF JEAN EDOUARD BAKER, PRESIDENT,
VETEMENTS TEXTILES, SA., PORT-AU-PRINCE, HAITI
Mr. BAKER. Mr. Chairman, distinguished Members of the Sub-
committee, it is a privilege to be before your prestigious Committee
this afternoon. As a Haitian citizen and manufacturer, I am con-
scious of the responsibility that is upon me to present and defend
an issue that could have tremendous impact upon my country. I am
here to support HERO, introduced in the House by Congressman
Clay Shaw. This version was introduced in the Senate by your es-
teemed colleague, Senator DeWine, and passed in June of this year.
It is the best deal for Haiti.
In the last two decades when Haiti was struggling to emerge
from dictatorship and political turmoil, there has been one element
that has never been addressed, the fundamental need for long-term
job creation as a part of the transition. Can a country without a
growing economy and vibrant middle class ever become a democ-
Let me take a moment to address some of Haiti's challenges.
First, chronic mismanagement by a series of governments. Second,
overpopulation. Haiti has 9 million inhabitants, with the majority
concentrated in the cities where jobs are scarce. Estimates show
that 70 percent of Haiti's working-age population is unemployed or
under-employed. Third, no significant natural resources. Fourth,
inadequate and decaying infrastructure.
In the face of these issues, Haiti's once dynamic apparel industry
is no longer competitive. In the 1980s, Haiti's industry supported
60,000 jobs. Now the sector employs only 20,000 workers. What
Haiti needs and what we are hoping to .gain with the HERO bill
as introduced by Representative Shaw are AGOA-type incentives.
The AGOA recognized that the least-developed countries of Africa
deserve special treatment. As the only least-developed country in
this hemisphere, I believe that granting similar incentives to Haiti
is the right thing to do. I fully support the Congress's efforts to as-
sist these African countries and I take this opportunity to con-
gratulate Chairman Thomas and Congressman Rangel for the lead-
ership that they have shown on AGOA. Your lesser developed coun-
try neighbor deserves these benefits, too.
In light of the quota elimination in January and stiff competition
in other suppliers, the only way Haitian companies can compete is
through a duty advantage that provides a simple and flexible rule
of origin with no tricks that anyone can understand and apply.
This bill would be a win-win situation for the United States. It
does not threaten U.S. jobs. In a recent U.S. Agency for Inter-
national Development study, the executive summary of which I
have submitted with my written testimony, it says the following.
"There should be no adverse impact on U.S. apparel manufacturers
since the type of apparel that could conceivably enter from Haiti
under the new provision of HERO have long since left the United
States for offshore operations."
It should also be noted that by keeping production in Haiti, sta-
tistics show that 15 to 20 percent of inputs are from the United
States, even if the main body fabric is from a third country. When
quotas in China expire at the end of the year, it is expected that
there will be a massive production shift to China. China, unlike
Haiti, produces its own inputs. Therefore, there would be no in-
crease in U.S. exports to China, but instead the net loss as produc-
tion moves away from countries like Haiti.
I would like to make a few important points before concluding.
First, as we create jobs and bring stability to Haiti, we alleviate
the migration problems of Haitians going to the Dominican Repub-
lic, the Bahamas, and, of course, Florida. Second, every job created
in the manufacturing sector in Haiti has the potential to create
one-and-a-half short- and long-term jobs in related service sectors.
Third, the average Haitian worker supports seven dependents. Es-
timates show that production growth could create 100,000 direct
jobs over the next 5 years. If we factor in the indirect employment,
the potential impact of this bill on Haiti's economy and society
would be staggering, giving access to proper nutrition, health care,
and education to millions. Access to these fundamental human
rights is a cornerstone of democracy.
Finally, I have included figures from the U.S. Census Bureau
and U.S. International Trade Commission showing recent U.S.
trade statistics with my testimony. The figures for Haiti reflect
normal trade patterns over the past decade. Haiti imports about
twice as much from the United States as it exports to the United
States. Other trading partners show a negative balance with the
United States. Estimates are that for every dollar generated in
Haiti, 60 percent is sent to the United States. Therefore, a stronger
Haitian economy implies increased export of U.S. goods and serv-
ices to Haiti. This is a true win-win situation.
In closing, I want to thank you for allowing me to appear before
you today. You have the opportunity to do something historic in
passing HERO as introduced by Congressman Shaw. The saying,
"trade, not aid," is perhaps not applicable to Haiti. We need aid.
By passing this bill, perhaps 10 years from now, you will have
changed the face of a nation to where aid is the exception and op-
portunity is the norm. Thank you.
[The prepared statement of Mr. Baker follows:]
Statement of Jean Edouard Baker, President, VWtements Textiles, SA.,
Distinguished Members of the Sub-Committee:
It is a privilege to be before your prestigious Committee this afternoon. As a Hai-
tian citizen and a manufacturer I am conscious of the responsibility that is upon
me to present and defend an issue that could have tremendous impact upon my
I am here to support the Haitian Economic Recovery Opportunity Act of 2004 in-
troduced in the House by Congressman Clay Shaw. This version was introduced in
the Senate by your esteemed colleague, Senator Mike DeWine, and passed in June
of this year. It is the best bill for Haiti.
Many Committee members are long-time friends of Haiti, and like many of its
citizens you have posed the question: "Will Haiti ever move past its problems?" I
know, as you do, that if hope and good intentions could change the course of history,
this hearing would not be necessary-Haiti would be the thriving, stable neighbor
that we aspire to being. But we all know that it takes more than this. The inter-
national community has had to physically intervene too often. In the last two dec-
ades however, when Haiti was struggling to emerge from dictatorship and political
turmoil, there has been one element that has never been addressed: the funda-
mental need for long-term job creation as a part of the transition. Can a country
without a growing economy and vibrant middle-class ever become a democracy?
Let me take a moment to address some of Haiti's challenges:
First: Chronic mismanagement by a series of governments.
Second: Overpopulation-Haiti has 9 million inhabitants with the majority con-
centrated in the cities where jobs are scarce. Estimates show that 70% of Haiti's
working-age population is unemployed or under-employed.
Third: no significant natural resources.
Fourth: Inadequate and decaying infrastructure.
In the face of these issues, Haiti's once dynamic apparel industry is no longer
competitive. In the 1980s, Haiti's industry supported 60,000 jobs. Now the sector
employs only 20,000 workers.
One of the fundamental reasons for this drop was of course the international em-
bargo in the early 1990s. And while Haiti was under the embargo, the rest of the
world was changing. Globalization was underway, with China and the rest of Asia
emerging as aggressive competitors. Countries of the Caribbean Basin had received
significant development funding to build modern infrastructure including ports and
airports, roads, electricity and telecommunications. When Haiti emerged from the
embargo, although the new era was greeted with hope, it quickly became clear that
the manufacturing sector was not getting the support that it needed. And left to
fend for itself, it struggled to compete internationally.
What Haiti needs, and what we are hoping to gain with the HERO bill as intro-
duced by Representative Shaw, are AGOA-type incentives. The African Growth and
Opportunity Act, passed unanimously by Congress in 2000 and renewed this year,
recognized that the Least Developed Countries of Africa deserved special treatment.
As the only Least Developed Country in this hemisphere, I believe that granting
similar incentives to Haiti is the right thing to do. I fully support the Congress' ef-
forts to assist these African countries; but your LDC neighbor deserves these bene-
fits too. In light of the quota elimination in January, and stiff competition with
other suppliers, the only way Haitian companies can compete is through a duty ad-
vantage that provides a simple and flexible rule of origin, with no tricks, that any-
one can understand and apply.
This will provide critical security and lowered risk for investors in Haiti's future-
foreign investors and local investors like myself. I have five factories in Haiti, and
employ 800 people. All of these factories were burned down to the ground during
the recent looting-looters even took the roofs off the buildings. My 800 workers had
no sewing machines to work on, no buildings to go to work to, but knowing that
they have no other support, I struggle to rebuild my factories. Even now, I have only
been able to start up one of the factories and put 150 people back to work. But I
have confidence that with hard work and great financial difficulties for my company
and my family, I can get my factories back on line, but I need to know that there
is security in my investment, and that there will be the opportunity to compete.
This bill would be a win-win situation for the United States. It does not threaten
U.S. jobs and a recent USAID study, the executive summary of which I have sub-
mitted with my written testimony (Attachment 1), says the following:
"There should be no adverse impact on U.S. apparel manufacturers since
the type of apparel that could conceivably enter from Haiti under the new
provisions of HERO have long-since left the United States for offshore oper-
nations Furthermore, according to the study as regards to any displacement
of U.S. textile mill products: "If there is any diversion, it is most likely to
come at the expense of imports from the Far East made with no U.S. compo-
nents ... ."
It should also be noted that by keeping production in Haiti, statistics show that
15-20% of inputs are from U.S.-even if the main body fabric is from a third coun-
try. Just as an example, my company uses a large number of American inputs, in-
cluding American buttons, American thread, American zippers, American labels,
and American packing materials and my goods are shipped on an American ship-
ping line. When quotas on China expire at the end of the year, it is expected that
there will be a massive production shift to China. China, unlike Haiti, produces its
own inputs, therefore there will be no increase in U.S. exports to China, but instead,
a net loss as production moves away from countries like Haiti.
I would like to make a few important points before concluding:
First: As we create jobs and bring stability to Haiti, we alleviate the migration
problems of Haitians going to the Dominican Republic, the Bahamas, and, of course,
Second: Every job created in the manufacturing sector in Haiti has the potential
to create one and 'a half short- and long-term jobs in related service sectors includ-
ing construction, food service, etc.
Third: The average Haitian worker supports seven dependents. Estimates show
that production growth could create 100,000 direct jobs over the next five years. If
we factor in the indirect employment, the potential impact of this bill on Haiti's
economy and society could be staggering, giving access to proper nutrition,
healthcare, and education to millions. Access to these fundamental human rights is
a cornerstone of democracy.
Finally, I have included figures from the U.S. Census Bureau and USITC showing
recent U.S. trade statistics with my testimony (Attachment 2). The figures for Haiti
reflect normal trade patterns over the past decade: Haiti imports about twice as
much from the U.S. as it exports to the U.S. Other trading partners show a negative
balance with the U.S. 80% of Haitian imports are from the United States, and this
will not change. Estimates are that for every dollar generated in Haiti, 80% is sent
back to the U.S. Therefore a stronger Haitian economy implies increased export of
U.S. goods and services to us. This is a true win-win situation.
In closing, I want to thank you for allowing me to appear before you today. You
have the opportunity to do something historic in passing HERO as introduced by
Congressman Shaw. The saying "trade, not aid" is perhaps not applicable to Haiti-
we need aid. But by passing this bill, perhaps ten years from now you will have
changed the face of a nation to where aid is the exception, and opportunity is the
Chairman CRANE. Merci beaucoup. Ms. Fox?
STATEMENT OF JANET E. FOX, VICE PRESIDENT FOR INTER-
NATIONAL SOURCING AND INTERNATIONAL MERCHAN-
DISING DIRECTOR, J.C. PENNEY PURCHASING CORPORA-
TION, PLANO, TEXAS
Ms. FOX. Good afternoon, Mr. Chairman, Members of the Com-
mittee on Ways and Means. My name is Janet Fox and I am the
Vice President for International Sourcing for J.C. Penney Pur-
chasing Corporation, the global source and arm for J.C. Penney
stores. J.C. Penney is one of America's largest retailers. We have
over 1,000 stores and last year had $18 billion in retail sales. With-
in my capacity as Vice President for International Sourcing, I am
responsible for the development of our strategic sourcing plans and
managing the assets to support our global merchandise sourcing.
Last year alone, J.C. Penney Purchasing international purchase of
goods were valued at over $7 billion at retail. Our extensive global
sourcing experience places J.C. Penney in a unique position to un-
derstand and comment on the proposed Haiti trade legislation and
its potential impact on the sourcing decision of U.S. purchasers.
I appreciate the opportunity to testify before you on the very im-
portant issue of helping Haiti, a country which faces tremendous
obstacles, with its economy under severe pressure and its private
sector struggling to maintain the nation's fragile but critical em-
ployment base. J.C. Penney currently purchases about $10 million
worth of apparel, primarily knit t-shirts and underwear, from
Haiti, or about 3 percent of Haiti's current apparel exports to the'
United States. Frankly, however, that is a very small part of our
international sourcing, and as we plan our business for 2005 and
beyond, looking forward to the removal of quotas, whether our sup-
pliers in Haiti will remain a part of our strategy will depend large-
ly and directly upon whether Haiti can overcome the substantial
competitive disadvantages it currently faces.
With the elimination of quotas, there will be unprecedented con-
solidation in the industry, a process we expect will evolve over the
next 5 years. The quota system has bred inefficiency and helped
bring about an oversupply of manufacturers that otherwise would
have been noncompetitive. J.C. Penney, like all retailers, is ad-
dressing how it must change its business in response to quota
elimination. To compete successfully in this new quota-free envi-
ronment, we will gradually reduce the number of suppliers we do
business with and grow our business with fewer suppliers. In a
quota-free environment, we will have no choice to be very discrimi-
nating as to who our suppliers will be, selecting only those who can
provide real value to our customer. Value does not mean the prod-
uct with the cheapest price. It means the supplier that is able to
provide a quality product and service, including speed to market
and supply chain efficiency and reliability.
Right now, Haiti's prospects once quota are eliminated are not
good. The uncertain political situation in Haiti and potential for
supply chain disruption has made some companies reluctant to
take the risk of even sourcing there. Another disadvantage is that,
currently, we feel only simple garments can be produced in Haiti.
