Commonwealth of the Northern Mariana Islands Testimony



David B. Cohen

Deputy Assistant Secretary of the Interior for Insular Affairs

Before the

Senate Committee on Energy and Natural Resources


Labor, Immigration, Law Enforcement and Economic Conditions

in the

Commonwealth of the Northern Mariana Islands

February 8, 2007

Mr. Chairman and members of the Committee, thank you for the opportunity to testify on the important issues facing the Commonwealth of the Northern Mariana Islands (CNMI). I come before you today wearing at least two hats: As Deputy Assistant Secretary of the Interior for Insular Affairs, I am the Federal official that is responsible for generally administering, on behalf of the Secretary of the Interior, the Federal Government's relationship with the CNMI. I also serve as the President's Special Representative for consultations with the CNMI on any matter of mutual concern, pursuant to Section 902 of the U.S.-CNMI Covenant.

Mr. Chairman, we would like to thank you and Senator Domenici for the comprehensive set of questions that you recently asked Secretary of the Interior Dirk Kempthorne on labor, immigration, law enforcement and economic issues in the CNMI. We have done our best to provide the information that you requested, and we have also identified areas where important information is currently unavailable. I will not use my statement to summarize the information that we have gathered for you, although I will be happy to answer questions about it and look forward to reviewing and discussing that information with your Committee's staff in the weeks ahead. Rather, I will provide a general summary of the current state of affairs in the CNMI as we see it, followed by some thoughts about where we might go from here.

I testified before this Committee last March about the very difficult economic and fiscal challenges that the CNMI was facing as its only two major private sector industries, garment manufacturing and tourism, were facing significant declines at the same time. The situation has changed since then. It has gotten worse.

The most compelling challenge that the CNMI faces today is how to deal with a deepening economic crisis that has triggered a growing fiscal crisis. Both of the CNMI's major industries continue to decline rapidly and simultaneously. Between 2000 and 2006, garment sales declined 49.5 percent, from $1 billion to $527 million. According to the CNMI Department of Finance, garment makers contributed, directly and indirectly, 37.9 percent of general fund revenues in fiscal year 2000. In fiscal year 2006, that share was down to 25.1 percent- and it is headed down still further since garment factory closing continues. In 2000, there were 34 holders of garment making and shipping licenses in CNMI. In December 2006, after the closure of Concorde Garment Manufacturing Inc.'s factory caused the loss of approximately 1400 jobs, only 19 garment factories remained.

The CNMI's other major industry, tourism, is also experiencing troubling declines. Just as the industry, dependent more heavily on Japan than it is on any other market, was recovering during the middle of the decade, Japan Airlines (JAL) discontinued flights to the CNMI in October 2005. This was a major setback to the CNMI's tourism industry because JAL carried 40 percent of all Japanese tourists to the CNMI and 29 percent of all tourists to the CNMI. With no carrier filling the void immediately and others only incrementally during 2006, tourist traffic was down 16 percent during the year. The tax contribution of tourism to the CNMI treasury cannot be measured as directly as that of garment manufacturers. However, it is reasonable to say that tourism is the only other major source of income and taxes in the CNMI.

The simultaneous decline of the CNMI's only two major industries has caused government revenues to decline sharply, dropping approximately 25 percent from $221.2 million in 2004 to a projected $165.8 million for the current fiscal year. Continued declines of this magnitude would cast doubt on the CNMI government's ability to remain solvent and to provide even the most basic critical services to CNMI residents.

I would like to also address the labor situation in the CNMI. Much has transpired since this Committee last held an oversight hearing on this subject in September 2000. The following are examples of the significant progress that the CNMI government has achieved since then:

