Drawing on internal U.S. government files --obtained from Commerce Department and USAID through Freedom of Information Act requests-- as well as from internal company contracts for offshore production and pricing acquired from anonymous sources, the National Labor Committee has been able to penetrate the surface rhetoric to examine "free trade" from within, as it was shaped behind closed doors. The information we have unearthed and the story it tells bears little resemblance to the idyllic image presented by the Clinton Administration on the eve of the Nafta vote. Let us see what the record actually reveals.

Commerce Department files show that they were writing and "cold calling" U.S. companies encouraging them to relocate offshore, where with wages of $1.00 an hour in the Caribbean they could expand their profit margins. Company executives were told by Commerce that they "owed it to their company" to consider offshore production.

It was the Commerce Department which introduced Westinghouse to the Dominican Republic, where Westinghouse could avoid U.S. corporate taxes and pay wages 15 percent of those in the U.S. Westinghouse immediately built five plants in the Dominican Republic and then shut its Connecticut plant, Bryant Electric. Six hundred workers lost their jobs, with $21 million lost in wages and tax revenues.

Did you ever wonder how U.S. companies shed their U.S. workforce to go offshore where they pay 51 cent-an-hour wages, yet their prices stay the same? Take Lee Apparel Company, for example, which makes pants in the Caribbean and ships them to the U.S. at a total cost of $6.62 and then sells them at a 514 percent mark-up for $34.00. Or take Abbott Laboratories, which has received $1,068,000,000 in tax breaks from the U.S. government since 1980. In the Dominican Republic, Abbott Labs pays its employees a little over $2,000 a year, and then gouges the U.S. public with 300 to 500 percent mark-ups on intravenous sets assembled there and exported to the U.S. duty-free. The Abbott Labs example unites the national debates over free trade, job loss and sky-rocketing health care costs, and does it based on concrete facts.

Baseball caps being worn in the recent major league playoffs were made by a Korean firm operating in a free trade zone in the Dominican Republic, where the workers, mostly women, were forced to work 12-hour shifts for 50 cents an hour. If they did not keep up with the production quota set by management, they were struck and threatened. A major league baseball cap costs $4.00 to make from beginning to end (using all Asian inputs) and sells in the U.S. for over $20.00.

U.S. taxpayers continue to give tens of millions of dollars to subsidize low-interest loans for the largest multinationals in the world, such a Texaco, Amoco, Mobil, ATT and DuPont. The U.S. taxpayers are at this moment about to subsidize a $75 million low-interest loan to the corrupt Honduran military.

USAID's model of development in Latin America is the Dominican Republic. Between 1982 and 1992 the U.S. Government provided the Dominican Republic with over $840 million in aid. Ninety-seven percent of this aid was to assist the private sector to create jobs. The employment the Dominican Republic got was an explosion of export processing zone jobs which increased from 16,000 in 1980 to 170,000 in 1993. As the number of assembly jobs producing for the U.S. market rose by over 1000 percent, real wages were slashed 49 percent.

Under the U.S. government-sponsored model, wages fell, poverty increased, income disparity widened and the Dominican Republic spent less on health care and education than any other country in the world except one.

However, trade between the U.S. and the Dominican Republic appeared to soar. The Dominican Republic became the 7th largest market for U.S. exports in all of Latin America, and exports create U.S. jobs. On closer inspection though, the National Labor Committee discovered that a full 50 percent of all U.S. "exports" to the Dominican Republic were merely U.S. components being shipped offshore for assembly and then re-export to the U.S. market.

To get an idea of the size and impact of U.S. government investment, trade and aid programs in the Dominican Republic, consider the following: In 1992, the U.S. exported $437 million dollars of apparel to the entire European Economic Community. This amounted to about one percent of the total EEC import market for apparel. Not a very impressive showing. However, the Dominican Republic, which is the size of Vermont and New Hampshire combined, exported $1.2 billion worth of apparel to the U.S. in 1992. The Dominican Republic exported more than two-and-a-half times the amount of apparel to the U.S. than the entire U.S. exported to all of Europe.

We will show that over the last decade the U.S. government spent more effort and was more successful in exporting jobs in pursuit of the low wage track than it did helping U.S. companies export products.