More sophisticated products must be produced elsewhere.
The CBTPA does not provide Haiti with a competitive advantage.
Given the current level of skills and productivity for Haitian work-
ers, the higher price point for U.S. yarns and fabric makes Haitian-
made CBTPA-compliant products uncompetitive. To offset the
lower skills and productivity in Haiti, it makes more sense to use
Asian fabric and pay full duty. We believe doing business in Haiti
is the right thing to do, both to help the people of Haiti and in the
interest of U.S. security, J.C. Penney is closely following the ac-
tions of the Congress to provide meaningful incentives to retailers
and suppliers to continue to source and produce goods in Haiti. We
have carefully considered each of the options noted in the Commit-
tee's hearing notice, as well as the third-country fabric option pre-
sented by the HERO Act approved by the Senate, and the cumula-
tion concept put forward by Mr. Shaw last year, and we have even
tried to come up with a few ideas of our own.
Duty-free access for apparel produced in Haiti for fabric produced
anywhere in the world would provide the greatest incentive for J.C.
Penney to continue to purchase from Haitian suppliers and per-
haps even expand that business. Only with third-country fabric can
Haitian manufacturers offset the limitation of the skills and pro-
ductivity of their workers. However, in our opinion, Haiti would not
require the same level of benefits as provided to the 40-plus coun-
tries under the AGOA.
We are doubtful that Haiti could produce enough garments to ac-
count for more than 1.5 percent of total apparel imports into the
United States. Right now, about two-thirds of 1 percent of the im-
ported apparel entering the United States comes from Haiti. Dou-
bling that would be a significant increase, especially in light of in-
creased competitiveness of other suppliers once quotas are elimi-
nated. Allowing third-country fabric but with a lower cap than
AGOA would allow Haitian suppliers to remain competitive while
realistically reflecting the production capabilities of the country.
We have reviewed a number of the proposed trade preference op-
tions. Contained within the written testimony we submitted are
more extensive comments on each of these options and its implica-
tions to my company. Whether it be preference-based on imports,
value-added rules, or single transformation, Haiti must compete in
the world market. Retailers and importers operate with economic
realities. Haiti's poor infrastructure, low sewing efficiencies, will
need offsets. With the elimination of quota in 2005, the Committee
now has a narrow window of opportunity to act to create a system
of incentives for apparel producers to remain in Haiti and for U.S.
retailers to continue to purchase Haitian products. We believe that
the Senate bill, HERO, does provide enough incentive to accom-
plish this goal. J.C. Penney very much wants to work with the
Committee to develop a viable and meaningful program of benefits
for Haiti. Thank you.
[The prepared statement of Ms. Fox follows:]
Statement of Janet E. Fox, International Merchandising Director and Vice
President, J.C. Penney Purchasing Corporation, Piano, Texas
Good afternoon, Mr. Chairman, members of the Ways and Means Committee. My
name is Janet Fox. I am the Vice President for International Sourcing for J.C.
Penney Purchasing Corporation ("JCPPC"), the global procurement arm for mer-
chandise for sale in JCPenney stores, catalog and internet operations. JCPenney is
one of America's largest department store, catalog and e-commerce retailers employ-
ing approximately 150,000 associates. As of May 1, 2004, JCPenney operated 1,021
department stores throughout the United States and Puerto Rico. JCPenney's fiscal
2003 sales were $18 billion.
I have 18 years experience in international sourcing. Within my capacity as Vice
President for International Sourcing of JCPPC, I am responsible for the develop-
ment of our strategic sourcing plans and managing the assets to support our global
merchandise procurement. We currently purchase and import merchandise from 55
countries worldwide and from all areas of the globe ranging from nearby Mexico to
China and Southeast Asia to the countries of the Sub-Saharan Africa. Last year
alone, JCPPC's international purchases of goods were valued at $7 billion retail.
Our extensive global sourcing experience places JCPenney in a unique position to
understand and comment on the proposed Haiti trade legislation and its potential
impact on the sourcing decisions of U.S. purchasers.
I appreciate the opportunity to testify before you on the very important issue of
helping Haiti, a country which faces tremendous obstacles, with its economy under
severe pressure and its private sector struggling to maintain the nation's fragile, but
critical, employment base. JCPenney currently purchases about $10 million worth
of apparel, primarily knit underwear, from Haiti, or about three percent of Haiti's
current apparel exports to the U.S. Frankly, however, that amount is a very small
part of our international sourcing and as we plan our business for 2005 and beyond,
looking forward to the watershed event of the removal of quotas, whether our sup-
pliers in Haiti will remain a part of our sourcing strategy will depend directly upon
whether Haiti can overcome the substantial competitive disadvantages it currently
With the elimination of quotas, there will be unprecedented consolidation in the
industry; a process we expect will evolve over the next five years. The quota system
has bred inefficiency, and helped bring about an over supply of manufacturers that
otherwise would not have been competitive. JCPenney, like all retailers, is address-
ing how it must change its business in response to quota elimination. To compete
successfully in this new quota free environment, we will gradually reduce the num-
ber of suppliers we do business with and grow our business with fewer suppliers.
This will result in the reduction of the number of countries and locations where ap-
parel is produced. Currently, we are in the process of narrowing our lists of sup- *
pliers in each product category. In the new quota free environment, we will have
no choice but to be very discriminating about our suppliers, selecting only those who
can provide real value to our customers. Value does not mean the product with the
cheapest price. It means a supplier that is able to provide a quality product and
service, including speed to market and supply chain efficiency and reliability.
Right now, Haiti s prospects once quotas are eliminated are not good. The uncer-
tain political situation in Haiti and potential for supply chain disruption has made
some companies reluctant to take the risk of sourcing there. Another disadvantage
is that currently only simple garments can be produced in Haiti; more sophisticated
products must be produced elsewhere. The Caribbean Basin Trade Partnership Act
("CBTPA"), providing duty-free access to a limited quantity of apparel produced in
the region from U.S. or regional fabrics produced from U.S. yars, does not provide
Haiti with a competitive advantage. It is not the cap that is the problem. Given the
current level of skills and productivity for Haitian workers, the higher price point
for the U.S. yars and fabrics makes Haitian-made CBTPA compliant products un-
competitive. To offset the lower skills and productivity in Haiti, it makes more sense
to use Asian fabric and pay full duty.
Because we believe doing business in Haiti is the right thing to do, both to help
the people in that country and in the interests of U.S. security and the security of
the Western Hemisphere, JCPenney is closely following the actions of the Congress
to provide meaningful incentives to retailers and suppliers to continue to source and
produce goods in Haiti. We have carefully considered each of the options noted in
the Committee's hearing notice, as well as the third country fabric option presented
by the HERO Act approved by the Senate and the cumulation concept put forward
by Mr. Shaw last year, and even tried to come up with a few ideas of our own. The
remainder of my testimony will address each of these options and ideas.
Obviously, duty-free access for apparel produced in Haiti from fabric produced
anywhere in the world would provide the greatest incentive for JCPenney to con-
tinue to purchase from Haitian producers and perhaps expand that business. Only
with third country fabric can Haitian manufacturers offset the limitations of the
skills and productivity of their workers. However, in our opinion, Haiti would not
require the same level of benefit as provided to the 40 countries under the AGOA.
We are doubtful that Haiti could produce enough garments to account for more than
1.5 percent of total apparel imports into the U.S. Right now, about two-thirds of one
percent of the imported apparel entering the U.S. comes from Haiti. Doubling that
amount would be a significant increase, especially in light of the increased competi-
tiveness of other suppliers once quotas are eliminated. Allowing third country fabric
but with a lower cap than AGOA would allow Haitian suppliers to remain competi-
tive while realistically reflecting the production capability of the country.
A preference system based upon the use of inputs made in countries with which
the U.S. has free trade agreements or unilateral preference arrangements might
also provide a limited incentive for sourcing apparel in Haiti. There are no textile
mills in Haiti but there are a few knit textile factories in Guatemala and Mexico
that could be a source for some fabrics. Unfortunately, Mexico's quality is weak in
knit fabrics. Colombia and Peru produce yarns and fabrics, but the costs and logis-
tics of moving those inputs to Haiti make little sense, especially given the types of
basic level garments Haitian manufacturers are currently capable of sewing.
We have considered whether a value added rule for determining eligibility for
duty-free access would provide an incentive for placing orders in Haiti. With fabric
generally accounting for about 75 percent of the cost of producing a garment, and
labor accounting for only 25 percent, the minimum threshold for U.S. or regional
content, including labor, would probably have to be no more than 35 percent for
JCPenney suppliers to consider taking advantage of such a rule. You have to keep
in mind that the garments that can be made in Haiti today are very simple ones,
things like underwear and t-shirts. There is little more than fabric, thread and
elastics, as well as packing materials, involved, so that provides limited options for
fulfilling the 35 percent minimum local or regional content. A 50 percent minimum
local or regional content would not be feasible for the type of garments Haiti is ca-
pable of producing.
We have also considered whether such a value added rule would be more useful
if it were based upon overall production over an annual period, rather than on a
shipment by shipment basis. An annual accounting process similar to the one that
applies today for brassieres under the CBTPA would be extremely unattractive, cre-
ating an auditing nightmare for any supplier that is not vertically integrated and
cannot readily obtain the necessary information. For a retailer like JCPenney, a
purchaser of finished products, we would be required to obtain all the necessary cost
information from our vendors and their subcontractors. The accounting burden on
JCPenney would be cost prohibitive.
A single transformation rule of origin for duty-free access for selected products
also might provide a basis for JCPenney to continue to purchase Haitian products
after this year, if the right products are covered. Obviously, a single transformation
rule means third country fabric could be used. So long as that were not burdened
with additional conditions, such as the use of thread sourced from particular loca-
tions or limitations on the use of foreign origin findings and trimmings, such a rule
for the products that Haiti is capable of producing is clearly worth considering. We
would suggest that it must include at a minimum all of the basic apparel items,
including underwear, knit tops, and basic wovens. In fact, we might suggest that
if this were the approach taken, a negative list might be more appropriate to avoid
any confusion, so that all products other than those expressly excluded are eligible,
and only tailored garments, such as suit-type jackets or lined dress pants, which are
highly unlikely to be produced in Haiti anyway, would be excluded. We strongly
urge the Committee not to structure such a program on a product-specific basis with
quantitative limits on eligibility set by product. That level of control creates in-
creased costs and risks, undermining the value of the benefit.
The proposed distinction in treatment between knit and woven garments is un-
likely to provide an incentive to source in Haiti. While we would welcome the oppor-
tunity to produce woven apparel in Haiti, the distinction between knits and wovens
created under the CBTPA is unfortunate. An opportunity for the Caribbean and
Central American countries to invest in woven fabric mills was probably lost as a
result of this distinction and offering incentives for such mills now, with quota
elimination just a few months away, is likely too late.
Haiti must compete in a world market. Retailers and importers operate with eco-
nomic realities. Haiti's poor infrastructure, low sewing efficiencies, will need offsets.
With the elimination of quota in 2005, the Committee now has a narrow window
of opportunity to act to create a system of incentives for apparel producers to remain
in Haiti and for U.S. retailers to continue to purchase Haitian products. We believe
that the Senate bill #S.2261 as written does provide enough incentives to accom-
plish this goal.
JCPenney very much wants to work with the Committee to develop a viable and
meaningful program of benefits for Haiti. We know that we both want to do the
right thing and that we all must be open-minded and flexible. I sincerely hope that
the thoughts JCPenney has provided to the Committee today are the beginning of
a fruitful and useful discussion, one that we can complete in time to truly help
Haiti. Thank you.
Chairman CRANE. Thank you, Ms. Fox. Mr. Levinson?
STATEMENT OF MARK LEVINSON, CHIEF ECONOMIST, UNITE
Mr. LEVINSON. Mr. Chairman, Members of the Committee, my
name is Mark Levinson. I am the Chief Economist at UNITE
HERE, a union of 450,000 apparel, textile, laundry, distribution,
hotel, and gaming workers. The apparel and textile industries in
the United States are in crisis. Hundreds of plants have closed.
Communities are devastated. Since January 2001, these industries
have lost over a-third-of-a-million jobs. Since what our members
call the so-called economic recovery began, these industries have
lost 196,000 jobs.
We recognize that Haiti is an extremely poor country. We do not
seek to deny jobs and economic advancement to Haiti's workers. To
the contrary, we believe U.S. policy can induce positive change in
Haiti and benefit U.S. workers. I want to focus on two issues not
adequately addressed by HERO, that is the expiration of apparel
and textile quotas and labor rights.
In 100 days, all apparel and textile quotas are scheduled to ex-
pire. If quotas expire, all apparel and textile producing countries
around the world, with the exception of China, will be devastated.
Workers in Latin America, the Caribbean, Asia, and Sub-Saharan
Africa will be thrown into direct, unregulated competition with
China and millions will lose their jobs as a result. It will also fur-
ther decimate the U.S. industry.
To get a sense of what this means, in categories where import
quotas have already been phased out, offers a glimpse of what is
to come. In the last two-and-a-half years, for the apparel products
removed from quota in 2002, China has increased its market share
of these products from 10 percent to 72 percent. At the same time,
Haiti's exports to the United States in these same categories de-
clined 53 percent, from 8.6 million square meters to 4.6 million
In response to this kind of problem, we need the kind of com-
prehensive program that is called for in the Textiles and Apparel
China Safeguard Act (H.R.5026). That act would ensure that the
China safeguard will be meaningful for the U.S. textile and apparel
industry. It will direct the President to use the special China safe-
guard to negotiate a comprehensive agreement by immediately en-
tering into formal consultations with China over textile and ap-
parel imports that threaten to disrupt the U.S. market. It will en-
force aggressively U.S. rights under the special China safeguard by
imposing restraints on imports if China does not agree on a mutu-
ally acceptable solution.