  • The independent Garment Oversight Board has been in place since 2003 as a result of a class-action lawsuit. The Board monitors compliance by CNMI garment factories with 59 standards relating to working and living conditions. The Board, which is made up of three former judges (including former California Supreme Court Justice Cruz Reynoso and former Washington Supreme Court Chief Justice Richard Guy), has engaged the nonprofit organizations Verité and Global Social Compliance to conduct comprehensive inspections of each factory twice a year (with additional inspections as necessary). A factory placed on probation as a result of a failed inspection loses its eligibility to sell to 26 major retailers.
  • The Federal Ombudsman's Office reports that the number of complaints filed annually had been reduced by over 60% since the inception of the office in 1999: from 1221 complaints per year to 473. In recent years, the complaints generally have concerned matters less grievous in nature than those identified in the early years.
  • In 2003, the CNMI government signed a Memorandum of Agreement with the Department of the Interior's Office of Insular Affairs to establish a refugee protection system. Under the guidance of U.S. Citizenship and Immigration Services, the CNMI amended its immigration statute, promulgated implementing regulations, and established a refugee protection program with financial assistance from the Office of Insular Affairs.
  • Under the Memorandum of Agreement with the Office of Insular Affairs, the CNMI also agreed to cooperate with the United States to combat human trafficking. In furtherance of that goal, the CNMI enacted the Anti-Trafficking Act of 2005.
  • In 1999, 23 garment factories entered into a strategic partnership with the U.S. Department of Labor's Occupational Safety and Health Administration (OSHA) that requires each participant to maintain a formal, written safety and health management system for each worksite and associated staff housing, and to establish a joint employer/employee safety and health team. OSHA credits this program with reducing the lost workday injury rate in these factories to well below the average for the industry nationwide. OSHA reports that over 44 full time health and safety managers have been hired by the garment factories pursuant to this partnership.
  • The CNMI government has negotiated agreements with the Chinese Economic Development Association to pre-screen Chinese nationals coming to work in the CNMI, limit the fees the workers can be charged by approved recruiters, and intercede on the workers' behalf when a dispute arises; implemented secondary preference for jobless alien workers already present in the CNMI;and completed a comprehensive revision of the alien labor rules and regulations to guarantee due process rights to alien worker complainants. While this type of pre-screening is not intended to, and does not, substitute for a visa screening process administered as a foreign affairs and national security function of the United States, it does assist in regulating the numbers of nonresident workers who come to work in the CNMI, ensuring that some minimum standards are met with respect to the qualifications of those workers, and in protecting their legal rights.
  • We congratulate the CNMI Attorney General's Office for aggressively investigating and winning convictions against club owners who pressured foreign employees into prostitution.

We give the CNMI government a great deal of credit for the progress that has been made in the last several years. A number of others deserve a great deal of credit as well, including Members of Congress who have pushed for reforms, the garment workers and their attorneys who brought the class action suit against the garment industry, international non-profit organizations such as Verité which conduct rigorous inspections of the garment factories, and longtime workers rights advocates such as former California Supreme Court Justice Cruz Reynoso who have worked to oversee the inspection regime. We recognize, however, that the situation remains far from perfect, and we continue to have a number of concerns. For example:

  • The CNMI Department of Labor still has too few experienced investigators and hearing officers to deal with the labor complaints that have been generated. Although about 1200 of the backlogged cases dating back to 1997 were recently closed, those cases were the ones most readily resolved (such as default cases and those where no further investigation was needed). Meanwhile, the CNMI Department of Labor continues to fall behind in completing its investigations and adjudications, resulting in 1349 cases still pending from 2004, 2005 and 2006.
  • We believe that enforcement in labor cases is hampered by an insufficient commitment by the CNMI law enforcement authorities to prosecuting or sanctioning repeat offenders.
  • We are concerned about foreign attempts to influence the adjudication of particular cases in the CNMI's fledgling refugee protection program.
  • We continue to be concerned about reports that increasing numbers of laid-off garment workers are turning to prostitution.
  • The CNMI's current fiscal crisis casts doubt on its ability to ensure the timely repatriation of thousands of garment workers employed by factories who may not have the resources to pay their wages in full and provide them a plane ticket to their point of hire. In addition, of the bonding companies who have a secondary obligation to pay back wages and provide tickets, a majority do not have sufficient assets to meet their obligations.
  • On November 30, 2006, the CNMI held a Workforce Development Summit cosponsored by the Northern Marianas College Small Business Development Center and the CNMI Workforce Investment Agency. The goals of the Summit were twofold: (1) offer an in-depth discussion of employment issues facing local residents and the public and private sectors, and (2) gather business and government leaders to discuss the CNMI employment needs with a goal of developing the local workforce to fill positions that are currently occupied by foreign employees. The Summit brought together business and government leaders to discuss the CNMI's critical employment needs so that government counseling, training, education, financial assistance, internship and placement programs could unify their efforts and maximize resources to develop the necessary resident labor talent. As a result, the CNMI is creating a demand-driven talent development action plan that will result in a higher percentage of resident workers employed in the private sector. The U.S. Department of Labor's Employment and Training Administration is assisting the CNMI with mapping their public and private resources and assets to begin development of their talent development action plan.

