CNMI pleads case in DC

Northern Marianas delegation led by Lt. Governor Diego T. Benavente has left for Washington D.C. to lobby for amendments to U.S. Tariff Code to help local garment manufacturers compete in the international market.

The Governor’s Office said the team included governor’s consultant Adam Turner and economic affairs special assistant Richard A. Pierce.

Gov. Juan N. Babauta has also asked Guam Delegate to the U.S. House of Representatives Madeleine Z. Bordallo to help push for the amendment to the Tariff Code’s General Headnote 3(a) to reduce the local content value-added requirement for all insular areas to 30 percent level, rather than the existing 50 percent.

Babauta noted that the 30 percent “is roughly the equivalent now afforded many countries in trading with the U.S. in other free trade agreements.”

The Tariff Code currently requires that 50 percent of the value of the garment has to be added locally by transformation—additional labor, packaging or other overhead costs—so that garment products coming from U.S. exporters like the Commonwealth could enter U.S. duty-free, as embodied in the General Headnote 3(a).

Babauta said that recent U.S. free trade agreements and preference programs contain more flexible local content requirements, “which results in an inexplicable situation where manufacturing in the U.S. territories entering the U.S. is treated less favorably than that from foreign countries.

“I am humbly asking for your support to remedy this inequity by supporting the CNMI’s attempts in amending General Note 3(a),” said Babauta in a letter to Bordallo dated June 13, 2005.

The governor said that, without the amendment, “our industry will continue to lose its ability to trade in the global market.”

He acknowledged that the drop in manufacturing output—25 percent from 2000 to 2004, and a minimum of 10 percent this year—has had a detrimental effect on government revenue.

He said the government gets 30 percent of its funds directly from the garment industry and another 20 percent in indirect taxes.

He said nearly half of the island’s employment “is either directly or indirectly linked to our apparel manufacturing industry.”

Meantime, the governor said that the CNMI delegation is scheduled to hold several meetings in D.C. to push for the federal amendment.

Early this year, former insular affairs director and now U.S. Senate Energy Committee staff Allen Stayman said that it would be extremely difficult for the CNMI to lobby for the HeadNote 3(a) amendment at this time, citing that U.S. lawmakers would not be inclined to do it to favor only the Commonwealth garment manufacturers.

“Politically, it would be very difficult for American politicians to create an exemption for CNMI, and not for their own people who are losing their jobs,” Stayman had said.

The amendment being asked by the CNMI would result in less production costs for the local garment industry and less solid waste, as it allows cutting of fabric materials outside the CNMI.

Babauta said the amendment would also allow factories to better use their current level of nonresident workers on island.

“There would be a higher level of production achieved with fewer workers from abroad,” he said.

Under the moratorium law, the CNMI garment industry is not allowed to hire over 15,727 workers.

The Governor’s Office has retained the services of D.C. consulting firm Sandler Travis & Rosenberg for $15,000 to lobby for the Headnote 3(a) amendment.