The Dominican Republic was the number one beneficiary in the Caribbean Basin of the CBI-sponsored trade and investment benefits. The most comprehensive review to date of U.S. companies with operations in the Dominican Republic reveals that these companies were involved in plant closings and mass layoffs costing over 35,000 jobs in the U.S. over the last few years. At this moment, an American Tourister plant is shutting down in Rhode Island. American Tourister can assemble its garment bags in the Dominican Republic for a total labor cost of $1.53 and sell the bags for $259 in the U.S. OshKosh closed a plant in Tennessee this last June and relocated production to its plant in Honduras. Timberland has 76 percent of its workforce outside the U.S. mainland. It cost Timberland about $14.50 to make a pair of boat shoes offshore which then sell for $85 in the U.S.

There are at least 320,000 maquiladora workers--overwhelmingly women-- producing apparel in the Caribbean Basin for the U.S. market. These women's basic human and labor rights --supposedly 'guaranteed' under U.S. trade law-- have been consistently violated over the last decade.

A soon-to-be released General Accounting Office study confirms National Labor Committee findings that workers employed in export processing zones throughout Central America and the Caribbean have had their most basic internationally recognized worker rights denied. Workers are routinely fired and blacklisted for attempting to organize. This is also the case at offshore U.S. companies. The GAO confirms that USAID did not concern itself with worker rights issues offshore or job loss in the U.S. that might result from its programs.

Why is the NLC investigation especially relevant now?

  1. Upcoming Nafta debate and vote.
  2. Release of GAO report on offshore production in the CBI countries.
  3. United States Trade Representative decision on worker rights violations in the Dominican Republic.
  4. Holiday shopping/interest in prices.
  5. Debate over rising healthcare costs.







U.S. Commerce Department Sends Jobs Offshore


In attempting to organize an investment promotion mission to the Caribbean Basin region, the U.S. Department of Commerce sent the following letter to over 1,000 U.S. businesses:

"The Informational Industries Mission to Barbados and Jamaica will allow a select dozen U.S. firms to evaluate and take advantage of pre-screened business opportunities in the developing world's two leading offshore centers for information processing....

"Barbados and Jamaica offer a unique combination of educated, low-cost workers, highly developed telecommunications services, and geographic proximity; which together equal profitability and productivity for U.S. information companies.

"Over the past ten years many of your colleagues and competitors have expanded into the Caribbean...Our office identified 25 new information processing investments in Barbados and Jamaica... These 25 operations reported annual service export earnings of $15.5 million with only 2.446 workers. With labor rates that range from just $1.00-$3.00 per hour, you can imagine the types of margins which these firms are enjoying.

"For the reasons cited, you owe it to your company to consider expanding in the Caribbean.. This mission offers the perfect opportunity, because it puts to work for you some 20 U.S. and Caribbean government and business officials. With the number of people working to ensure you have a successful visit, your participation this October will be equal to hiring a team of consultants each working for about a dollar an hour.

"...I look forward to assisting your company over the next few months." (emphasis added.)

One company contacted by the Commerce Department responded:

"trying to keep jobs in the U.S.! It is amazing to me that our government is not doing the same. Am sure you won't have the nerve to reply."

Public's Number One Concern: Protecting Jobs

President Clinton was right when he recently said, "American workers are now the most productive in the world." But then, the president tried to use this productivity to promote the free trade agreement with Mexico. He told a group of workers in Kentucky, "You've got to believe in yourselves. We can do this. We can compete. We can win if we have access to the markets. That's what this [Nafta] gives us."

However, only three days before the president spoke, a national poll by the Times Mirror Center for the People and the Press found that "the top foreign policy goal of the public was protecting U.S. jobs." Reality has been a tough teacher. In the last three years, 1990 to 1992, we have lost 1,351,000 manufacturing jobs in the U.S. Since 1980, we have lost 3,000,000 manufacturing jobs and real wages are down ten percent. In the apparel industry, between 1980 and 1992 we have lost 299,300 jobs and real wages have fallen 13 percent. Between 1989 and 1992 the textile industry lost 44,000 jobs, losing 3,000 jobs in January 1993 alone. The electronics equipment industry lost 127,400 jobs between 1990 and 1992, and real wages have declined five percent. In the last three years, leather workers have lost 10,400 jobs, while the footwear and jewelry industries have lost 9,200 jobs and 5,200 jobs respectively.

