Report says taxing garment products a “grave injustice”

Attempts by the US Congress to impose federal minimum wage in the Northern Marianas and tax its garment products exported into the mainland would be a “grave injustice” to efforts by the island government to ensure self-sustaining economy.

This was the contention of a commentary written by Daniel Mitchell for The Washington Times in which he lambasted US lawmakers for relentless attacks against the CNMI amid its economic success under the American flag.

Titled “Modern Siege of Saipan,” the opinion came on the heels of bipartisan proposal in the Congress that would slap hefty tax on apparel produced in the islands as well seek drastic raise in the current minimum wage rate of $3.05 to that of the federal level of $5.15.

“Washington politicians should cease their assault on Saipan. With the exception of ensuring that contracts are honored and laws obeyed, the federal government should not interfere with the voluntary exchange of goods and service,” Mitchell wrote in the commentary published last May 5.

Noting several accusations leveled recently by some Washington interest groups, which have been supported by US politicians opposed to Commonwealth’s control of labor, immigration and minimum wage, Mitchell claimed these were “misguided.”

He said that “as a result, all the legislative proposals would be a grave injustice. Instead of attacking the CNMI, policy-makers should try to replicate its success in other US territories.”

Mitchell, who is the McKenna senior fellow in political economy at the Heritage Foundation, likened the criticisms to a modern assault on the island that occurred during World War II in the battle for control between the US and Japan.

“Only this time, instead of Marines, gunboats and aircraft, the attackers are using laws, regulations, and bureaucrats,” he wrote.

Northern Marianas “is under assault because of its success. Entrepreneurs have created a thriving textile industry. Combined with tourism, this has allowed the CNMI to prosper. While other US territories are a drain on the taxpayer, the CNMI is nearly self-sufficient.”

At least three proposals have been introduced in both the US House of Representatives and the Senate, amending provisions of the Covenant — the landmark agreement that formed the political union between the CNMI and Washington more than 20 years ago.

Sen. Spence Abraham (R-Michigan) and Sen. Fritz Hollings (D-South Carolina) as well as Rep. Bob Franks (R-New Jersey) and Rep. John Dingell (D-Michigan) have sponsored separate measures in both houses seeking repeal of the tariff privileges granted the island under Headnote 3 (a) of the Covenant.

Likewise, Sen. Ted Kennedy (D-Massachusetts) and Rep. David Bonior (D-Michigan) have also introduced a bill that will mandate that the US minimum wage apply in the CNMI.

Charges of “exploitation” debunked: Mitchell, however, junked arguments presented by these lawmakers to push their legislation, saying the nonresident workers on the island, mostly from China and the Philippines, enjoy a higher wage and benefits which otherwise they would not have in their countries.

“Guest workers are lucky, not exploited. Workers from China and the Philippines come to the CNMI because they can make much more money in Saipan than they can make at home,” he said.

In cases where local employers fail to provide what is stipulated in the workers’ contract, Mitchell suggested the government must see to it that the terms are enforced and that fraudulent behavior is penalized.

“It is worth noting, however, that factories in Saipan have a lower rate of OSHA violations than their counterparts in the rest of the United States.”

Mitchell also contended that the planned increase in the CNMI minimum wage would “almost certainly drive most of the garment producers to Third World locations.”

He added: “The ‘exploited workers’ would lose their jobs and the islands would demand subsidies from Uncle Sam to make up for the concomitant economic downturn.”

On the removal of the duty-free privilege, Mitchell said that “import taxes are ill-advised, especially when imposed on intracountry products. Taxing products shipped between the CNMI and California is like taxing products shipped between Hawaii and California.”

Criticizing the Dear Colleague letter sent by Abraham and Hollings, he pointed out that these lawmakers’ claim — that the free entry of CNMI goods to the mainland is costing the American taxpayers an estimated $200 million each year — would in fact result to a reversal.

“In reality, taxpayers are saving money because of the current arrangement and would pay $200 million more each year if the Abraham-Hollings tax increase were enacted,” Mitchell said, in an apparent reference to the CNMI reverting to federal subsidies once the Covenant is amended.

“Since the United States routinely condemns foreign leaders like Saddam Hussein and Slobodan Milosevic for breaking their commitments, one can only hope that Bill Clinton, Spence Abraham, Fritz Hollings, et al., will honor the commitment we made with the CNMI.”