Although President Reagan's Caribbean Basin Initiative has attracted more attention than trade during its first year, most observers say the program shows signs of success in drawing investment away from the Far East to help develop Caribbean and Central American countries.
Bolstered by a strong dollar, imports from 20 countries eligible for CBI's duty-free status on designated products were up 17 percent six months after the program's inception. However, imports from 121 other developing countries with similar tariff waivers were up 28 percent.
"It's really too early to tell just how effective CBI is going to be," said Jon Rosenbaum, assistant U.S. trade representative. "It was made a 12-year program because it can take two years and even four for a business to get going. CBI is not a quick fix. It was meant for the long run."
Over the last year, many government agencies, beneficiary countries and individual businessmen have promoted CBI with almost missionary zeal. The CBI information center of the Department of Commerce held seminars in 35 U.S. cities and nine foreign countries. The Overseas Private Investment Corporation (OPIC) and the Department of Commerce took missions of businessmen to many countries, and the nations themselves hosted several missions.
Fred Brooke, chairman of MacGregor Sporting Goods, in East Rutherford, N.J., personally invited 22 businessmen to Haiti, where he has been established since 1976. "The Caribbean had an image problem," Brooke said. "People thought there was a revolution a week."
As a result of the various incentives, the CBI information center receives 150 inquiries a day; Haitian commercial attache' Harold Joseph's telephone rings constantly, and three of Brooke's corporate guests, one of them Coleco Industries Inc., have set up in Haiti, with three others now in exploratory phases. Also, OPIC, which insures against revolution, wrote 32 new policies in 10 CBI countries last year.
"The U.S. has never before had a preferential trade program," Rosenbaum said. "This is a unique situation. And I don't think the need will arise again." The Reagan administration hopes to stabilize the region politically through free enterprise that would result in improved social conditions. The U.S. government has spent about $2 billion on CBI since it was conceived in 1982. The Agency for International Development spent almost $800 million last year on CBI-related projects.
"The area was leaning left," said Peter Johnson, director of Caribbean/Central American Action, a privately funded organization committed to economic development. "St. Lucia, Dominique, Jamaica, St. Kitts were all left. Without CBI, I doubt if Reagan would have had the invitation to go into Grenada."
The push on, countries have become healthily competitive, luring investors with cheap labor, longer tax holidays, streamlined paperwork -- even offers of citizenship targeted at Hong Kong businessmen, whose country faces reclamation by China in 1997, and at Palestinian entrepreneurs in the Persian Gulf, who have difficulty obtaining visas.
"Our ideal investor is usually a middle-sized firm looking for a long-term arrangement to have a product manufactured for a U.S. company that already has a need for that product," said Larry Theriot, director of the CBI information center. Theriot attempts to match potential investors with in-country firms that provide the plant, labor and management to oversee packing, shipping and red tape. The investor needs to supply only raw materials, machinery and top management.
For duty-free status, the product must have 35 percent of its value added in an eligible country. This means a blouse might be cut out in the United States or the Far East, shipped to the Caribbean for stitching and then sent to the United States for marketing.
If there is a jewel in CBI's crown, ironically it is Haiti, the region's poorest country. "No one was better prepared to take advantage of CBI," Theriot said. "The Haitian businessman is very sophisticated and professional. The country has virtually been a free zone since the late '60s. The people are nice."
More than 250 firms already have located in Haiti, which has a minimum wage of less than $3 a day (Taiwan's is $10 a day). Almost all baseballs and brassieres are assembled there, along with electronic and sporting goods, textiles and toys. Assembled goods for export were valued at $60 million last year, compared with $2 million 10 years ago. "Most of this is due to the end of the world recession," said Claude Levy, director of Association des Industries d'Haiti. "But the CBI has attracted positive attention to my country."
Neighboring Dominican Republic established 21 new free-zone factories in the past year and has a waiting list for space now under construction, according to Wilson Rood, director of the American Chamber of Commerce there.
Of all CBI's critics, labor remains its most consistent. "When we have unprecedented trade deficits and 7.2 [percent] unemployment, it's ironic we are encouraging a program which will create higher deficits and fewer jobs at home," said Mark Anderson of the AFL-CIO.
Other critics want to remove the quota on sugar and to reconsider the exemption of certain products that were objects of strong lobby before legislation, such as textiles, leather wearing apparel and canned tuna. "Only 10 percent of imports from the area qualify," said one detractor, "and two-thirds of those were coming in duty-free already under GSP," the generalized system of preferences.
Although proximity has been one of CBI's selling points, shipping rates remain staggeringly high. "They'll come down," Johnson said, "when we have more to put in the holds."
"I think over the long haul CBI will work" said Margaret Hayes of the Council of the Americas, "but it will take a good quota of luck and timely conversion of trends. Business is faddish and was headed there anyway. Right now, the economy is cooperating.
"Many countries have expected people to come to them. It's going to require changes on their part, in laws and in favorable attitudes toward foreign investors. CBI's not a giveaway. It's something they have to work for," she said.