Imports are up and the U.S. trade deficit is soaring. In 1992, the merchandise trade deficit was $62 billion. In the first five months of 1993, the deficit is running at $44.6 billion --50 percent ahead of last year-- and could top $100 billion by the year's end.

A recent study by Boston University's School of Management found that between 1989 and 1991 large U.S. manufacturing companies virtually doubled the percentage of their production which was done offshore. In 1989, 10.7 percent of production was done offshore, while in 1991, the figure had grown to 20.4 percent. The study goes on to note that, "Historically, survey respondents have viewed [plant] reorganization and relocation negatively: signs of failure, or impediments to competitive improvements." However, by "1992, plant closing and relocation and reorganization of manufacturing function were among the highest pay off activities." The fact that plant closings /relocations are now regarded as "successful ways to improve manufacturing competitiveness" represents a "radical shift."

On top of the plant closings and job loss, in October of this year the U.S. Labor Department admitted that its program to retrain manufacturing workers who have lost their jobs due to imports is not working very well. Only one in five retrained workers finds a job that pays at least 80 percent of what their former job paid.

In 1992, over 16.5 million American workers earned wages that fell below the poverty line. This is 20 percent of the entire workforce. Between 1987 and 1992, 2.2 million Americans joined the ranks of the working poor.

With grim statistics like this, and with the U.S. Commerce Department advertising $1.00-$3.00 wages available offshore, it is no wonder that U.S. workers fear for their jobs, and place job protection as one of their primary concerns.

Behind the Rhetoric, Internal Documents

The National Labor Committee wanted to take a look behind all the rhetoric surrounding the free trade debate. If we could, we wanted to find out what went on behind the closed doors of U.S. government agencies which were promoting free trade, and to get an inside look at U.S. corporations' "bottom line" offshore. Together with the Center for Constitutional Rights, we waged a year-long battle to secure relevant government files through the Freedom of Information Act (FOIA). We focused primarily on the Commerce Department, but we also requested internal files from USAID, the State Department and the Department of Labor.

Anonymous sources provided us with internal company documents concerning offshore production, including material and assembly costs right down to the last penny. It is interesting to compare the companies' actual total production costs offshore with the prices they charge the U.S. consumer. Right now we are reviewing company documents from Westinghouse, Abbott Laboratories, Lee and Company, OshKosh B'Gosh, Timberland, and the Starter Corporation. We are also looking into the offshore production cost versus U.S. pricing practices of Van Heusen, Haggar, American Tourister, Best Form, Izod and Hanes. The National Labor Committee has only reached the beginning stages of analyzing the documentation we possess, but even at this point, it is clear that there is 300 to 500 percent mark-up on goods made offshore.

Other sources --also wishing to maintain their anonymity-- have supplied the National Labor Committee with internal World Bank staff reports, as well as with internal analysis from a major industry association.

The report which follows is an attempt, as we said, to get behind the rhetoric of free trade.



I. Targeting U.S. Companies

The aforementioned 1991 Commerce Department letter --the one pointing out that, "With labor rates that range from just $1.00-$3.00 per hour, you can imagine the types of margins which these [offshore] firms are enjoying." --was not sent out to just anyone. There was a method, or rather an elaborate game plan. Internal government documents show that, working with the Commerce Department, the U.S. Agency for International Development (USAID) financed a study which "analyzes the critical aspects involved in establishing offshore data entry operations, lists existing data entry firms in the Caribbean, and identifies potential U.S. corporations and service bureaus which may be interested in setting up data entry operations in the region," referring to the Caribbean Basin area. The USAID-funded study "recommends that service bureaus should be the primary target for any investment promotion." Another study, financed by USAID and the World Bank, was conducted so that "Leading U.S. service bureaus and subcontracting intermediaries will be identified with the targeted sectors, along with comparative cost pro formas for U.S. versus offshore operations."

