Statement of the Haiti Democracy Project and Manchester Trade

to the House Ways and Means Committee

on Haiti?s eligibility under the Hemispheric Opportunity Through Partnership Encouragement (HOPE) Act of 2006

February 28, 2007

In December 2006, Congress passed an important humanitarian measure in support of the poorest country in the hemisphere. The HOPE act, while limited, has the potential to restart the motor of job creation in one of Haiti?s few remaining viable industries. In a country where those few who have work make an average of a dollar a day, and where the number of textile manufacturers has dropped from ninety in the late 1990s to fifteen today, the HOPE concession is crucial to Haiti?s recovery. The HOPE act sets forth eligibility requirements under Section 5002(d). Criteria include progress in creating a market-based economy, rule of law, elimination of trade barriers, anti-poverty and -corruption policies, and respect for workers? rights and for internationally-respected human rights. By mid-March President Bush can certify that Haiti has met these requirements and make HOPE operational.

The Haiti Democracy Project and Manchester Trade believe that Haiti either meets these conditions or is making continual progress toward them. “Haiti” in this case must be understood not as merely the government of Haiti, for the functioning of government in Haiti has been seriously impaired for more than two decades; this is indeed the definition of the problem of Haiti. Despite the recent progress evidenced by fair and accepted elections, the resultant government has not yet consolidated and is only beginning to function effectively.

Rather “Haiti” is here better understood as the complex of government, civil society, private sector, the supportive international community, and the concerned Haitian diaspora that make up what Haiti has in terms of functioning institutions. The question is whether these components working together meet Haiti?s eligibility requirements. Let us review the requirements and also some of the serious objections that have been raised to Haiti?s eligibility.

Section 5002(d)

Haiti shall be eligible for preferential treatment under this section if the President determines and certifies to Congress that Haiti?

(A) has established, or is making continual progress toward establishing

(i) a market-based economy that protects private property rights, incorporates an open rules-based trading system, and minimizes government interference in the economy through measures such as price controls, subsidies, and government ownership of economic assets.

Haiti indeed has a market-based economy based on private property and has considerably less government involvement in the economy than most U.S. free-trade partners.

(ii) the rule of law, political pluralism, and the right to due process, a fair trial, and equal protection under the law;

Political pluralism is flourishing in Haiti and legal rights are enshrined in the constitution and are actively promoted by civil society and the population. One cannot state that the rule of law exists throughout Haiti. Due to Haiti?s tragic history over the past quarter century, 82 percent of Haiti?s trained professionals live abroad. There are a great number of poorly educated and poorly paid civil servants prone to corruption.

However, substantial progress is being made to spread the rule of law through the island. The government has focused on creating a capable judiciary system?a crucial component in assuring there is rule of law. We have been very impressed with the quality of the new appointments. The Haitian police force supported by the U.N. forces on the island has become proactive in pursuit of the kidnapping rings that have sown terror in Haiti. The police and U.N. have recently launched an offensive against the gangs? strongholds in Cité Soleil and other areas, scattering the leadership of the gangs and establishing government presence in these areas for the first time in years. The international force is assisting in training and establishing internationally accepted standards for all elements of law enforcement and the judiciary.

(iii) the elimination of barriers toUnited States trade and investment, including by? (I) the provision of national treatment and measures to create an environmentconducive to domestic and foreign investment; (II) the protection of intellectual property; and (III) the resolution of bilateral trade and investment disputes;

The government and society of Haiti welcome U.S. investment, and the improvement of the investment climate was one reason why Haiti strongly backed the HOPE initiative. It is no deliberate policy but sheer lack of infrastructure, security, and legal capacity that is the main impediment to investment, both domestic and foreign. The HOPE act, by reviving a crucial Haitian industry, begins to address this crucial constraint. Unlike other countries including some FTA partners, Haiti has always welcomed foreign investment and treated it as favorably as it treated local investment.

(iv) economic policies to reduce poverty, increase the availability of health care and educational opportunities, expand physical infrastructure, promote the development of private enterprise, and encourage the formation of capital markets through microcredit or other programs;

The present government launched a “social-appeasement” policy aimed at countering the lure of the gangs, and Haiti?s international partners have pledged, and begun to disburse, billions of dollars to address basic human needs. The Haitian-American diaspora also pours in more than $1 billion a year in family remittances. If security can be reestablished and investment resumed, we believe these policies and concrete actions will begin to show success in reducing mass poverty and improving health and education.