A word about worker rights in Haiti. Haiti's labor laws have
been repeatedly criticized by the ILO, the State Department, and
the International Confederation of Free Trade Unions for failing to
meet basic international standards. The Haitian labor code dates
back to the Duvalier dictatorship and falls far short of ILO stand-
ards in ways that I detail in my submitted statement.
Even where protections for worker rights do exist in law, they
are only very rarely, if ever, enforced. The result is a climate of
outright impunity for employers and frightening violence and inse-
curity for workers. Trade unionists are threatened, beaten, ar-
rested, and assassinated for their activities, and those responsible
for the violence go unpunished. Workers are subject to verbal
abuse, physical threats, sexual harassment on the job, with no ef-
fective protection from the courts or the labor ministry.
Increased trade and investment can benefit workers and reduce
poverty in Haiti, but workers' rights must be respected in order for
those benefits to materialize in the form of better jobs and higher
wages. The HERO Act that passed the Senate recognizes the cru-
cial link between increased trade benefits and progress on worker
rights by requiring Haiti to establish or make continual progress
toward establishing internationally recognized worker rights in
order to receive additional trade preferences. The language is bor-
rowed from AGOA and it builds upon the worker rights conditions
that currently apply to Haiti under the Generalized System of Pref-
erences (GSP) and CBI programs.
Under current conditions, Haiti does not meet the worker rights
provisions of the GSP and CBI programs, much less the proposed
HERO Act. The Act would apply exclusively to Haiti, it provides a
golden opportunity to take a more tailored approach by linking spe-
cific concrete benchmarks on worker rights with phased-in market
access initiatives. Most importantly, such a system will not just set
tailor-made labor rights benchmarks for Haiti, it will actually en-
able Haiti to meet them. In my testimony, I give two possible ex-
amples of how this could work that I don't have time to summarize
here, one based on the Cambodian model, one based on a labor om-
budsman model that is used elsewhere in the Caribbean for human
rights issues, and I would urge the Committee to look at those seri-
[The prepared statement of Mr. Levinson follows:]
Statement of Mark Levinson, Chief Economist, UNITE HERE
I am the Chief Economist at UNITE HERE a union of 450,000 apparel, textile,
laundry, distribution, hotel and gaming workers. The apparel and textile industries
in the United States are in crisis. Hundreds of plants have closed. Communities are
devastated. Since January 2001 these industries have lost over 357,000 jobs. And
since the so-called economic recovery began these industries have lost 196,000 jobs.
We recognize that Haiti is an extremely poor country. We do not seek to deny jobs
and economic advancement to Haiti's workers. To the contrary. We believe U.S. pol-
icy can induce positive change in Haiti and benefit U.S. workers. But we do not be-
lieve that the approach embodied in the HERO Act (S. 2261), passed by unanimous
consent in the Senate, is the right approach. I want to focus on two issues not ade-
quately addressed by S. 2261: the expiration of apparel and textile quotas and labor
Haiti and the Expiration of the Quota System
The apparel industry in Haiti is the country's largest single source of jobs and
export earnings and it relies almost entirely on the United States as a market for
its output. The apparel share of total Haitian exports in 2001 was 83 percent, or
$245 million. The Haitian apparel industry employed about 27,000 workers in 2002,
up from 17,000 in 1997. The growth of Haiti's apparel industry is constrained by
the country's underdeveloped infrastructure, high utility, shipping and warehousing
costs and political instability. Haiti's apparel exports to the U.S. consist almost en-
tirely of cotton apparel and manmade-fiber apparel-namely T-shirts, underwear,
and other pants, shorts and nightwear-for which major suppliers are highly con-
strained by quotas. These basic garments are characterized by long and standard-
ized production runs, low labor content, and few styling changes.
This highlights a serious problem. In 100 days all apparel and textile quotas are
scheduled to expire. Simply granting more tariff preferences to countries whose ex-
ports will soon be swamped by Chinese production is not an effective policy.
If quotas expire almost all apparel and textile producing countries around the
world, with the exception of China, will be devastated. Workers in Latin America,
the Caribbean, Asia and sub-Saharan Africa will be thrown into direct, unregulated,
competition with China, and millions will lose their jobs as a result. It will also fur-
ther decimate the industry in the U.S. 600,000 U.S. workers will lose their jobs
within several years of the expiration of quotas.
Categories where import quotas have already been phased out offer a glimpse of
what is to come. In the last two and one-half years, for the apparel products removed
from quota in 2002, China increased its market share of these products from 10 per-
cent to 72 percent. At the same time, Haiti's exports to the U.S. in the same categories
dropped 53 percent, from 8.6 million square meters to 4.6 million square meters.
If China captures 70 percent of the entire U.S apparel and textile market that
would result in a net shift of approximately $42 billion in trade from other exporting
countries to China. The projected export losses (assuming losses proportionate to ex-
isting market share) for countries are: CBI region $6.3 billion, Mexico $5.4 billion,
Indonesia $1.6 billion, Bangladesh $1 billion, Lesotho $289 million, Mauritius $187
The Senate passed bill would provide an incentive for importers and retailers to
close their operations in the Caribbean and Central America and move to Haiti
where they can use Chinese fabrics and yarn and get duty free access to the U.S.
market. The main beneficiary would be Chinese and other Asian fabric producers.
U.S. and Caribbean textile workers and producers would be hurt.
We need the kind of comprehensive program that is called for in H.R. 5026 the
Textiles and Apparel China Safeguard Act. The Act would:
1. direct the President to make two changes to the overly restrictive rules issued
by the Bush Administration to implement the China safeguard so that the
safeguard will be meaningful for the U.S. textiles and apparel industry;
2. direct the President to use the special China safeguard to negotiate a com-
prehensive agreement by immediately entering into formal consultations with
China over textiles and apparel imports that threaten to disrupt the American
3. enforce aggressively U.S. rights under the special China safeguard by imposing
restraints on imports if China does not agree on a mutually acceptable solu-
Producers from 52 countries have recently joined together to call for an extension
of the quota system until 2008. UNITE HERE, along with other apparel and textile
worker unions from around the world, under the auspices of the International Tex-
tile Garment Leather Workers Federation (ITGLWF), is demanding that the textile
and apparel quotas be extended, and that phase-out not occur until there are en-
forceable protections for workers' rights in the global trading system. Only with
such guarantees in place will workers in the U.S. and around the world be able to
compete on a fair playing field.
Workers' Rights in Haiti
Haiti's labor laws have been repeatedly criticized by the International Labor Or-
ganization (ILO), the U.S. State Department, and the International Confederation
of Free Trade Unions (ICFTU) for failing to meet basic international standards. The
Haitian labor code dates back to the Duvalier dictatorship, and falls short of ILO
standards in a number of key respects.
There is no prohibition on anti-union discrimination in hiring, allowing employ-
ers to bar known union activists from employment.
Though the law does prohibit firing workers for union activities, it does not pro-
vide reinstatement as a remedy for such firings, as required by the ILO. Thus,
even if the law were fully enforced, employers could fire any workers with union
sympathies and simply pay the fines required as the cost of doing business and
keeping unions out.
The labor law fails to require good-faith bargaining by employers with union
representatives, and sets a prohibitively high threshold for unions to meet in
order to compel bargaining. As a result, collective bargaining is virtually non-
existent in Haiti.
There are numerous restrictions on the right to strike, including compulsory ar-
bitration provisions that have been criticized by the ILO.
Even where protections for workers' rights do exist in the law, they are only very
rarely if ever enforced. The result is a climate of outright impunity for employers,
and frightening violence and insecurity for workers. Trade unionists are threatened,
beaten, arrested and assassinated for their activities, and those responsible for the
violence go unpunished. Workers are subject to verbal abuse, physical threats, and
sexual harassment on the job, with no effective protection from the courts or the
Given the economic and political situation in the country, there is hardly a func-
tioning Labor Ministry at all. The problems with corruption and rule of law that
plague Haiti are particularly acute for workers, who have few if any means of re-
solving disputes with employers and exercising their fundamental rights on the job.
Only five percent of the workforce in Haiti is unionized, and collective bargaining
does not exist in the private sector. The widespread abuse of workers' rights makes
it extremely difficult for workers in Haiti to organize independent unions and bar-
gain for a fair share of the wealth they produce. Though some of the wealthiest
clothing brands in the world source from Haiti, the minimum wage in the country
amounts to less than twelve dollars a week.
For example, at Haitian American Textile Co. in Port-au-Prince, which has sup-
plied uniforms to the Cincinnati based uniform rental giant Cintas, workers have
reported being forced to work long hours to meet high daily quotas in order to be
paid their daily rate. That wage was far below what they needed for basic survival-
leading workers into a cycle of debt to food vendors and to "loan sharks." Workers
at Haitian American have reported being unable to address dangerous conditions-
like sweltering heat that has caused workers to pass out, lint and dust-filled air,
and machinery lacking safety guards that have punctured workers' fingers-because
of the constant fear of being fired.
Another recent example of the Haitian workers' struggle to gain respect for their
basic workplace rights is a free trade zone, financed by the World Bank, in
Ounaminthe, Haiti. The employer in the zone, a Dominican company called Grupo
M, has fired workers for union organizing, stationed heavily armed security at plant
gates, and refused to abide by Haitian labor law, much less internationally recog-
nized worker's rights. The World Bank, in recognition of the likely inability of the
Haitian government to adequately protect workers' rights in the zone, included its
own workers' rights conditions in the loan agreements-requiring respect for free-
dom of association and the right to organize and bargain collectively, and mandating
the creation of a compliance mechanism to monitor workers' rights, improve internal
management practices, and provide for a workers' rights ombudsperson to receive
complaints and resolve disputes. Though the workers' rights conditions in the loan
still need to be fully complied with, they have provided important leverage to help
mediate disputes between workers and Grupo M and provide a basic safeguard for
workers' fundamental human rights in the zone.
Linking Labor Rights and Trade in Haiti
Just as the World Bank recognized that additional safeguards for workers' rights
and a program to help the parties monitor and enforce those rights was necessary
for apparel production in Haiti to succeed, Congress must build a strong structure
of support for workers' rights in Haiti in order for additional market access to pro-
vide any real benefits for Haitian workers. Increased trade and investment can ben-
efit workers and reduce poverty in Haiti, but workers' rights must be respected in
order for these benefits to materialize in the form of better jobs and higher wages.
The HERO Act (S.2261) that passed the Senate recognizes the crucial link be-
tween increased trade benefits and progress on workers rights by requiring Haiti
to establish, or make continual progress towards establishing, internationally recog-
nized workers' rights in order to receive additional trade preferences. This language
is borrowed from AGOA, and it builds upon the workers' rights conditions that cur-
rently apply to Haiti under the GSP and CBI programs.
But it is unlikely that this conditionality will have much success in Haiti unless
it is supported by a mechanism that specifically addresses the severe obstacles to
the exercise of workers' rights that exist in the country. This Committee now has
an important opportunity to shape just such a mechanism that will help lift up
Haiti so it can meet international labor standards. Writing conditionality into a
trade preference program is necessary, but not sufficient, in the case of Haiti. Haiti
cannot meet these conditions on its own. The labor rights conditions must be backed
up by a strong, independent enforcement mechanism that can monitor workers'
rights on the ground, assist the Haitian government in bringing its laws into com-
pliance with international standards, and help build the local institutional capacity
necessary to provide workers and investors with the confidence that workers rights
and rule of law will be respected in Haiti.
Haiti's labor laws fall well below international standards, and those protections
that do exist are rarely if ever enforced. Under current conditions, Haiti does not
meet the workers' rights provisions of the GSP and CBI programs, much less the
proposed HERO Act. Because the Act would apply exclusively to Haiti, it provides
a golden opportunity to take a more tailored approach by linking specific, concrete
benchmarks on workers' rights with phased-in market access incentives. Most im-
portantly, such a system will not just set tailor-made labor rights benchmarks for
Haiti, it will actually enable Haiti to meet them.
One model worth examining for the HERO Act is the bilateral textile and apparel
agreement with Cambodia. The Cambodia agreement requires Cambodia to meet
core labor standards, and factories must agree to ILO monitoring of labor rights con-
ditions in order to benefit from the export quotas established by the accord. The ILO
must certify compliance with these conditions each year before the annual quota in-
crease of 18 percent is granted under the bilateral agreement. The Cambodia agree-
ment created concrete incentives for factory owners and the government to improve
workers' rights, and provided them with the means to meet these goals by laying
out specific goals on workers' rights and creating and funding an independent moni-
toring program. The ILO reports that the agreement has led to real improvements
in workers' rights in Cambodia.
Another model which is not linked directly to trade, but which has helped to ad-
dress the rule of law failures and corruption problems that create impunity for
human rights violators in Central America, is the ombudsperson model. Central
American governments have agreed to create human rights ombudsmen that are
independent of existing government ministries, can receive and investigate com-
plaints about individual human rights cases, and can issue recommendations for
structural reforms needed to address more systematic abuses and bring the country
into compliance with international human rights norms. While the political will to
accept these recommendations is sometimes lacking, the ombudsman mechanism
has provided an independent party that can bypass dysfunctional institutions, effec-
tively investigate and verify human rights abuses, and make authoritative rec- "
ommendations for systematic reforms.
