PROTECTIONIST WAVE THREATENS CBI

One casualty of the Iran-Contra arms controversy may well be Reagan-inspired initiatives in the Caribbean. Not the least is the highly controversial Caribbean Basin Initiative, launched more than three years ago to stimulate trade between the United States and its southern neighbors.

The original idea was brilliant: to create a one-way free trade area with countries strategically important to the United States desperate for new export markets and U.S. expertise.Opponents on Capitol Hill scoff at the CBI, contending that preferential treatment in the form of duty-free entry provisions for exports to the United States from the more than 25 designated countries costs jobs at home. What they fail to mention is that under the CBI, import sensitive products such as textiles and leather goods are excluded from the initiative.

According to Manuel A. Casiano, Jr., a publisher and former White House delegate to the task force on small business, There has been a complete lack of understanding of appropriate goals to be sought after by CBI policy-makers.

In fact, this negative and somewhat protectionist approach has sharply curtailed the success CBI could achieve over the last three years.

Before testy congressional critics eschew the CBI completely for its shortcomings, a good idea would be to separate fact from fiction.

First, prior to enactment of the CBI in 1983, our trade relations with the Caribbean and Central American nations were negligible, and - with the exception of Mexico, Nicaragua and El Salvador - our foreign policy establishment in Washington virtually ignored the region.

Second, the deficit-minded Congress whittled away the original legislative provisions regarding duty-free exports from the region. By excluding exports of leather goods (shoes, handbags etc.) and textile products the total benefits package was sharply cut.

Tight reins on textiles quotas were relaxed last year with the elimination of certain restrictions on items with U.S. material content. Nevertheless, unfavorable terms of trade still persist for primary products, a big percentage of Caribbean exports.

Wild fluctuations in world market prices for coffee and sugar have induced many countries to diversify their export base, an effort which is being assisted by aid from the Agency for International Development.

Third, statistics show that, in comparison with other U.S. trading partners, job displacement and/or market disruption caused by exports from the region is minuscule. The level of imports from a region that collectively has a population of roughly only a quarter that of our country simply cannot undermine U.S. competitiveness, CBI proponents say.

On the contrary, they assert, U.S. competitiveness should be enhanced by business opportunities enhanced by CBI - establishment of joint-ventures, licensing arrangements, and off-shore production facilities.

A fourth important fact is that a new flurry of activity has occurred through the seminars, workshops, and conferences sponsored by government and private sector entities in the United States and throughout the region.

Without CBI, attendance at the annual Miami Conference on the Caribbean now in its tenth year of existence would not draw as many as 2,000 participants each year. Hosted by the Washington-based non-profit organization, Central/Caribbean American Action, conference organizers admit the list of participants is growing so fast it is difficult to accommodate everyone.

Finally, one piece in the puzzle overlooked by CBI policy makers is the role of our own trust territory, Puerto Rico, in the promotion of trade and investment in the region.

Early this year Gov. Rafael Colon of Puerto Rico announced his commitment to a serious leadership role in the Caribbean Basin region. According to statements made recently by several Puerto Rican officials, this was not just

because of the 936 funds (bank deposits made by U.S. mainland companies operating under Section 936 of U.S. tax code.)

The banks of Puerto Rico have $700-$800 million in 936 funds in their coffers to disburse for projects selected on the basis of creditworthiness and rate of return. But Puerto Rican leaders are afraid the protectionist cloud hovering over Washington will discourage further attempts to develop the region. Countervailing duties and quota restrictions have already been invoked by U.S. authorities against Costa Rican ornamental flower imports and Dominican Republic sugar imports, respectively.

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