The labor situation in the CNMI is inextricably linked to the fiscal and economic situation. The most significant threat to the human rights of foreign employees in the CNMI today is the deteriorating economy. This manifests itself in a number of ways, including by depriving the government of the resources that it needs to effectively prevent, investigate and prosecute labor abuse. The closure of large garment factories places significant demands upon the local government, and simultaneously causes the government to lose revenues that it desperately needs to meet those demands and all of its other obligations. This mutually reinforcing negative cycle illustrates that while the departure of the garment industry may be in the long-term best interests of the CNMI, an immediate, abrupt departure is not. Change is necessary, but we should be wary of exacerbating a situation that is already fraught with peril.

In addition to these concerns, we remain troubled by the serious structural imbalances in the CNMI economy and in CNMI society. The CNMI remains a two-tier economy where the private sector is overly reliant on foreign employees, and where the indigenous population is overly reliant on the public sector for employment. Because of the unique economic structure of the CNMI and the fact that approximately 50% of the residents are foreign employees, the ability to import labor is a factor that tends to depress wages in the private sector, which in turn tends to reinforce the reluctance of U.S. citizens to work outside of the public sector. There have been attempts to address this unique structural problem through local legislation, but the problem persists.

Additionally, having a large alien work force with little economic power and relatively limited legal rights has created a great risk of exploitation and abuse in the CNMI. As noted above, the CNMI has made commendable progress over the last several years in curbing labor abuse. Our experience tells us, however, that excessive reliance within the CNMI on a foreign, low-wage work force creates a risk of abuse. That risk could be overcome with a high level of effort, vigilance and resources, but it would probably be difficult to sustain such efforts under the CNMI's current fiscal and economic conditions. Perhaps we would not all have to work so hard to prevent abuse if the structure of the CNMI's economy did not give rise to such risks. And eliminating the most overt forms of abuse will not necessarily eliminate subtler forms of exploitation that arise when foreign employees have little power and a great deal to lose if they assert even the limited rights they have.

Mr. Chairman, I call to your attention the unique situation of the long-term foreign employees that have become an integral part of CNMI society. A number of foreign employees have been working in the CNMI for five, ten, fifteen or more years. Many are raising children in the CNMI, and their children are U.S. citizens. These employees were invited to come to the CNMI because they were needed, they came and have stayed legally, and they have contributed much to the community. They were essential in building the CNMI economy from the ground up from what it was at the inception of the Commonwealth: a rural economy with little industry, tourism or other commercial activity. Long-term foreign employees are integrated into all levels of the CNMI's workforce and society, serving as doctors, nurses, journalists, business managers, engineers, architects, service industry employees, housekeepers, farmers, construction workers, and in countless other occupations. I hope that the Committee and the CNMI Government will keep the situation of these long-term members of the CNMI community in mind as they consider reforms to the CNMI's immigration system.

We stress, Mr. Chairman, that the CNMI's situation is unique, and that our discussion of the CNMI should not be extrapolated to draw observations about other economies, including that of the U.S. as a whole. The CNMI's proportional reliance on foreign labor is overwhelming when compared to that of many other economies, including the U.S.'s economy as a whole; foreign employees constitute approximately half of the CNMI's population. The CNMI also has the ability to admit foreign employees from low-wage economies in the region without being subject to Federal laws designed to protect opportunities for the U.S. workforce. The sheer scope and scale of the foreign labor situation in the CNMI make the CNMI a special case.