Some combination of these two models could help improve workers' rights in
Haiti. The HERO Act should create and fund a mechanism that contains the fol-
Establish a workers' rights ombudsperson that is independent of Haitian offi-
cials and political parties, who can receive and investigate complaints of work-
ers' rights abuses and verify whether or not internationally recognized workers'
rights have been violated in individual cases.
Authorize the ombudsperson to recommend solutions in individual cases of
abuse, and require individual factories to implement relevant recommendations
in order to benefit from increased market access under the Act (companies can
sign up to participate at the beginning of the program, and their exports will
receive preferences unless the ombudsperson reports that they are out of com-
pliance with recommendations).
Authorize the ombudsperson to recommend more comprehensive reforms to ad-
dress systematic workers' rights problems-labor law reforms, judicial and ad-
ministrative reforms, etc.-with specific benchmarks for the implementation of
the recommendations. U.S. and international funding and technical assistance
should be made available to help the Haitian government implement the rec-
Each year, the annual increase in imports under the Act will only occur if the
ombudsperson certifies that the government is making sufficient progress in im-
plementing the recommended reforms and specific benchmarks have been met.
Members of UNITE HERE and the hundreds of thousands of apparel and textile
workers who have lost their jobs, many of them from the Caribbean including Haiti,
support a trade policy that would help the impoverished-whether in Haiti, the Car-
ibbean, China or the United States-to improve their standard of living and gen-
erate new domestic demand in a virtuous cycle of equitable development, while pro-
viding new markets for overseas investors and workers, including those in the
Chairman CRANE. Thank you very much, Mr. Levinson. Now I
would like to ask our colleague, Thaddeus McCotter, to come for-
ward to introduce his constituent, Nigel Thompson.
Mr. MCCOTTER. Thank you, Mr. Chairman. I am here today to
introduce Mr. Nigel Thompson. As you know, Mr. Thompson is Ex-
ecutive Vice President of Planning and Development with the
Yazaki Corporation. In this capacity, Mr. Thompson is responsible
for information technology, research and development, marketing,
and product planning.
Yazaki North America, which is based in Canton, Michigan, em-
ploys roughly 1,500 people in my district and supplies our auto-
motive companies with electronics, instrumentation, and wiring
systems. As a tier-one automotive supplier and employer in the
Canton area, Yazaki is an integral component in Southeastern
Michigan commerce and I am pleased Mr. Thompson could appear
before you as an important representative of our industry from my
district. I am also very happy that he is here because Yazaki em-
bodies what the right trade policies can do to bring jobs to our Na-
tion and to districts like mine in the manufacturing arena. Thank
you, Mr. Chairman.
Chairman CRANE. Thank you, Thaddeus. Mr. Thompson?
STATEMENT OF NIGEL THOMPSON, EXECUTIVE VICE PRESI-
DENT OF PLANNING AND DEVELOPMENT, YAZAKI NORTH
AMERICA, CANTON, MICHIGAN
Mr. THOMPSON. Mr. Chairman, Members of the Committee,
Congressman McCotter, thank you very much for that introduction.
Thank you very much for giving me the opportunity to talk here
about something other than textiles.
Yazaki Corporation, that I represent, is a major global auto-
motive supplier. We supply a range of products, instrumentation,
electronics, ag was already said, and particular wire harnesses to
pretty much all of the vehicle manufacturers in the world and we
produce those products also all over the world and in the Americas,
particularly in Mexico, Nicaragua, Haiti, Brazil, Colombia, and Ar-
gentina. The reason I mentioned wire harnesses is because we
would like to propose, and my testimony is on this basis, to extend
the scope of HERO to include automotive products, and in par-
ticular wire harnesses, a product that is not being produced in the
United States for several decades, principally due to the intense
cost reduction pressure within the auto industry.
To clarify this proposal, I guess I should probably first explain
a little bit about what a wire harness is. I think we probably all
know and have a picture in our minds about textiles and t-shirts
and so forth. The wire harness represents perhaps the nervous sys-
tem of a motor car. A modern motor car has a great deal of elec-
trical equipment. All this electrical equipment is connected to-
gether by the vehicle wiring system. It typically could have as
many as 500 or 1,000 circuits on a modern car. This is a complex
assembly of wires, connectors, terminals, fuse boxes, relays, elec-
tronics, for which the final assembly process is both complex and
employs large numbers of people. To give you an example, for a
high-volume production vehicle, a typical U.S. market minivan or
pickup truck produced in, say, 400,000 or 500,000 units per year,
there might be as many as 5,000 people employed in producing the
wire harnesses for such a vehicle.
A Yazaki-affiliated production company has had a pilot plant in
Haiti for about the last 15 months, currently employing around
about 300 people, with very good experiences. We believe Haiti has
significant growth potential for this product sector, and clearly,
that potential would be significantly assisted by being able to im-
port into the United States without duty. The existing trade ar-
rangements require 35 percent local content, which, as many of my
colleagues have testified here, in a country really without indus-
trial infrastructure, such as Haiti, cannot be met. The majority of
the components and raw materials used in an automotive wire har-
ness actually come from the United States or Mexico. So, allowing
those components to count as local content would then allow Haiti
to compete with Mexico, or actually rather more importantly to
compete with Southeast Asia and particularly China.
In the textile industry, as has been testified here, that is clearly
seen as a major impact or a major threat to Haitian development.
It is also true in the automotive industry. One of our objectives is
to develop a regional strategy for production here, which allows
production in this region to compete effectively with Southeast Asia
and particularly China, long-term. Allowing HERO to expand its
scope to include such products would clearly support our objectives.
Haiti has certain advantages. It has a logistics advantage be-
cause of its location in the region, a much shorter supply pipeline
than Southeast Asia or China. It has a disadvantage, of course, in
duty and in infrastructure, as has been mentioned. If we can re-
move at least one of those obstacles, then with further economic de-
velopment, the infrastructure will develop and we can expect Haiti
to be able to grow as part of this region.
In conclusion, I would say if HERO is intended to help the Hai-
tian economy and its people, and clearly from all of the testimony
we have heard this afternoon that has been a common thread, then
adding another product classification to broaden the industrial base
that provides good jobs linked to a major U.S. manufacturing in-
dustry, the auto industry, with no impact on U.S. jobs, with an op-
portunity for U.S. component suppliers to supply into Haiti, that
would seem entirely consistent with the original aims of the Act.
I have been to Haiti. Clearly, many people here have been to Haiti.
This is about the poorest country in the Western Hemisphere and
we have all seen the news over the last few days. Anything we can
do, not just in terms of short-term aid but in long-term economic
support and development, must be the right thing to do and has
to be worth doing. Thank you for giving me the opportunity.
[The prepared statement of Mr. Thompson follows:]
Statement of Nigel Thompson, Executive Vice President of Planning and
Development, Yazaki North America, Canton, Michigan
Submitted by Yazaki North America, Inc. (YNA) on behalf of The Yazaki Group
in Support of the Haitian Economic Recovery and Opportunity Act.
Yazaki Corporation was founded in 1929 and incorporated in 1940, and is a glob-
al, tier-one automotive supplier with operations in 37 countries. North American op-
erations were established in 1966 and are now conducted by Yazaki North America,
Inc. (YNA), based in Canton, Michigan, where we employ 1,500. Core commodities
for YNA include automotive electronics, instrumentation, components, and wiring
systems, the latter of which is a primary focus. An automotive wire harness is the
vehicle's electrical skeleton-an assembly of wires, coverings, connectors, modules
and other components which accomplishes all of the electrical connectivity require-
ments in an automobile. The nature of the product means that the assembly process
is highly labor intensive, and employs significant numbers of people.
As Yazaki has expanded around the globe, the company has sought opportunities
to locate facilities in lesser developed and developing countries. This has been good
for our business, but we also take very seriously our responsibility to be a good cor-
porate citizen. As a result, we have been able to provide jobs and economic oppor-
tunity, and contribute to improving the communities in which we do business.
Arnecom (a Yazaki affiliated company in Mexico) established a wire harness pilot
plant in Haiti about 18 months ago, recognizing at that time the potential in the
country and the needs of its people for employment and economic opportunity. This
pilot operation now employs approximately 250 people.
We believe expanding the scope of products covered by HERO to include labor-
intensive automotive products like wire harnesses will provide additional benefits
to the Haitian people entirely consistent with the original intentions of the Act, with
no adverse impact on U.S. employment.
HERO-Related Key Points
In order to keep pace with domestic car maker's cost targets for wire harness
products, manufacturing operations moved out of the United States several decades
ago. Consequently, there are no domestic automotive suppliers who assemble wire
harnesses in the U.S. Therefore, expanding HERO to include wire harnesses poses
no threat to the U.S. automotive job market. Additionally, there are aspects of an
expanded HERO, which could contribute to job growth in the U.S.
Existing trade preference programs such as GSP and CBERA cap the U.S. content
allowed for meeting local content requirements. In a country like Haiti, which has
very little industrial infrastructure, it is not realistic to expect that it could meet
local content requirements without imported materials. Therefore, allowing NAFTA
or U.S. content to be counted will benefit suppliers from both countries and quite
possibly provide new employment opportunities in each. Many of the components
used in wire harnesses, like wire, connectors, terminals, plastic resins, and grom-
mets are made in the U.S., including for Yazaki plants in Michigan, Georgia and
In our case, if the Congress includes wire harness assemblies among expanded
trade preferences for Haiti, Yazaki expects to significantly increase its investment
in the Arnecom plant in Port au Prince. YNA currently supplies U.S. automakers
with wire harnesses produced in China and SE Asia, as well as in Mexico, Haiti
and Nicaragua. Haiti has a much shorter supply route than do operations in Asia.
The combination of lower logistics costs and tariff relief would significantly improve
our cost competitiveness, and hence that of our U.S. customers, some of whom we
currently supply from Haiti.
This plan poses no threat to the competitive landscape relative to NAFTA or other
regions. Additionally, in keeping with the intent of HERO, if Congress provides this
incentive, we will be better poised to expand our investment in Haiti, which may
grow employment by as many as five times the current level.
Further information on Yazaki may be found at www.yazaki-na.com.
Chairman CRANE. Thank you, Mr. Thompson. Now, Mr. Rangel
has an appointment at 3:30 but he has one question he would like
to put to the panel before he departs. Mr. Rangel?
Mr. RANGEL. Thank you, Mr. Chairman. I thank all of you for
showing that this interest in a country that embarrassingly is in
our hemisphere that we haven't done enough for, but certainly each
time there is another tragedy there we commit ourselves to do bet-
ter, and this gives us another opportunity for Democrats and Re-
publicans to come together.
As most all of you know, the reputation, and I say reputation,
in Haiti is that it has a violent anti-union atmosphere and that it
is very difficult for us who are not Haitians to really know the de-
gree in which people have some type of human rights and assembly
and organizing. The ILO has taken the very basic non-controversial
standards and saying, give them a chance to do something, and it
has been recommended that one of the possible solutions might be
to have an ombudsman, a monitor, something with international
prestige, not to negotiate higher wages but to make certain that
there is an opportunity for people to be trained to move forward
and ultimately achieve what we were able to do in the United
States, a viable middle-class would certainly help society no matter
where it is.
Mr. Baker, since you are Haitian, and Mr. Woltz, since you have
done business there, could you share with me or give me any sense
as what is acceptable in terms of being included in an international
agreement with international responsibility, not to be the equiva-
lent of our American Federation of Labor-Congress of Industrial
Organizations, but what do you just think is fair and what are you
willing to accept so that we can take this to other people who just
don't like the term "union" because they have had bad experience,
but it would be called decency and the opportunity to organize, to
assemble, to negotiate. Mr. Baker, as a Haitian, what is the atmos-
phere for that today?
Mr. BAKER. Thank you. I think there are three things that are
happening in Haiti that can help us along that issue. The first
thing is that, as you know, most retailers are requiring today that
the plant that is producing for them meets certain internationally-
recognized standards. Indeed, a lot of plants today in Haiti are
moving toward becoming members of Worldwide Responsible Ap-
parel Production (WRAP). This oversees the conditions, the work-
ing conditions inside the plants and the procedures that are used
inside the plants. Most plants in Haiti today are moving toward
The second thing that I think could be very helpful is the fact
that within the law, this bill, it was adopted the same conditions
which was set into the AGOA bill, and we are hoping that the
same principle could apply also for Haiti. The third and most im-
portant thing is what the Haitians are doing today on this issue.
The Ministry of Social Affairs have invited private sector associa-
tions and labor union to meet and organize a tripartite Committee
to first look at the old labor accord that indeed dates back to
Duvalier, to see how we can modernize it, how we can actualize it
and adopt internationally-recognized conditions, and we are all
committed to work toward that goal.
In this sense, I think the bill that is today, which gives the U.S.
Administration the right to come and oversee what we are doing
in terms of progress, is a way for you to supervise what we are
doing, because having good intention is one thing but delivering is
another thing. We are committed to try to deliver. We are com-
mitted to try to reach standards that are here today in the United
States. It would be unrealistic to think that we can change Haiti
overnight, but we are all committed to make a serious effort to
Mr. WOLTZ. One of the ways that Haiti does change, and not
overnight but very, very quickly, is the kinds of people that are en-
couraged to make an investment in Haiti. We are a private label
manufacturer, which means that we don't have our own brand. We
sell to J.C. Penney, to Sears, to Dillard's, to whoever. We are never
going to put millions of dollars worth of investment at risk by hav-
ing one of our customers embarrassed by something that happens
in one of our facilities, and I think you will find that is, by and
large, what drives most people.