(v) a system to combat corruption and bribery, such as signing and implementing the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions

Corruption and bribery have unfortunately become ingrained in Haiti?s government and folkways, as is the case in many other developing countries, and constitute a fundamental obstacle to progress. However, progress has been made recently. The previous government?that of the interim prime minister Gerard Latortue?did Haiti credit by establishing two investigatory commissions in Haiti that found serious embezzlement by the previous president, Jean-Bertrand Aristide. The Latortue government also launched a lawsuit in U.S. federal court seeking recovery of these stolen assets. The U.S. government is helping by trying and convicting a number of highly-placed drug traffickers who had operated with impunity in Haiti for many years. Together these investigations and convictions are effectively countering the long tradition of impunity enjoyed by corruptionists in Haiti.

These efforts are aided by Haitian civil society, the diaspora, and the international presence. Haiti has a chapter of Transparency International. A senatorial committee is looking into the corruption among its ranks, and the proceedings are followed by the media and civil society. A government-appointed prosecutor has expressed the will to root out all of the major corruption among the “untouchables” of Haiti, frequently powerful officials of previous governments. The administrator of the electoral commission was able to intercept fraud and hold three fair and accurately-counted elections in 2006.

A U.S. trade association representing U.S. protectionist textile interests and having no experience in Haiti, in a statement to the U.S. trade representative on February 13, 2007, has cited Haiti?s corruption as the main reason why President Bush should delay any decision to find Haiti eligible for the benefits of HOPE. The National Council of Textile Organizations claimed that Haiti would not produce textiles at all but would merely smuggle in Chinese finished products using its HOPE quota, and that it would be shielded in doing so by its endemic corruption, beyond the effective purview of U.S. customs enforcement.

This is simply not correct. Haiti is benefiting from special textile provisions under the CBI and has never been cited for violations involving transhipments. The fact is that the Haitian companies themselves realize the danger of such violations.

The law requires Haiti to present U.S. customs an acceptable visa system of control. It is at that time that the U.S. government will decide whether Haiti has a system capable of preventing transhipment. If it has such a system, it will be certified for HOPE benefits. The U.S. trade association?s arguments are premature and prejudge a system that is currently being created and will be judged by U.S. authorities in the future.

We also note that that the trade association has dramatically shifted its argument since last September. Then, it claimed that Haiti?s low-cost production would seriously harm U.S. textile manufacturing. Now it is claiming just the opposite: that Haiti would not produce at all but would sneak in others? goods.

The common point in the organization?s stance has remained opposition to HOPE, under which Haiti?s now-minuscule market share could rise to 1 percent of the U.S. garment market now and 2 percent in five years.

While ceding the point of Haiti?s ingrained corruption, we strongly question the claim that Haiti would not produce but merely smuggle. Haiti has the capacity and desire to produce.

In recent years, Haiti?s instability has grown and disrupted Haitian manufacturers? ability to win and keep overseas customers. Many were forced to close, as noted, but many also sought to keep their plants open or intact, pay their workers something even when there were no orders, and keep going somehow. This testifies to their desire to produce. This idle capacity and employer-worker bond remains and will be quickly reactivated with the economic incentive provided by HOPE.

During recent decades, Haiti?s workers and employers displayed impressive prowess in low-cost garment production. They do not need to smuggle out Chinese finished goods. They can make much more money by weaving Chinese and other yarn and assembling the products in Haiti. They know how to weave and sew. They have the experience, the capacity, and the willing and dexterous workers. There is a Haitian manufacturers? association, there are trade unions, and the self-interest of these sectors will insure that no one be allowed to endanger Haiti?s access under HOPE by smuggling finished goods.

(vi) protection of internationally recognized worker rights, including the right of association, the right to organize and bargain collectively, a prohibition on the use of any form of forced or compulsory labor, a minimum age for the employment of children, and acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health; (B) does not engage in activities that undermine United States national security or foreign policy interests; and (C) does not engage in gross violations of internationally recognized human rights or provide support for acts of international terrorism and cooperates
in international efforts to eliminate human rights violations and terrorist activities.

