When the U.S. GAO released its minimum wage report, however, it was as if the chamber regressed to its old role as the defender of the status quo which included the late and lamentable garment industry.
“It was increased wage rates that drove the industry out of Saipan, not [international trade rule] changes,” declared the chamber in its comments regarding the report. But most garment factories on island began shutting down when the new international trade rules took effect in 2005 or two years before the feds did what CNMI leaders had been promising to do since the mid-1980’s: increase the local minimum wage rate.
As noted by the GAO report, the 2008 McPhee & Associates and Conway study commissioned by ex-garment executive Uncle Ben found that “lifting of quotas on garment imports to the United States had rendered the CNMI’s garment industry unfeasible….”
The chamber claims that the elimination of the garment industry “has had the single largest negative effect on the CNMI economy.” But one can also reasonably argue that its existence has had the single largest negative effect on the CNMI. An Interior report that was ignored by CNMI leaders noted that the actual cost of hosting the factories was more than the revenue collected from the industry which was exempted from paying the business gross revenue tax.
In any case, blaming the feds for the industry’s demise is like blaming a train for running over a pedestrian who took a nap on the railroad track.
As the GAO report pointed out, the industry grew and expanded during a time when international rules governing apparel and textile trade were being renegotiated. In short, the manufacturers and the CNMI officials in their pockets knew what they were getting into:
“The Uruguay Round of Multinational Trade Negotiations, initiated in September 1986, agreed to an objective of integrating the textile sector into the General Agreement on Tariffs and Trade, thereby contributing to further trade liberalization. Negotiations on textiles began in 1987, and by December 1991 the proposed final agreement brought the sector into conformity with the General Agreement on Tariffs and Trade over a 10-year period; this would be accomplished through several stages by which imports could increase until all quota restrictions were ended after 10 years. In 1994, the United States agreed to the World Trade Organization Agreement on Textiles and Clothing to remove quota restrictions in a series of stages beginning on January 1, 1995, and ending with the removal of all remaining quotas on January 1, 2005….. The end of U.S. quotas on apparel imports in 2005 negated the value of quota-free status for Guam and the CNMI. CNMI textile exports to the United States began to fall in advance of the final quota removal.” My italics.
CNMI leaders were aware that the industry would not be here forever. Instead of preparing for the inevitable during the 10-year transition period, they lifted the moratorium on the hiring of more nonresident garment workers. The moratorium was imposed in the late 1980’s as part of the commonwealth’s “reform measures,” which included a limit on the stay of guest workers in the CNMI. At that time, the Reagan and Bush Sr. administrations were already inclined to federalize local immigration but this was blocked by congressional Democrats, including George Miller, who wanted to give the commonwealth an opportunity to implement local reforms.
Such measures included the gradual increase, by 30 cents, of the local minimum wage rate until it reached the federal rate. These “reforms” were eventually repealed at the behest of garment manufacturers.
The “success” of garment factories that exported “Made in the USA” clothes sewn by nonresident workers who were paid way less than the federal rate provoked intense federal and U.S. media scrutiny and battered the CNMI’s global reputation. CNMI leaders assumed they could “lobby” their way out of the gathering storm. They decided to bet everything on Delay and Abramoff’s U.S. House Republicans. Except for CNMI leaders and their garment friends, everyone else was aware that the U.S. was a two-party system and that the party out of power — the U.S. Democrats — would one day be in power. That day came in Jan. 2007 and the predictable result was the federalization of local minimum wage and immigration.
The CNMI had so many opportunities to avoid an economic meltdown. Instead, it made very bad choices.
So what else could the CNMI have done to make the factories stay on Saipan? Reduce the then-$3.05 per hour rate to $1? Scrap the user rate?
Legalize child labor?
It is useless to bang one’s head against the wall of reality. The party’s over. The very low wages that made these islands attractive to labor-intensive investments are now history. And whining over the departure of a sordid industry that created so many problems for the CNMI will not improve its worsening economy.
Send feedback