We want to do what is fair and right to attract the best workers
we can. We make money in the apparel business when we operate
efficiently. Trying to see how little you can pay somebody is a to-
tally self-defeating strategy. You want to set up an operation where
people are incentivized to make as much as they can, that you at-
tract the best workers that you can. The best workers are not going
to work somewhere where they are not treated well. So, that is
something that when these plants go in, when people invest their
own money in a plant, they will themselves be policed by their cus-
tomers, by the government, but also by their commitment to pro-
tect their investment.
Mr. RANGEL. That is very encouraging. Your company, UNITE
used to be the International Labor Women, but they had something
called, "look for the union label." The whole idea was that these
standards that Mr. Baker and you are talking about, it meant that
you don't have to go beyond that. If the label is there, they are fair.
They are equitable. They do treat their workers right. Do you think
there would be any objection to the ombudsman concept where not
the United States, but some international person would be there
where you can stamp, "approved by the ILO." I am not saying it
could work, but I gather from what you are saying is that you
would be proud to be a part of something that was fair and equi-
table for the workers. Would you accept an ombudsman under the
suggestions that some people have made from the ILO?
Mr. WOLTZ. We would be, frankly, leery of an ombudsman be-
cause of the mechanism of who you select and some history that
ombudsmen have had a political agenda that goes sometimes be-
yond the workers in a particular plant. If there is some kind of vet-
ting process where everybody gets involved in who you pick-I
think your point of how you get somebody, a statute that somebody
can say, okay, this person is above the fray. They don't necessarily
have a political bent to this job. I think-
Mr. RANGEL. I think we could work that out, because I would
be just as concerned as to what kind of politics they would have
anyway. Thank you so much. Thank you, Mr. Chairman. Thank
you, Conimittee Members, for allowing me this courtesy.
Chairman CRANE. Happy to do it. Now, I would like to put a
question, or more than one question, to the entire panel. The first,
one bill that has been introduced to give additional trade pref-
erences to Haiti would allow Haiti to source fabric from any U.S.
Free Trade Agreement (FTA) partner as well as countries partici-
pating in the African, Caribbean Basin, and Andean preference
programs. I would like you to comment on what kinds of fabric are
and are not commercially available in these countries. Does anyone
wish to respond?
Ms. FOX. I will respond to that.
Chairman CRANE. Ms. Fox?
Ms. FOX. J.C. Penney, as you know, we source all over the
world, and in regards to your question, we have actually tried
doing CBTPA-sourced fabrics, and unfortunately, it has become evi-
dent to us that it is quite uncompetitive, and it is not just the
price. It is not the price that is the sole issue. It is that price com-
bined with the inefficiencies of the production capabilities of the
worker in Haiti make it uncompetitive.
In regards to other countries in the region, Mexico, Guatemala,
as I said, we produce primarily knit underwear and very basic t-
shirts, so I am primarily addressing knits, and that is really the
strength of Haiti in the apparel industry. In looking at Mexico,
Guatemala, the quality and consistency out of those countries for
that type of fabric is not where it needs to be now. Maybe in the
future, it will get up to that standard. Looking at Peru, Colombia,
and other places, the logistics of moving it make it become uncom-
petitive in regards to the pricing and things like that. So, we have
taken a look at that and we have tried to figure out if it is economi-
cally feasible, and our industry is so hyper-competitive that every
nickel affects our retail cost, and so far, we have been unable to
feel that we are competitive enough using those options.
Chairman CRANE. Is Mexican fabric available and competitive?
Ms. FOX. Mexican fabric is available, but the quality is not to
what we are looking for. The pricing is okay, but it is more the
quality that we are concerned about.
Mr. WOLTZ. I don't think that there is anywhere near the capac-
ity to supply the needs available in this hemisphere, just pure ca-
Chairman CRANE. Mr. Felker?
Mr. FELKER. Yes, Mr. Chairman. My segment of the industry
would be very supportive of an effective short supply availability
system, whereby if the fabrics are not available from the U.S. ori-
gin, then there would be an efficient and commercially viable
means and system for allowing those fabrics to come in from other
Chairman CRANE. Yes, Mr. Baker?
Mr. BAKER. Mr. Chairman, you mentioned the original bill and
why did we come up with a second bill, and really the shortcomings
of the first bill were really two-fold. First, the countries that al-
ready have a FTA with the United States, most of them do not
have fabric or do not have the quality that the buyers are looking
for. Second and most important, I think the first bill was studied
in looking at Haiti as a part of the CBI. Frankly, when you look
at it, when you try to compare Haiti, you cannot compare Haiti
with Honduras and Guatemala. You more have to compare Haiti
with Lesotho and Mozambique and we feel that what was really
fair for Mozambique and Lesotho is what really Haiti needs today.
Chairman CRANE. Thank you. Now for the entire panel again,
several of you suggested that if Haiti isn't given the ability to buy
fabric from anywhere in the world, the country cannot be competi-
tive. There are a variety of options that differ from the HERO bill
but could provide equally meaningful benefits and I would like you
to comment on several ideas that have been raised.
First, those of you who produce in Haiti mentioned that you tend
to purchase many American imports, such as thread, packaging,
trim, buttons, labels, and some fabric. If you combine the value of
these items with the value added in Haiti and the possible flexi-
bility of cumulating fabric sourced from any U.S. FTA partner or
a preference beneficiary country, what would be an acceptable per-
centage level for a value-added rule of origin for apparel? Secondly,
would providing increased flexibility to fulfill this test through an-
nual aggregation versus a per-garment test be workable? Third,
would a single transformation rule for some specific apparel items
be useful? Finally, would a trade preference level for specific types
of fabrics be meaningful?
Mr. WOLTZ. I would like to take the first shot at answering that
if I could, Congressman Crane.
Chairman CRANE. Absolutely.
Mr. WOLTZ. Any time that you specify, you wall off, you limit,
you block, you keep people from building flexible manufacturing
plants, you limit the amount of investment. Right now, a content
agreement that might have been worked out several years ago, we
are going to start making next week in Central America a poncho,
a knit poncho that has very little labor or input in it, something
that I don't think anybody in the fashion industry even foresaw 2
or 3 years ago. We don't know right now what we are going to be
sewing as a fashion item 2 or 3 years from now. We don't know
whether we are going to be making long skirts out of synthetics or
short skirts out of denim. We don't know what the fashion apparel
market is going to be.
If we set up rules and we set up tests that we are going to have
to go through, short-supply mechanisms, all of those things have
been tried in the past and they have all resulted, all resulted in
a steady exodus of jobs from places that have those restrictions to
places that don't have those restrictions. If there are a lot of re-
strictions put on Haiti, people that are going to do anything but
make a very narrow commodity are not going to want to invest
their money in Haiti.
Chairman CRANE. Mr. Felker?
Mr. FELKER. Yes, Mr. Chairman. I think we have to look at the
dynamics of world trade as it is today. The prices-cost and prices
are confused. The prices coming out of Asia will undercut U.S. fab-
ric prices if our labor costs were zero. These are predatory pricing
tactics where the industry, specifically in China, is out to take mar-
ket share and to destroy an industry, and once it destroys the in-
dustry, then it will be free to utilize different pricing strategies if
it wishes to.
So, I think to allow a short-term disruptive mechanism that is
being practiced in global trade to wipe out an industry that will
never be rebuilt is short-sighted. So, we need to take these pre-
cautions to keep this market share grab from undermining perma-
nently an industry in the United States.
Chairman CRANE. Ms. Fox?
Ms. FOX. Addressing the value-added concept, I think that,
again, the kind of products that we are having produced in Haiti
are very basic and anything more than 35 percent would be prohib-
itive for us. We are making t-shirts. It is little more than fabric.
I think one of the other points you made was about the annual
counting concept in there and cumulation. For a retailer, that
would be very difficult in that the accounting of it is something we
don't do. We are not a manufacturer. So, being able to keep the ac-
counting would be a nightmare for retailers.
I think we talked about single transformation, which would basi-
cally mean third-country fabric would be allowed, but it would be
okay as long as we didn't put additional limitations on things, for
instance, that it had to be thread made in the United States or it
had to be any other kind of trims made somewhere else. I think
without those limitations, that would work for us. Inputs, as we
talked before, from other countries for us is limited incentives be-
cause, as Mr. Woltz commented, the capacity to produce a lot of the
things for fabrics is not there. The quality, as I mentioned, is not
there. So, those are issues that we are facing.
I think that the one thing that we need to be fully aware of is
that there is really a need to keep it simple. With the elimination
of quota, the marketplace is wide open and any type of bill or act
that makes it difficult for us to source makes it hard for us to un-
derstand, because some of these things are very difficult for the av-
erage sourcing person to understand. We won't go there. I think
that that is one thing that I would plead with everybody, is to try
and keep this as simple as possible in order to give the greatest
potential benefits to Haiti.
Chairman CRANE. Thank you. Another panel question. Would
improved access for Haitian apparel provide more opportunities for
certain U.S. industries, such as cotton yarn, bindings, and trim-
mings, to sell into Haiti, particularly if the program is designed to
give preferential treatment to regional inputs over other third-
country inputs, and how could we design such a program? Yes, Mr.
Mr. FELKER. Mr. Chairman, I think if preferential treatment
for Haiti exists to a significant degree with the CBTPA, but yes,
if there are-if we can overcome some of the difficulties of con-
ducting business in Haiti, and I mentioned the primary one is the
lack of working capital and the difficulty of understanding how you
can collect the receivable from Haiti, but yes, I think there is tre-
mendous opportunity for expanded trade with U.S. manufacturers
of yarn and fabrics and other inputs in Haiti if we can build an
infrastructure there and a legal system and if we can get through
the initial stages of understanding how the money will flow and if
it will flow.
Chairman CRANE. My final question is for you, Mr. Thompson.
In your testimony, you suggest that if the local content require-
ments were more flexible for auto parts to allow Haiti to source
more inputs from the United States or North American Free Trade
Agreement (NAFTA) (P.L. 103-182) countries, then you expect
Yazaki to increase its investment and employment level in Haiti.
This is exactly the goal we are trying to achieve for Haiti. So,
would you please elaborate on Yazaki's potential plans for Haiti,
and do you envision the increased sales from Haiti coming at the
expense of other producers in the region or from other producers
Mr. THOMPSON. Thank you for the question, Mr. Chairman. To
take your last point first, do we see expansion in Haiti coming at
the expense of other producers in this region, the answer is basi-
cally no. As I mentioned in my testimony, our objective is to keep
our production in this region comparative with Asia and particu-
larly China. If were to expand in Haiti, those jobs would otherwise
almost certainly end up in China or Southeast Asia.
The first part of your question relates to using increased compo-
nent input from the United States and Mexico. Certainly, we can
see that looking at our existing production, if we were able to ex-
pand that in an environment that didn't have the duty associated
with it, using our existing sourcing from suppliers of components
such as wire, connectors, terminals, and so forth, some of which we
make in the United States, some of which other suppliers make in
the United States and Mexico, we could meet the local content re-
quirements currently as specified-if we allowed the full value of
imported components from the NAFTA region.
Chairman CRANE. Thank you. Mr. Levin?
Mr. LEVIN. The last answer is straightforward and is less com-
plex than the rest of what we have discussed here today. It has
been an interesting panel, because I think it shows how these are
not simple issues and any attempt to try to simplify them, for ex-
ample, talking win-win, is misguided because it impacts. So, let me
just follow that up. Mr. Woltz, you have some facilities in Central
America, don't you?
Mr. WOLTZ. Yes, sir. We have an extensive facility in El Sal-
Mr. LEVIN. That is what I thought. What is the name of the fa-
Mr. WOLTZ. Primo.
Mr. LEVIN. Exactly. This isn't the time to talk about Primo, Mr.
Woltz. I think you and I have-
Mr. WOLTZ. You and I have met on Primo-
Mr. LEVIN. We surely have.
Mr. WOLTZ. I think that you have been very pleased with how
that whole situation has resolved itself.
Mr. LEVIN. I don't think so.
Mr. WOLTZ. Okay.
Mr. LEVIN. I am not sure. I surely wasn't-it surely dem-
onstrated earlier the problems that exist when there is an effort of
workers to exercise their rights, and maybe I will have to remem-
ber exactly where the situation is now. Let me just ask you if third-
country fabric were allowed without limit, just give us a reasonable
estimate over the next 5 years what percentage you think of your
fabric would come from third-country sources.
Mr. WOLTZ. Last year, Perry Manufacturing bought roughly 30
percent of its fabric from the United States and the CBI region. It
bought 54 percent of its fabric from China. We would see probably
the same kind of mix going forward as different products, as dif-
ferent mills are started in Central America and as the fabric prices
in China, we feel like will probably continue to go up. As quotas
come off in China, the demand for Chinese fabric is going to ex-
pand and we are going to have to compete more with Chinese man-
ufacturers for that fabric. So, I think there is an opportunity for
that mix to kind of stay just about the same, near term.
Again, one of the big things that gives a chance for growth in
Haiti is right now, nobody sews synthetics in Central America be-
cause of the 33-percent duty rate. If duty comes off of synthetics,
there is a whole other category of fabrics that may be sourced in
the region. As you said, it is not a very simple thing. Every time
you take one peel of the onion, there is a whole other question.