The question, Mr. Chairman, is not whether the CNMI's current economic structure is a good one. It is not. The question is how to help the people of the CNMI build a strong, prosperous and just society without causing needless pain and suffering to innocent people—including the foreign employees—in the transition. The Administration is committed to working with Congress and with the CNMI's representatives to establish a framework that will allow the people of the CNMI to build such a society. We are ready to explore with you and with the CNMI's representatives various options for establishing such a framework, including federalizing the CNMI's immigration system in a manner that would not cause needless economic or fiscal harm. Since federalization would constitute a paradigm shift from the current system, we believe that various options for federalization should be considered carefully in order to avoid unintended consequences. We would respectfully offer the following as suggested principles to guide any discussion of federalization:

First, we must ensure that national security and homeland security issues are properly addressed. In a post-9/11 world, this principle must take priority over all others. Any proposal should be fully vetted by the experts at the Departments of Homeland Security, State, and Justice to ensure that it provides adequate protections for the CNMI and for the rest of the U.S.

The second principle is that, subject to the need to address compelling national security and homeland security concerns, we should minimize damage to the CNMI economy and maximize the potential for future economic growth. We must recognize that the CNMI is in a very fragile economic and fiscal condition. The Federal Government must make every effort to avoid imposing measures that could plunge the CNMI even deeper into crisis. The cash-strapped local government, which is struggling to absorb sharp decreases in revenues, is already unable to provide critical services such as water and power in a reliable fashion. If the current crisis is exacerbated, it could endanger the health, safety and welfare of innocent people, threaten the public order, and leave large numbers of foreign workers jobless and stranded.

Once the CNMI gets through the current crisis, it will have to build a sustainable economic future. This is probably an opportune moment in the CNMI's history for the people of the CNMI to engage in a facilitated process to develop a homegrown strategic plan for its economic future. The process should involve all segments of society, and the ultimate product should be one that the large majority of the community is willing to buy in to. If the CNMI were to embark on such a process, there would not necessarily be a need for Congress to delay its effort to establish a framework for a new immigration system. We would suggest that Congress build sufficient flexibility into that framework, however, so that the CNMI's vision for its future could be duly considered and, to the extent possible, accommodated when it is ready.

Regardless of whether such a strategic planning process occurs or what it produces, we should recognize that the CNMI's unique circumstances should be taken into account. By controlling its own immigration system, the CNMI enjoys a competitive access advantage—in other words, it has the ability to make it easier for certain classes of visitors to enter the CNMI than to enter the rest of the U.S. This competitive access advantage enabled the CNMI to reach out to other tourist markets after it lost a significant share of its Japanese market. It has also allowed the CNMI to consider legitimate economic opportunities that might arise from admitting students, retirees, investors and others who might not have easy access to the rest of the U.S. If the CNMI were to lose its competitive access advantage with respect to legitimate foreign visitors, it would significantly restrict the already limited range of options that the CNMI has to build a viable economy.

As part of the bargain through which the CNMI currently retains the flexibility to control its own immigration system, the U.S. seeks to insulate itself from the impact of CNMI immigration decisions by maintaining a “second firewall” between the CNMI and the rest of the U.S. Aliens seeking admission to the CNMI must be processed and inspected through CNMI immigration procedures, which could be thought of as the “first firewall.” Admission to the CNMI confers no right of admission to the rest of the U.S. Aliens seeking to travel from the CNMI to the rest of the U.S. must apply separately for admission to the U.S., and all persons traveling from the CNMI to the rest of the U.S. are inspected as if they were arriving from a foreign country (the “second firewall”). While DHS has statutory authority to inspect and determine the admissibility of aliens proceeding from all insular territories to the remainder of the United States, including those territories governed by U.S. immigration law, the “second firewall” authority is broader and more significant in the case of a territory like the CNMI which operates its own immigration system.

