NMI agrees on unified resolution for Congress

Business and government leaders agreed yesterday on the need for unified action to let the U.S. Congress know of the “near death” economic situation of the CNMI due to the worldwide lifting of trade quotas this year.

In particular, garment and local leaders agree that a joint resolution signed by the governor, presiding officers of the Legislature, and the Washington Representative be made to petition Congress to amend Headnote 3(a) of the U.S. Harmonized Tariff Schedule, so that local manufacturers can increase the maximum allowable foreign content material on their products from 50 percent to 70 percent to ensure the industry’s global competitiveness.

While they acknowledge that the congressional amendment is a tough fight, the CNMI should not waiver in its effort and should let the federal government know that “we’re about to get hit by tsunami.”

In his presentation, Saipan Garment Manufacturers Association executive director Richard Pierce said the dramatic decline in the garment industry would have a widespread impact on the community.

He pointed out that garment sales in the CNMI have consistently dropped in the last four months. From $78.3 million in December 2004, the number dropped to $63.3 million in January when the WTO lifting took effect. This further went down to $54.6 million in February. In March, the sales went up a little to $57.2 million.

In user fees, CNMI government revenue from the industry decreased by $1.2 million in the last three months.

Further, the garment industry’s cargo volume has dropped 4 percent during the first five months of the fiscal year, with only 240,562 tons of total cargo processed at the Port of Saipan.

Pierce warned that the continued decline of the industry would result in the loss of 2,000 government jobs.

With factories downsizing and closing down, he said a 10-percent sales decline would mean a loss of $12 million for the government; a 200-percent drop would translate to $24 million; 40 percent, $46 million; and a 60-percent decline would mean a $70 million loss.

SGMA cited that the garment sector pays nearly $70 million in direct revenues to the government annually—about 30 percent of a $217-million budget. The garment industry also contributes nearly $50 million in indirect local revenues: food, gas, supplies, repairs and maintenance, and other services.

Overall, he said the garment industry’s total direct and indirect contribution to the CNMI economy totals $229 million to $290 million.

Further, statistics showed that the industry yielded $532 million in business revenues, which rose to $1 billion in 2004.

Ten years ago, the industry employed 11,570 people and registered a labor income of $131 million. In 2004, the employment figure rose to 22,5000, resulting in $324 million in labor income.

All these, however, could come crashing down unless the garment sector and the government work together to resolve the situation, he said, and this could be done by having Headnote 3(a) of the Tariff Code amended.

“It would allow Saipan factories flexibility to cut pieces overseas at lower cost and then assemble them on Saipan. It means reduced production cost, which would help factories become more globally competitive,” said Pierce.

Other solutions to enhance the industry’s competitiveness is to seek Social Security tax exemption for employees from China, which would result in $22.5 million savings, divided equally between the employers and employees.

Other measures would be to eliminate restrictive and counterproductive labor regulations that include moratorium restrictions on labor and licenses, class action lawsuits, CNMI-imposed industry inventory, and bonding roadblocks.

Present in yesterday’s meeting were Lt. Gov. Diego T. Benavente, House Speaker Benigno R. Fitial, Sen. Diego Songao, Rep. Oscar Babauta, and Executive Branch officials.

The officials expressed their support for the submission of a joint resolution to the U.S. Congress for the Tariff Code amendment.

“We’ve got to get moving. We’ve got an attitude problem here—that all is well in the CNMI,” said Fitial. “Well, it’s not.”