In the 1980s and 1990s, as U.S. activists rightly expressed concerns about overseas “sweatshops,” Haitian manufacturers got the message and took the steps to make sure that their market access would not be affected by this issue. It was relatively easy for them to do so because they could easily exceed Haiti?s low minimum wage and remain competitive. Also, the cost to them of assuring adequate lighting, ventilation, and work hours was low. The Haiti Democracy Project has visited factories in Haiti and found conditions to be decent.

Haiti has freedom for union-organizing and even militant and largely-political unions have appeared in the textile sector.

Haiti?s government does not engage in human-rights violations. Politically, there is a threat to certain individuals? rights from armed remnants of the Aristide government (two regimes ago), but it is not widespread nor countenanced by the present government.

Altogether, then, the Haiti Democracy Project and Manchester Trade consider that Haiti meets the criteria of the HOPE act. The scenario put forward by the U.S. textile association, that Haiti would hide behind its corruption to ship finished Chinese products, appears to us to be completely unrealistic in the Haitian scene. Knowing many of Haiti?s manufacturers personally, and with abundant experience with young, able Haitians who desperately seek remunerative work, we find it inconceivable that they would stand by idly and watch someone deprive them of their livelihood in this manner. On the contrary, Haitians can be very assertive in demanding their rights. They most definitely would be so if they saw the opportunity afforded by the HOPE act being threatened.

As progressive organizations the Haiti Democracy Project and Manchester Trade are also extremely sensitive to the claim of the American textile interests that workers in the rural South would lose their jobs. We simply find, however, that Haiti?s market impact, well below 1 percent now and allowable to a maximum of 2 percent in five years, is too minuscule to have the claimed effect. Furthermore, if there is competition with anyone, it is with China, not the United States. The textile association itself acknowledged this when it claimed that Haiti would ship finished Chinese goods rather than produce. By producing, Haiti would then displace Chinese goods, not American.

Since the expiry of quotas on January 1, 2005, it is China that has been the nine-hundred-pound gorilla in the world textile market with its low-cost labor and strong fabric industries. “Haiti’s production is so small that it’s not going to have any effect on the United States,” said apparel specialist Don Truluck of High Point, N.C., noting some factories in China produce more than all Haiti combined.

The jobs in question long ago left America. The United States now exports far more to Haiti than it imports. With the United States being the largest exporter to Haiti, the business generated by development in Haiti, as stimulated by the HOPE act, will go to U.S. exporters above all.

The humanitarian and policy reasons for the prompt execution of HOPE are also compelling. Even if it came at the expense of U.S. economic interests, which it does not, HOPE would be eminently defendable on humanitarian grounds alone simply because of Haiti?s intense poverty. From a policy point of view, it makes no sense whatever to maintain a U.N. mission in Haiti at the cost of a half billion dollars a year, and not to stimulate the Haitian economy so as to hasten the day of the mission?s departure.

Thus the Haiti Democracy Project and Manchester Trade present this testimony to the Ways and Means Committee, certainly as a supporters of Haiti and the cause of Haiti?s unfairly deprived and desperately poor masses, but not in a blindly partisan sense. We remain highly aware of the ills of Haiti, yet strongly believe that the government assisted by the private sector, civil society, the international community, and the Diaspora is making continual progress. Designation under HOPE will accelerate this progress and even help Haiti become ready to negotiation an FTA with the United States.

We would point out that in a number of areas Haiti is ahead of U.S. free-trade partners. In other areas, it is making continual progress in meeting HOPE criteria. It is our expectation that by the time certain HOPE provisions providing special access expire in about three years, Haiti will fully satisfy these conditions and could be ready to enter into a free-trade agreement with the United States. The possibility of such a step would galvanize the whole island to meet these conditions since HOPE only covers garment production and Haiti has the possibility of being competitive in many other sectors.

Not only would such exports help alleviate poverty and create jobs in Haiti, they would remove the discrimination that Haiti is currently experiencing vis-a-vis its neighbors who are members of FTAs. They would also displace imports from the Far East. Haitian imports would contain a significant amount of U.S. components, thus benefitting U.S. workers. The Asian imports it would replace contain hardly any U.S. components. The reciprocal elements of an FTA would also assure more exports to Haiti that will create jobs in the United States.