Mr. LEVIN. So, let me be clear, because in your testimony you
say, without the ability to use fabric from anywhere in the world,
Haiti will not be part of that supply chain.
Mr. WOLTZ. Right.
Mr. LEVIN. I thought I heard you say that you didn't think
there would be any basic change in where you source-
Mr. WOLTZ. Without being able to get about half of our fabric,
like I said, 54 percent, we would not be able to run those factories.
Mr. LEVIN. You are now getting that fabric from China?
Mr. WOLTZ. Last year, we bought 54 percent of fabric we con-
sumed from China, 30-
Mr. LEVIN. So, you are doing that now. So, why do you need-
Mr. WOLTZ. When quotas come off, in order to be competitive
with garments manufactured in China, India, Pakistan-
Mr. LEVIN. Okay.
Mr. WOLTZ. Other places, our prices are going to have to be
lower. China is a threat, but it is also in some categories not the
threat that Pakistan and India are. In order for us to compete in
this region, we are going to have to have a low-cost, duty-free base.
In order to maintain our other manufacturing in other Central
Mr. LEVIN. Then if I understand what you are saying, it would
seem to me you are saying that you would have to source more fab-
ric from outside of the United States to be competitive.
Mr. WOLTZ. Right now-
Mr. LEVIN. No, but in the future, to compete with China, you
would have to then source more fabric from outside of the United
Mr. WOLTZ. As we grow our business-if we stay the same next
year, I said we would probably consume the same percentages of
fabrics. Again, I don't know next year what my customers are going
to want to buy. I don't know whether they are going to want to buy
thin skirts made out of synthetic. I don't know whether they are
going to want to buy short skirts made out of denim. Those are de-
cisions that are not made by me, that are made by, heck, Ralph
Lauren and the fashion designers that are going to set the trends.
In order for me to service those customers, I have got to be free
to satisfy their needs at the quality they require and the price, and
I don't know where I am going to buy that fabric. If I could buy
it all in the United States, it would be better-
Mr. LEVIN. Yes, and I am not being critical-
Mr. WOLTZ. Last year, I couldn't.
Mr. LEVIN. I am just trying to understand. I am not being crit-
Mr. WOLTZ. Okay.
Mr. LEVIN. It seems to me you are saying that you need to in-
crease the amount of fabric that you buy other than from the
United States. In simple terms, it seems to me when you say, with-
out the ability to use fabric from anywhere in the world, Haiti will
not be a part of the supply chain-
Mr. WOLTZ. That is true.
Mr. LEVIN. So, you must be saying that there is going to be a
shift of your purchases over time from the United States to some-
Mr. WOLTZ. There very well may be.
Mr. LEVIN. Okay.
Mr. WOLTZ. As I said, we bought 13 percent of our fabric in the
United States, 17 percent in the region. So, it is already down to
Mr. LEVIN. What was the 34 percent that you mentioned?
Mr. WOLTZ. Excuse me, 34 percent from the region. Basically 17
Mr. LEVIN. Seventeen in the United States and 17 in the-
Mr. WOLTZ. In the region, Honduras-
Mr. LEVIN. In this region. Okay.
Mr. WOLTZ. El Salvador.
Mr. LEVIN. All I suggest is that we try to be-
Mr. WOLTZ. The balance is some rayon prints from Korea, be-
cause that is the only place that they make rayon prints.
Mr. LEVIN. I think in order for us to address this, and I am in
favor of doing so, we need to be clear with each other what the po-
tential impact is and not try to assume that there won't be. Mr.
Felker is urging there will be an impact, and when I press you, I
think you are essentially acknowledging that over time, there is
likely to be an impact in terms of the fabric that you buy made in
the United States, and then we will go on from there. We will have
an intelligent discussion about it. Mr. Baker-by the way, I think
there is some inconsistency. We are not clear. Ms. Fox, you say you
buy simple garments from Haiti. Mr. Woltz, you talk about spe-
cialty. You are in the specialty line, right?
Mr. LEVIN. So, you are involved with different products, right?
Mr. WOLTZ. I think the definition of simple, we make a variety
of styling that is not tailored clothing, it is not curtain waistband
slacks, it is not those kinds of things-
Mr. LEVIN. Not underwear and t-shirts.
Mr. WOLTZ. We are not in the underwear business. We make
placket shirts like golf shirts, jogging suits, turtlenecks, mock tur-
tles, styled tops, that kind of thing, which I think Janet would clas-
sify as more simple sewing.
Ms. FOX. That is what we would call basic, as opposed to fash-
ion. That region is really not capable of making fashion at this
time. That business is in China, and-
Mr. LEVIN. Mr. Woltz makes them.
Ms. FOX. His products aren't really-we would consider that
more of a basic item as opposed to a fashion item with a lot of de-
tailing and tailoring taken into it, things with linings and what
not. Those are not the kind of things that Perry Manufacturing
makes. They are more of a conservative, more basic producing sup-
plier. We would not go to them for high fashion.
Mr. WOLTZ. The difference is "high."
The difference is high. We make what we consider fashion be-
cause it changes every season.
Ms. FOX. Yes.
Mr. LEVIN. Okay. I have some questions, but the time is up. Mr.
Baker, I would like to ask you some questions. I will submit them
Chairman CRANE. In writing?
Mr. LEVIN. In writing.
[The information was not received at the time of printing.]
Chairman CRANE. Very good. All right. Mr. Shaw?
Mr. SHAW. Thank you, Mr. Chairman. Coming into this hearing,
and after listening to the Senate panel, it seemed like a very sim-
ple solution, which you people have shot down. We do not want to
make an agreement or file a law that would make Haiti simply a
platform for China, and we certainly don't want to impact upon the
other trade agreements that we have with other countries. Mr.
Felker, you hit on that. If we give Haiti the only, the country that
has the advantage of being able to export without duty items made
from fabrics from China, we certainly would in the long run be
doing that, even though with our FTA with Africa, there is a cer-
tain amount of that in the short term, but that phases out in the
long term. However, we want to be sure that there is quality mate-
rial available so that we can have a quality product coming out of
Does anyone on the panel have information as to exactly where
we are with the technology? How far down the line do we have the
Mexicos or the Caribbean countries or Central American countries
or possibly even down into South America, where we are negoti-
ating FTAs now, how far down the line would they be in being able
to manufacture quality textiles that would be able to make it
where you would invest in Haiti and produce the employment that
we are after? Does anybody want to take that? Mr. Felker?
Mr. FELKER. Yes. I have been in many textile plants through-
out the region that you have described and the technology is large-
ly there. The application of the technology varies from location to
location. Certainly in the United States, many mills, the surviving
mills, I should say, are state of the art and have the ability to
produce very, very high quality.
Now, quality can be measured in terms of flaw level and also in
terms of intrinsic values. There are certain products that are not
produced in the United States that would qualify as very high-
quality products, and I think there does need to be a system that
does allow these-a short-supply system that works, is commer-
cially viable, that allows access to these products that are not
available in the United States. As far as the ability to produce
world competitive, flawless-type fabrics and yarns, the technology
is there. I hope that helps your question.
Mr. SHAW. The technology is there here in the United States.
Mr. FELKER. It is here in the United States, and the technology
is available and in place to a very significant degree in the Andean
region and in Mexico-
Mr. SHAW. How long would it take for the capital investment in
order for them to gear up to be able to manufacture the-it is one
thing to say the technology is there, but we also need the capital
Mr. FELKER. To gear up for the infrastructure, the infrastruc-
ture is largely there, not so much in the Caribbean, but in Mexico
and in the Andean nations. The economics of manufacturing in the
Caribbean are-for the yarns and fabrics, for wovens, is somewhat
Mr. SHAW. Are you saying that the countries that we have FTAs
with can compete quality-wise with China right now?
Mr. FELKER. Yes, not across the board with all companies, but
Mr. SHAW. Does anybody have a contrary view? Ms. Fox? What
does J.C. Penney say?
Mr. FELKER. Well, I disagree with that. I think that if you look
at the types of yarns that are spun here, and we are talking about
knits because that is what the conversation is, because really
wovens is not really something that is strong in this region, if you
look at the type of yarns that are spun in the United States and
also spun in Mexico, it is not the same quality, tightness. The fin-
ishing is different. So, that is why J.C. Penney primarily sources
most of its fabric, not from China, China, Korea, India, Pakistan,
and I think to Mr. Woltz's comment, Pakistan actually has a much
greater threat to the knit industry than will China. The products
that we are talking about for Haiti are really not the type products
that were produced in China.
Mr. SHAW. I think what is facing this dilemma, and I will wrap
it up now because my time is almost up and it has been a long
afternoon, but I think the dilemma facing us right now is that we
want to pass a bill that we will be able to conference with the Sen-
ate, but we have to be very careful on how that is going to impact
on other manufacturers in other countries that we have FTAs with,
so we have got our work cut out for us and we are going to have
to move forward.
I was hoping"that we could get a bill passed before we adjourn.
I still hope we can, but this issue has certainly complicated the
road to the passage of a bill. Also, the question still remains and
will always remain when you're dealing with our friends over in
the Senate is that if we change anything, can we ever get it back
on the Senate floor and get it off, and that is a problem. We don't
want to be very reckless just in order to expedite the process.
Thank you all, and I yield back.
Chairman CRANE. Mr. Thompson, did you have a question?
Mr. THOMPSON. Thank you very much, Mr. Chairman. If I
might just make a small contribution from the viewpoint of the
auto industry, Congressman Shaw's question was about how fast
you can implement technology in Haiti. From the automotive in-
dustry viewpoint and looking at wire harnesses, we would con-
fidently expect that wire harness production in Haiti would deploy
exactly the same technology and the same processes that produce
extremely high-quality product in all of the other countries in the
world in which we operate and we could do that within the period
of 1 to 2 years.
Chairman CRANE. Thank you very much. I want to express ap-
preciation to all of you for your participation, giving of your time
so generously. Your contributions play a very important role in our
decisionmaking here and you folks are all on the frontlines and we
can't thank you enough for your involvement. As I have told folks
many times, keep the faith, fight the fight, but remember the war
is eternal. Thank you. The hearing stands adjourned.
[Whereupon, at 4:07 p.m., the hearing was adjourned.]
[Submissions for the record follow:]
Statement of U.S. Association of Importers of Textiles and Apparel
The U.S. Association of Importers of Textiles and Apparel, USA-ITA, strongly
supports legislation to provide enhanced trade preferences to apparel manufactured
in Haiti, as a means of ensuring that orders are placed in Haiti after 2004. Given
the extraordinary disadvantages Haiti currently faces, it is unlikely that U.S. im-
porters and retailers will include Haiti in their future business plans, unless signifi-
cant additional incentives are provided. Apparel importers and retailers will need
a strong and compelling reason to be in Haiti after this year; the Haiti Economic
Recovery Opportunity Act approved by the Senate and under consideration in the
House would give them that reason.
The poorest country in the Western Hemisphere, Haiti is also among the most
destitute nations in the world. With an average life expectancy of 53 and literacy
rates at only about 50%, over 80% of Haiti's population lives in extreme poverty
and, according to official statistics, which could be understated, more than 16% of
the population is unemployed. The Haitian economy continues to stagnate after a
period of political upheaval, and its economy grew at an anemic 0.7% in 2003, which
resulted in a net per capital loss when one factors in population growth. However,
as a report by the U.S. Agency for International Development recently stated, "one
bright spot is exports (mainly apparel and textile)," with the United States serving
as Haiti s largest trading partner. Without immediate and meaningful help from the
U.S. Congress, that one bright spot is likely to disappear in 2005.
A program that will effectively entice American importers and retailers to do busi-
ness in Haiti next year absolutely must be commercially sound, with rules that do
not add prohibitive costs and risks. Simplicity is key. Rules that are too complicated
and too confusing will destroy any incentive for business to go to Haiti. Simply put,
business should not need a Ph.D. to establish a compliant duty-free program; while
companies may have tolerated added compliance burdens while quotas were in
place, once those quotas are gone and unlimited options around the world are finally
available, that patience will be gone.
Regrettably, the Caribbean Basin Trade Partnership Act has not served to bring
significant new orders to Haiti; instead, the presence of quotas on other suppliers
is probably the primary reason Haiti is producing any apparel for the U.S. market
today, with CBTPA providing some incentive as well. Over half of what Haiti ships
to the U.S. market today is knit shirts-35 percent of the apparel exports are cotton
knit shirts and 18 percent are man-made fiber knit shirts. Approximately 68 percent
of the Haitian-made apparel entering the U.S. qualifies for duty-free access under
CBTPA. Another 20 percent enters the U.S. under other provisions reserved for
goods containing some U.S. content (the so-called "807" provision), thereby quali-
fng for a small duty reduction. While U.S. importers therefore have used the
CBTPA to produce garments in Haiti, their willingness and reason for continuing
to do so after December 31, 2004, is extremely limited. Once quota costs are elimi-
nated for other suppliers, producing CBTPA compliant garments in Haiti simply will
not be justified in terms of cost, especially given the simple garments produced
Recognizing this reality, the Senate-approved Haiti Economic Recovery Oppor-
tunity Act, S. 2261, and its House counterpart, H.R. 4889, would establish a trade
preference program similar to the one established for the least developed countries
of sub-Saharan Africa under the African Growth and Opportunity Act. The parallel
is clearly appropriate. Haiti is as poor as these sub-Saharan nations and the obsta-
cles to its future success in apparel production are painfully similar. While Haiti
has the advantage of a closer location to the United States and therefore can meet
the important speed to market demanded by retailers today, it shares the lower pro-
ductivity levels and more limited skills, as well as the lack of adequate and competi-
tive supplies of essential inputs, including yars and fabrics. Only with the ability
to obtain duty-free treatment for apparel produced from third country fabrics will
Haiti be able to produce garments that are competitive with garments produced
elsewhere in the region or in Asia.
