Economic Sanctions Against a Small U.S. Possession are Unwarranted, Says Group

Efforts by the Clinton Administration and several elected officials to place economic sanctions on a small U.S. possession are unwise and unwarranted, says The National Center for Public Policy Research.

On Thursday, April 29, Senators Spencer Abraham (R-MI) and Ernest Hollings (D-SC) are scheduled to hold a press conference to announce their support for what amounts to economic sanctions against a part of the United States, the U.S. Commonwealth of the Northern Marianas Islands, a U.S. possession located near Guam.

Abraham and Hollings, along with President Clinton, want the U.S. government to unilaterally alter the contract, known as the Covenant, made between the CNMI and the United States when the CNMI formally and voluntarily joined the U.S. in 1976.

According to a "Dear Colleague" letter signed by Abraham and Hollings on April 15, 1999, the Senators want the U.S. government to: 1) ban all CNMI-made goods from bearing the "Made in the USA" label, although these products are made in the USA (just as products manufactured Puerto Rico are); 2) impose custom duties on products made in the CNMI and sold elsewhere in the U.S.

"Senators Abraham and Hollings say they want to do this because some factories in the CNMI have Chinese owners and because labor complaints have been made about some of the 30 garment factories on Saipan," said Amy Ridenour, President of The National Center for Public Policy Research, who spent a week in the CNMI investigating charges. "But this ignores some basic facts. First, a majority of the garments manufactured in the CNMI are produced in factories owned by U.S. citizens. Second, U.S. government inspectors monitor employment conditions in the CNMI, and OSHA has reported that garment factories on the U.S. mainland have twice as many violations per inspection (5.3) as do CNMI garment factories (2.1). CNMI’s own Department of Labor and Immigration also conducts inspections, and has quadrupled the number of administrative hearings on labor-related complaints to 1,000 hearings a year. Since the population of the CNMI is small ­ estimated at 59,913 in 1995 ­ this means that workers with complaints can expect government action."

"Abraham and Hollings complain that, ‘Chinese factories operating in Saipan rely almost exclusively on low-paid and poorly treated foreign indentured workers,’" added Ridenour. "In fact, although temporary foreign workers are employed in Saipan due to a local labor shortage, the terms of their employment are regulated by the government. By law, each foreign guest worker must receive free housing, transportation, food and medical care, which costs employers the equivalent of $4.75 per hour, and, as of July 1997, must be paid a minimum wage of at least $3.05 per hour. While this is not a lucrative wage in much of the U.S, it is good money in Asia ­ approximately 8 to 12 times as much money as an equivalent worker in the People’s Republic of China is paid."

"Abraham and Hollings also emphasize the number of Chinese workers in the CNMI in their public statements," said Ridenour. "For the record, it should be noted that as of the 1995 census only 11.8% of the CNMI population, including foreign guest workers, was of Chinese descent."

The National Center for Public Policy Research believes that any concerns about employment conditions in the CNMI should be handled as they are on the mainland: by U.S. and local government inspectors who have the authority to enforce government employment regulations. These inspectors are on the job in the CNMI.

"One of the most ludicrous comments made by Abraham and Hollings on this issue is their comment that part of the reason they endorse the policies they do is from a desire to end ‘hurt [to] legitimate enterprises operating legally in U.S. territories and possessions.’ In fact, removing the ‘Made in the USA’ label from CNMI goods and imposing import duties upon them will hurt every business in the CNMI that exports to the U.S., including those owned by U.S. citizens who have done nothing wrong."

"If Abraham and Hollings don’t want Chinese businesses operating in the U.S., they should simply say so," said Ridenour, "and perhaps introduce legislation banning Chinese-owned businesses from operating in the U.S. We wouldn’t necessarily consider such a step sound public policy, but it would be intellectually honest, and it would presumably apply to all 50 states and all U.S. possessions, rather than singling out one rather poor possession that lacks the political power to defend itself. We must remember that the CNMI does not have factories out of a desire to vex mainland politicians. It does so for the same reason there are factories in Detroit or Charleston. In 1980, 80% of the CNMI government’s funding came from subsidies paid for by taxpayers on the mainland. Today, excluding some capital improvement funding, the government of the CNMI takes no tax money from the mainland, in large part because the local garment industry pumps $130 million annually into the local economy. The CNMI is essentially getting itself off welfare. This is not a trend we should try to reverse."

The National Center for Public Policy Research is a non-partisan Capitol Hill think-tank established in 1982. It has received no cash contributions from the government of the CNMI nor any business operating in the CNMI. Contact David Almasi at (202) 507-6398 x106 or visit on the Internet.

The National Center for Public Policy Research is a communications and research foundation supportive of a strong national defense and dedicated to providing free market solutions to today’s public policy problems. We believe that the principles of a free market, individual liberty and personal responsibility provide the greatest hope for meeting the challenges facing America in the 21st century.