Even under an immigration system administered by the Federal Government, the law could provide greater flexibility to admit foreign visitors to the CNMI than is currently allowed under the Immigration and Nationality Act. This greater flexibility could be justified by the fact that the CNMI's economic viability is arguably dependent upon having it. As with the current system, the U.S. could seek to insulate itself from any impact to the rest of the U.S. from granting greater flexibility to the CNMI by maintaining the “second firewall” between the CNMI and the rest of the U.S. Under such a scenario, aliens entering the CNMI after qualifying for special visas or visa waivers would have to qualify separately for admission to the rest of the U.S., and all persons traveling from the CNMI to the rest of the U.S. would continue to be inspected as if they were arriving from a foreign country.

We raise these ideas not as concrete proposals, but as discussion items that Congress, the Administration and the CNMI government could explore together. The underlying point here is that for the CNMI to build a viable new economy, it will likely need to remain readily accessible not only to a reasonable number of workers, but, more importantly, to customers such as tourists and students. Achieving this objective may require some degree of flexibility and creativity.

The third principle is that we must ensure that the new CNMI economy is not as conducive to worker exploitation and abuse as was the old CNMI economy. Since the CNMI has a very limited indigenous labor pool, it is reasonable for its economy to rely to some degree on foreign workers. But the mistakes of the past must not be repeated, with a large class of politically powerless foreign employees populating the lower tier of a two-tier CNMI economy, regulated by a government without adequate resources to prevent exploitative practices.

The fourth principle is that we should carefully analyze the likely impact of major proposals before we implement them. Just as we would not perform major surgery on a patient without first performing a detailed diagnosis and medical analysis, and just as we do not build even schools or hospitals without conducting an environmental analysis or impact study, neither should be attempt to perform major surgery on the CNMI's economy and society without first analyzing the likely impact. Labeling our efforts as “reform” does not relieve us of the responsibility to carefully consider the potential consequences of our actions before we take them. This is especially true when we are dealing with an economy and society that is as fragile and potentially volatile as that of the CNMI. If we leap before we look, we could inadvertently and needlessly hurt people that we are trying to help. We should, however, be expeditious in our analysis, and not use the need to study as an excuse to delay. The people of the CNMI are eager to get on with their future.

The fifth and final principle is that we must ensure that the people of the CNMI participate fully in decisions that will affect their future. A better future for the people of the CNMI cannot be imposed unilaterally from Washington, D.C., ignoring the insights, wisdom and aspirations of those to whom this future belongs.

Mr. Chairman, three years ago this month, I testified on behalf of the Bush Administration before the House Committee on Resources in favor of granting the CNMI a non-voting delegate to the U.S. House of Representatives. In my testimony, I spoke of the courageous military service to two Chamorros: Captain James Pangelinan, who served with the 25th Infantry Division in the Sunni Triangle and has since been promoted to Major, and Specialist Monique Sablan, who was seriously wounded in Iraq while serving with the 101st Army Airborne Division. If I may, Mr. Chairman, I would like to read a short passage from my testimony from three years ago:

Capt. Pangelinan and Specialist Sablan have put their lives on the line so that the people of Iraq can achieve the dream of a democracy, in which every community is represented in an elected national government. Other servicemen and servicewomen from the CNMI are fighting so that the people of Afghanistan can achieve the same dream.

…[T]hese brave young men and women from Saipan, from Tinian, from Rota, have the same dream for themselves as they do for the peoples of Iraq and Afghanistan. They dream of being represented in the national legislature of their country, the country whose uniform they proudly wear, the country that they proudly defend. They dream that they will one day have the representation that has been afforded to every other state, territory and commonwealth in the American family.

Mr. Chairman, since I delivered that testimony, I have attended the funeral of Army Sergeant Wilgene Lieto in Tanapag, of Army Specialist Derence Jack in Chalan Kanoa, and of Army Sergeant Eddie Chen in Arlington National Cemetery. Just last week, Mr. Chairman, we lost Marine Lance Corporal Adam Quitugua Emul of Tanapag, killed in action in Iraq. These sons of Saipan died so that the people of Iraq could enjoy rights that are still not enjoyed by the loved ones that these brave young men have left behind.

Before considering legislation that would drastically change the lives of the people of the CNMI, we hope that Congress will consider granting them a seat at the table at which their fate will be decided.

Thank you.

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