USA-ITA appreciates the Committee's desire to identify whether there are alter-
native origin rules that would encourage apparel manufacturing orders to be main-
tained or added in Haiti. However, our members' review of the suggested alter-
natives concludes that it is highly unlikely that anything less than a single trans-
formation rule-allowing the use of third country yarns and fabrics-would result
in serious consideration of Haiti as a source for apparel after 2004. Efforts to
"tweak" existing programs, such as CBTPA, will not be sufficient. With that in mind
as well as with a strong understanding of the ways in which companies are restruc-
turing in response to the elimination of quotas, USA-ITA has two recommendations
beyond the Senate-passed bill.
First, it is worth considering the idea of a single transformation rule for "certain
apparel." However, USA-ITA urges the Committee, if it proceeds with the idea of
a single transformation rule for "certain apparel," it must not burden such a rule
with separate product-by-product caps or with additional paperwork burdens. Such
complications will only destroy any incentive for U.S. importers to explore that op-
tion. The program must include those products Haiti is capable of producing and
any cap on duty-free access must be based upon commercial reality and viability;
a level that is too low creates a risk that companies will not participate at all.
Second, although clearly not as attractive to U.S. apparel importers and retailers
as a more straight-forward third country fabric provision, application of the Gener-
alized System of Preferences program to apparel would be a possibility. The idea
is not new or unique; the European Union includes apparel within its GSP program.
USA-ITA members advise that a value-added rule based upon the GSP program,
namely 35 percent value added plus substantial transformation plus direct shipment
to the U.S. market, with other countries in the region and U.S. inputs allowed to
help make up that 35 percent threshold, might provide a small incentive to place
some orders in Haiti. Expressly placing Haiti apparel under the GSP program also
carries with it the conditions and standards that are part and parcel of the U.S.
GSP program, including affording internationally recognized worker rights.
USA-ITA also urges the Committee not to perpetuate an inappropriate distinction
between apparel made of knit and woven fabric. As a practical matter, only knit fab-
rics are produced in the Caribbean and Central American region; wovens are vir-
tually non-existent. The more limited benefits for woven apparel under CBTPA, re-
quiring that the fabrics be formed in the U.S. from U.S. yarns (while knit apparel
can use fabric woven in the region from U.S. yarns), has effectively undermined any
incentive for investment in such mills in the region. Continuing that distinction
would only serve to eliminate the ability of Haiti to shift into other products. Cre-
ating an incentive for investment in woven fabric production now, by providing ben-
efits for apparel made from fabrics woven in the region, while noble, is truly too
late, particularly in light of the amount of production capacity already in place in
Adjustments in-the caps on benefits under CBTPA would be largely tantamount
to rearranging th" deck chairs on the Titanic. While Haiti might benefit from its
own non-underwear t-shirt cap, if it were set at a commercially viable level, it is
not the caps that will prevent Haiti from maintaining the interest of U.S. importers
or winning more orders from U.S. buyers next year. With Haiti accounting for only
0.67 percent of the apparel imported into the United States in one year period end-
ing July 2004, and the overall CBTPA cap never filling, it is apparent that other
issues are behind the trends. Only the non-underwear t-shirt cap fills early. Ulti-
mately, the issue is how to make apparel, including more types of apparel, produced
in Haiti competitive. The way to do that is to allow it to reduce costs sufficiently
to offset its lower productivity levels.
USA-ITA does commend the concept behind H.R. 1031, which would encourage
U.S. free trade agreement partners and unilateral preference partners to use inputs
produced in any of these countries and regions. While our members do not yet view
this as a viable option for Haiti, because too few of the U.S. partners produce suffi-
cient quantities of cost competitive yarns and fabrics or have the logistics in place
to allow timely movement of inputs from one location to another, the goal of inte-
grating productive capabilities among our preferential trade partners is clearly the
right direction. At some point in the future, when our preference regions include
more yarn and fabric producers, the inclusion of such cumulation benefits could be
a winning business plan.
USA-ITA respectfully urges the Committee to quickly approve legislation that
will give U.S. importers a real reason to do business in Haiti. With very little time
left for legislative action, we ask the Committee to pass meaningful and substantive
legislation. Time is of the essence. Haiti is already losing business as the end of the
decades of quotas nears. The most recent trade datashows that the month-to-month
and quarter-to-quarter data are falling much faster than the year-ending data. That
signals that orders are moving, primarily to other Central American countries, and
portends the difficulties Haiti will face unless the Congress acts now to provide sub-
stantial benefits to justify the placement of business in Haiti.
[BY PERMISSION OF THE CHAIRMAN:]
Statement of Camara Nacional de la Industria Textil, Ciudad, Mexico
Camara Nacional de la Industria Textil (CANAINTEX) appreciates this oppor-
tunity to submit for inclusion in the record our views on legislation according cer-
tain U.S. trade preferences to Haiti.
Canaintex is the national association representing more than 400 manufacturers
of textiles (yarns, fabrics and non wovens) in Mexico. The fiber, textile, and apparel
sector accounts for 7.5% of Mexico's manufacturing GDP and employs more than
Canaintex firmly believes that the future of the textile industry in the hemi-
sphere-in the U.S. as well as in Mexico and the Caribbean-depends on the extent
to which countries in the region eliminate trade barriers and create an integrated,
efficient regional textile market. Market based, regional integration will allow sup-
pliers in the hemisphere to deliver a "total package" regional product to our apparel
customers in the United States at competitive prices, delivery times and quality
standards. We believe this is ultimately the only basis on which Western Hemi-
sphere textile producers will be able to successfully compete with Asian suppliers.
In line with this approach, member companies of Canaintex have made substan-
tial investments in capital equipment and technology to position Mexican companies
as price competitive, reliable suppliers of high quality inputs to regional apparel
At the same time, the Government of Mexico has worked to negotiate Free Trade
Agreements to open up regional markets to Mexican textile products and, equally
important, to expose Mexican textile companies to market disciplines and ensure we
We believe the results speak for themselves. In the highly competitive U.S. mar-
ket, the Mexican textile industry was able to establish itself as the number one for-
eign supplier in a broad range of products. At the same time, Mexico grew to become
the number one export market for U.S. textile manufacturers and U.S. cotton grow-
Moreover, in the past year, we have worked with U.S. trade negotiators and our
colleagues in the region to introduce the concept of textile cumulation into trade
agreements with Central America and the Dominican Republic, and we are seeking
wider cumulation in on-going negotiations with the Andean countries. Cumulation
is a powerful tool for rationalization of the hemispheric textile market, and an im-
portant building block in constructing a Free Trade Area of the Americas (FTAA).
In this context, Canaintex believes that the original HERO concept-to provide
Haiti with the opportunity to incorporate inputs from countries with which the
United States has Free Trade Agreements-is the most effective means of achieving
the twin goals of promoting apparel production in Haiti and strengthening the re-
gional textile and apparel industry. There is a real possibility that expanding the
range of qualifying sources to include Asian suppliers-including China-could cre-
ate incentives to dislocate existing production in the hemisphere, widen the threat
to U.S. and regional textile producers from unfairly traded product, and increase the
opportunities for illegal transhipments of Chinese textiles. These effects would exac-
erbate the employment and other economic effects associated with the ending of tex-
tile quotas in January 2005 which have been documented by the International
Canaintex believes that quality inputs required to support expanding Haitian ap-
parel production are available from FTA supplier countries in the volumes needed,
at highly competitive prices and with short delivery times, making the expansion
of preferences to non-FTA suppliers unnecessary. This would be particularly true if
the U.S. Congress were to take early action to approve the trade agreement with
Central America and the Dominican Republic.
In the case of Mexico, the fact that Mexican producers currently supply more than
$88 million worth of knit fabric to the United States market stands as clear evi-
dence that we have the available capacity to supply Haiti with high quality knit fab-
ric in the quantities required.
Canaintex would welcome an opportunity to work with the Committee to ensure
that the needs of Haiti's apparel industry can be met within this hemisphere.
[BY PERMISSION OF THE CHAIRMAN:]
Statement of Marie-Claude Bayard, Haitian Manufacturers Association,
My name is Marie-Claude Bayard. I am President of the Haitian Manufacturers
Association (ADIH) and it is an honor to present my personal perspective and that
of our Association to your prestigious Committee.
My professional activities in the textile sector began in 1975 and we employed
over 1,400 people at peak times in 3 factories. Today, we operate only 1 plant em-
ploying approximately 600 people working for Wal-Mart and JCPenney via SaraLee
and Perry Manufacturing. The downsizing resulted mostly from the migration of our
children's wear suppliers towards cheaper production lines in the Far East with
which we could not compete.
The Manufacturers Association represents a very large group of industrial enter-
prises and related businesses with one-third of its members operating in the textile
Quite concerned by the new threats and challenges posed by the prospects of a
world shaped by globalization, ADIH began to search for ways to assist its members
in their adjustment programs and to help propel Haiti on the path of substantial
increase from its low level of production. The results of our search were conclusive:
our best and only choice for a fairly quick response to the dire needs of the country
in investments and job creation was, and still is, the textile assembly industry with
its huge potential for massive employment of unskilled labor and its demands for
reasonable financial investments.
We applauded Congress when it passed the AGOA bill with special provisions
given to the least developed countries in Africa. It was a fair gesture and it con-
firmed our belief that we could also expect the same fairness towards Haiti, the
least developed country of the Americas and one of the United States closest neigh-
We are very grateful to the U.S. Congress for taking the time to look for ways
to assist Haiti and support the Haitian garment industry and its workers. We are
also grateful to all the U.S. firms like Perry Manufacturing, JCPenney, Wal-Mart,
Tropical Manufacturing, A&E Threads, the American Apparel and Footwear Asso-
ciation, the U.S. Chamber of Commerce, the American Chamber of Commerce in the
Dominican Republic, the Associacion de Zonas Francas de la Republica Dominicana,
and so many others who put their faith in our small and troubled country and sided
with our efforts.
HAITI NEEDS HELP
While we gather here to discuss issues related to the HERO bill, our country is
at a crossroad that brings both serious concerns and great hopes. Concerns, because
institutions are still weak and the extreme poverty and level of unemployment
render the task of nation building more difficult and troublesome. At the very mo-
ment that we should be paying respect to the memory of our ancestors who achieved
a remarkably successful revolution, we are faced with Haiti's disastrous position in
two important classifications: ranking 80th in the Global Competitiveness Report,
and 145th in the Human Development Index. It is a worrisome story: the income
per is less than $400 a year and will remain low unless the course is radically al-
tered. The common citizen is wrestling between electricity shortages, lack of potable
water, of-minimum healthcare, of schools and daily meals for all children. Unem-
ployment or underemployment among those of working age is far in excess of 70%.
It is therefore evident that building democratic institutions is extremely problematic
under such conditions.
Only by enhancing Haiti's attractiveness can we hope for substantial business in-
vestments. CBTPA did not fulfill the expectations because of its limitation to U.S.
fabrics, more expensive than most of the world, or because of knit regional fabric
not readily available or delivered on time, also for not allowing the use of regional
woven fabric. This is what HERO, as passed by the Senate, would in fact correct.
By allowing production from third country fabric, HERO would create the oppor-
tunity for all manufacturers to compete with the low production costs of Asia and
set the base for Haiti to become a garment production center for the region.
Quoting the USAID report of 2003: "HERO will stimulate production in Haiti of
apparel from both U.S. and third country fabrics. If there is any diversion, it is most
likely to come at the expense of imports from the Far East made with no U.S. com-
ponents or imports from U.S. preferential trading partners who will see their textile
mill products incorporated into apparel in Haiti as opposed to within their own
We are very grateful to the U.S. Congress for taking the time to look for
ways to assist Haiti and its workers. "There are some very impressive well-man-
aged companies, consciously striving for the American model, run by young men
with a strong U.S. background, with full computerization of production planning
and accounts, and in some cases also, marketing plus product development."
The type of assembly carried out in Haiti would have minimal or no impact on
employment in the United States. Again as quoted in the USAID report, "there
should be no adverse impact on U.S. apparel manufacturers since the type of apparel
that could conceivably enter from Haiti under the new provisions of HERO have
long-since left the United States for offshore operations." In fact, it would encourage
the emigration of jobs away from the Far East and back to our own hemisphere.
It would also create new jobs in the United States since unlike in the Far East,
most of Haitian foreign exchange earnings are utilized to purchase American prod-
ucts and, furthermore, many components included in garments would be purchased
in the United States.
Growth in Haiti will also benefit the whole state of Florida. Haiti has a high pro-
pensity to import products and services originating in Florida and increased export
earnings will augment this propensity.
We have all witnessed the human misery represented by disadvantaged Haitians
risking their lives in perilous sea voyages to reach the shore of Florida where they
literally have to swim to shore with absolutely nothing. It is only by creating em-
ployment opportunities in Haiti, as will happen through HERO, that we can reduce
this flight. And on the basis that one formal job in Haiti feeds 6 mouths, such em-
ployment could conceivably support over 15% of the entire population.
The private sector of Haiti has become increasingly conscious that the new rules,
and norms in our global environment also require a complete new approach to the
business of growth. The Haitian Manufacturers Association has, for some time now,
endorsed the World Responsible Apparel Production or WRAP standard. A new so-
cial conscience has matured not only to create the most favorable investment cli-
mate through the promotion of proper public policy framework but also and fore-
most by ensuring the best working environment and social conditions for our work-
force conducive to personal growth.
Again quoting the USAID report: "This 'social conscience' of some employers is
distinct from the ruthless drive for productivities and cost reductions in textile com-
panies around the world, especially in Asia and the former Soviet satellite countries
of Eastern Europe. ... A strong element of compassion and care is very apparent
in some of the larger and more successful Haitian-owned companies."
It must also be noted that 75% of employees in the Haitian sector are female.
With great pride, we have seen some of our workers become quality managers,
line supervisors, production managers and head mechanics and their children grad-
uate from high school and go to college to become doctors, nurses and engineers.
Many of the workers have gone from using the services of loan sharks to enjoying
the facilities of the formal banking system for their personal savings or private
loans to build their homes or start their personal businesses. Haiti's manufacturers
strive to serve the best interests of both their workers and their consumers' Social
If things proceed the way the United States wishes, the Free Trade Agreement
of the Americas will be a reality in the near future. We are convinced that there
is no way for a small country like Haiti to prevail by itself. We realize that our
whole Caribbean region is particularly vulnerable. Integration, if conducted prop-
erly, represents the appropriate method by which we can benefit to the maximum
from the winds of globalization and set sail towards the future model of competitive
development. However, the participation of small economies is imperative for the
success of the FTAA. We are ready to move towards strategic alliances with part-
ners of the region and foremost with our next door neighbors.
Sadly enough, there is no quick fix to the problems of poverty and underdevelop-
ment. The purpose of HERO is to help improve the economic and political situation
in Haiti through trade and thereby allow Haiti to better be able to confront its seri-
ous economic and social problems. For once, our LDC status can be considered a
strategic advantage, presenting enormous opportunities for Haiti and for business
people willing to seize them. The HERO bill approved by the Senate, the new In-
vestment Code and the new Law on Free Zones offer great advantages to investors
willing to export from the Haitian platform. New industrial parks are being built
under specs that are fully congruent with the most stringent international environ-
Haiti needs HERO. As business people, we need HERO to enhance our contribu-
tion to the welfare of the Haitian society, by creating much needed stable jobs to
jump start the economy. In the new world of the Americas, the walls of prejudice,
poverty, and protectionism can be toppled by extending a helping hand to a small
country like Haiti and connecting through the bonds of freedom and prosperity. The
U.S. free trade agenda can help a fragile democracy in the Americas, just as U.S.
trade policy after World War II helped secure democracy and hope in Western Eu-
rope and Japan.
There is, as yet, no fabric or yarn manufacturing facility in Haiti. With China,
the fourth largest trading nation in the world, now in the WTO, if left unattended,
Haiti will face devastating global competition. This must not be allowed to happen.
A solid legislation like the HERO bill is a valuable instrument for energizing key
actors to attain socio-economic and political progress and help nurture economic de-
velopment initiatives. Expectations that HERO would find its way through Congress
unopposed has itself reinforced the current momentum in the sector in Haiti. We
are therefore convinced that employment and exports could increase by approxi-
mately 30% in the short to medium term.
Haiti is only two hours' travel time away from the U.S. as opposed to the long
hours needed to reach the Far East or China: businesses will respond favorably to
the opportunity of HERO to avail themselves of the best possible insulation for the
future, within the national constraints.
With growth, finally Haiti will be empowered to draw on its art, its traditions and
culture to reinvent itself through the open-mindedness, hard work and perseverance
of its people. Our citizens dream of a life free of despair and this extraordinary city
of Washington can play a leadership role to hearten our citizens through an ade-
quate legislation that will unlock the country's potential. The challenges are gen-
uine. We should not minimize their significance. But we can learn from one another
while also perceiving special needs and circumstances in a bond of mutually bene-
[BY PERMISSION OF THE CHAIRMAN:]
Statement of Patrick Moynihan, Haitian Project, Inc., Port-au-Prince, Haiti
My name is Patrick Moynihan, and I am grateful for this opportunity to submit
this statement to the Subcommittee in support of legislation for trade preferences
for Haiti. I am the President of the Haitian Project, Inc. and Director of Louverture
Cleary School, an independent Catholic secondary school for economically under-
privileged, academically gifted students in Port au Prince, Haiti.
Given that I am an educator rather than a textile or trade expert, it may not be
readily apparent why I would request to speak on behalf of the HERO Act. Since
1996, I have directed Louverture Cleary School, The Haitian Project's free secondary
school for academically gifted children from the poorest regions of Haiti. The objec-
tive of the school is to form our young, talented students into civic-minded, produc-
tive leaders for Haiti-a country that has suffered far too long from the instability
created by an economically divided society easily exploited by mercurial and divisive
leaders who find little challenge in manipulating the country through threats of rev-
olution and oppression simultaneously. Therefore, as an educator, my interest in the
HERO Act is very pragmatic. Haiti needs a stronger, larger middle class to buoy
its nascent democracy. Therefore, its people need jobs. Specifically, our graduates
need jobs if they are going to make a difference.
Simply put, our mission of educating economically disadvantaged students to be-
come the future leaders in their country cannot be realized unless there are oppor-
tunities for gainful employment at the end of their education. It is critical for our
students to have job opportunities such as those offered by the apparel industry in
Haiti. In order for those jobs to be created and available to our students, Haiti must
be provided trade preferences such as those in the HERO Act.
Part of my responsibilities as the president of Louverture Cleary and The Haitian
Project is to work with the business community of Haiti to find meaningful employ-
ment for our graduates as they pursue their university education. This activity has
provided me with the opportunity to visit, on numerous occasions, factories in Haiti
involved in production ranging from textiles to electronics. While many of our stu-
dents are employed in retail companies and others are studying medicine at the top
universities in Haiti, a significant portion work in industrial settings as quality con-
trol managers, accountants and inventory managers.
I must say that my visits, which are frequent and unannounced, have never left
me with the impressions that I hear stated by some of your colleagues in the name
of protecting the Haitian worker. This leads me to wonder if the negative descrip-
tions, which have at times been very personal condemnations, used to describe the
working conditions in Haiti are motivated more by politics than a true interest in
helping the Haitian worker. I suppose I would believe the sentiments of those who
oppose Haiti being assisted in finding work for its people through trade acts such
as this one, if those same politicians would propose opening our borders to allow
all the unemployed Haitians, over 60% of the country, to move here and compete
for jobs. At the very least, I can say that their words have little basis in reality
given my experience in Haiti.
Certainly, salaries in Haiti are very low-too low for the missionary-minded like
myself. However, how will wages ever increase without competition? We are not
counting on altruism in this country to improve laborer's pay-we should not expect
to find it doing so in other countries. With increased employment comes training
and increases in productivity. Increases in productivity provide laborers with the
chance to organize into unions and demand more of the profits their work produces.
Increased employment also creates stability and funds infrastructure advancements
both of which reduce the risk for investors backing companies looking for new loca-
tions for their factories. This, in turn, increases the number of companies willing
to compete for Haitian labor-the last natural resource Haiti has to bring to the
global market. We can continue to pour money into Haiti through USAID and other
non-self-sustainable programs, or we can provide ways for Haiti to develop an econ-
We also know that this trade initiative comes with significant requirements that
must be fulfilled in order to "merit" the advantage. These requirements will encour-
age improvements in the treatment of labor in Haiti as well as positively motivate
the government of Haiti to improve itself. It is easier to invite a horse to water than'
push him there. The HERO Act invites social and political responsibility by offering
a tangible reward for doing the hard work of maturing a country from revolution
I also believe extending the HERO Act to Haiti will benefit the United States. It
is in our best interest to work cooperatively with all our brothers and sisters in the
Americas to create a more stable and economically healthy region. No offense to Mr.
Frost, Trade Acts, not walls, will make better neighbors and neighborhoods in the
As a final point, each day I am approached by at least five people who are looking
for work in Haiti. Depending on their circumstances and education, their plea
ranges from desperation caused by hunger to anger caused by frustration. It is not
easy to watch a country undergo the industrial revolution starting at its most basic,
manual and rigorous level. Yet, it is more painful to think that people will always
starve in Haiti and go without education with only the hope of getting out to console
them. I ask that you pass this trade act. Let's give Haitians of all economic levels
a working chance by giving them a chance to work.
Statement of National Retail Federation
The National Retail Federation (NRF) submits this statement to the Ways and
Means Trade Subcommittee to express the U.S. retail industry's strong support for
a trade preference program for Haiti. NRF is the world's largest retail trade associa-
tion, with membership that comprises all retail formats and channels of distribution
including department, specialty, discount, catalog, Internet and independent stores
as well as the industry's key trading partners of retail goods and services. NRF rep-
resents an industry with more than 1.5 million U.S. retail establishments, more
than 23 million employees-about one in five American workers-and 2003 sales of
$3.8 trillion. As the industry umbrella group, NRF also represents more than 100
state, national and international retail associations.
NRF welcomed the passage of S. 2261-the Haiti Economic Recovery Opportunity
Act of 2004 ("HERO")-in the Senate. We also applaud quick action by the Ways
and Means Committee to help ensure House consideration of the initiative before
the end of the 108th Congress. In order to assist the economic recovery and develop-
ment of Haiti, the most impoverished country in the Western Hemisphere, the
HERO bill focuses on incentives necessary to build a viable apparel industry, using
the African Growth and Opportunity Act as a model. Like AGOA, the HERO bill
employs a flexible rule of origin that provides duty free treatment to clothing made
in Haiti from third-country yarns and fabrics.
This flexibility to use third-country inputs in apparel production is absolutely es-
sential to the success of any trade initiative for Haiti, due to two trends that are
creating a paradigm shift in the competitive landscape for textile and apparel pro-
duction and sourcing. The first is the end of the global system of textile and apparel
quotas on January 1, 2005. Once textile and apparel quotas end, the cost of quota
will no longer be a factor in production and sourcing decisions. The chief bene-
ficiaries from this change will be the most competitive Asian producers, who have,
heretofore, been the most severely restrained by quota restrictions.
The second event is a fundamental change over the past decade in the way ap-
parel is manufactured, from the old "cut-and-sew" model to so-called "full package"
production. While labor costs remain a competitive factor under this system, it is,
at best, secondary, and is certainly not as important a consideration as in the past.
Indeed, in full package production, apparel producers who are the most competitive
share a certain number of characteristics. In general, they are able to provide their
customers a range of services, including the ability to work closely with designers,
adaptability in the face of rapidly changing demand, and the ability to maximize
speed to market. But perhaps the most important trait they share is access to the
widest range of yarns and fabrics.
Again, this situation favors manufacturers in Asia over those in the Caribbean
Basin region, like Haiti, who have found themselves bound to the cut-and-sew model
and over-reliant on high-priced U.S. yarn and fabric as a result of the inflexible
rules of origin under the Caribbean Basin Initiative and the Caribbean Basin Trade
Partnership Act. The compliance costs created by these programs often negate the
duty preference and have made it more difficult for Haitian and other regional pro-
ducers to compete effectively against the most efficient Asian manufacturers. The
end of the quota will only exacerbate this competitive handicap.
In addition, the political and economic instability in Haiti has created yet another
significant competitive obstacle for that country. In sum, without strong incentives
to encourage apparel retailers, importers, and manufacturers to do business in
Haiti, the prospects for the apparel sector there are bleak. Conversely, a strong
package of incentives that will enhance the advantage of proximity to market that
Haiti does have, as well as provide apparel retailers and manufacturers a commer-
cially-viable environment in which to do business will encourage trade, development,
and the creation of desperately-needed jobs in the country.
The HERO bill is commercially viable in the sense that it includes the necessary
incentives to overcome the risks for apparel retailers, importers, and manufacturers
to do business in Haiti, and to achieve its ultimate objective of promoting trade, in-
vestment and job creation in Haiti. Given the short time left to this Congress and
the imminent end to the quota system, it certainly makes sense for the House to
consider passage of the Senate bill as quickly as possible. If the Ways and Means
Committee and the House conclude that a different approach is warranted, it should
still be guided by the considerations discussed above to craft a commercially viable
bill with simple and flexible rules of origin. Simplicity and flexibility are key. Retail-
ers simply will not use any program that handcuffs them with rigid, complex rules.
Other approaches that meet the simplicity/flexibility test have been proposed in
other pieces of legislation. For example, the Middle East Trade and Engagement
Act, which has been introduced with bipartisan support in both the House and Sen-
ate, adopts for apparel the simple, straightforward rule of origin under the General-
ized System of Preferences. The GSP system provides preferential treatment to arti-
cles that undergo at least 35 percent value added production in the beneficiary
Finally, in debate on the Haiti initiative, some have suggested that limiting im-
ports from China is necessary to ensure that countries like Haiti can continue to
export to the United States in the post-quota world. This argument is a red herring.
The simple fact is that there is no guarantee that any trade diversion created by
limiting imports from China will benefit countries like Haiti. Rather, it is more like-
ly to shift to other Asian producers that are not subject to any quantitative restric-
tions. Secondly, limiting imports from China does nothing to build the competitive-
ness of Haiti or any other producer. Conversely, however, providing the right pack-
age of trade incentives and crafting an initiative for Haiti that meets the "commer-
cial viability" test will help build a more competitive apparel sector in that country.
This in turn will help spur trade, investment, and job creation, and ultimately bet-
ter political stability in Haiti, an outcome that is clearly in the interests of the