Based on such research, Tom Wilde, at Commerce's International Trade Administration, put together a "target list...which contains names and addresses of insurance firms, financial institutions," as well as "data entry, publishing, typesetting, airlines, and software companies." Other government files show that, "The Latin America/Caribbean Business Development Center has contacted the Data Entry Management Association and the Information Industry Association (IIA) to determine the interest of U.S. companies. The IIA has agreed to survey their members and assist us in recruiting potential delegates" --referring to the investment mission.

By the end of 1991, Commerce could state, "We promoted the mission through brochures, regional newsletters, and cold calls. Over 1,000 brochures were mailed to nine different industries...In addition, LATCOM mailed 200 of the brochures to companies participating in its upcoming Latin America Telcom event in Puerto Rico."

In promoting the information industry investment mission to the Caribbean, the Commerce Department carried out somewhere between 200 and 600 "cold calls" to targeted companies. A whole script was prepared for the Commerce staff making the calls. Under "Factors Important to Data Entry/Information Processing Industry" was listed "High labor availability at low cost relative to U.S. (e.g. U.S. direct labor of $6.00-$10.00/hr. vs USD .75-3.85/hr in Caribbean."

Companies were told if they made the investment trip, "You will also have a chance to learn of the local and U.S. Embassy services available to American firms with an interest in doing business on the islands."

Is This Sort of Thing Continuing?

It would appear so. In an April 1993 letter we received from Walter Bastian, the Acting Director of Commerce's Latin America/Caribbean Business Development Center (LA/C BDC), he states that the "LA/C BDC maintains a working file on the data entry service industry because, in the past, it has been a major generator of employment for the region" --with a little help from Commerce we might add. (emphasis added)

Not only are the same people who ran these sorts of operations --like Walter Bastian, among others-- still at Commerce, but at the end of 1991, Paul Moore from Commerce wrote to the USAID-funded investment promotion group in Jamaica, Jampro, (which was allocated over $34 million from USAID):

"The good news is that we have established contact with at least twelve companies that indicated a future interest in Jamaica information processing prospects. With your help, we will continue to work with these candidates and facilitate their visit to Jamaica..."

According to Jampro, the data processing industry in Jamaica grew 140 percent in 1992, and is expected to grow by another 100 percent this year.

Commerce Leads a Mission to New York and Connecticut

Commerce had been active along these lines for a number of years. Back in 1988, Commerce observed that a "mission to the North East would be a good way to recruit interested parties." So Commerce led a "data entry trade mission" to New York and Connecticut. "The mission seeks to locate corporations and service bureaus that may wish to contract key punching operations or directly invest in the Caribbean Basin." Anyone today who views the empty corporate office buildings in Connecticut must marvel that the Commerce Department played such a role --no matter how small-- in a state that ended up losing 12 percent of its jobs between 1989 and 1992.

Commerce Promotes American Airlines' Offshore Data Entry Operations

On their trip through corporate offices in New York and Connecticut, one of the offshore data entry operations promoted was that of American Airlines. By contracting out their data entry work to American's 2,500 employees in Barbados and Jamaica, U.S. corporations could cut costs. This was the logic of the Commerce mission.

Back in 1983, American Airlines laid off 400 employees at their Tulsa, Oklahoma ticket research and control center, and moved the jobs offshore to Barbados.

According to the Washington Post (April 20, 1989), by making the move, American Airlines saved between $4 and $6 million over what it would have cost to continue the ticketing operation in Tulsa.

How American Airlines got to Barbados is also interesting. According to the USAID-funded Barbados Industrial Development Corporation:

"In 1983, AMR Corp., which also is the parent company of American Airlines, encountered quality, productivity, and labor difficulties at its data-processing headquarters in Tulsa, Okla. The Barbados Industrial Development Corp. (IDC),... which has a U.S. office in New York City, encouraged AMR to consider" Barbados.

The same Washington Post article quoted above also noted that "American also says it has found that even at lower prices, Barbadians do better work." American Airlines liked the fact that with 18 percent unemployment in Barbados, the people welcome these jobs as if "sent from heaven."

Wages in Barbados are 1/3 of those in the U.S. this was too much for American, so in 1987 they expanded into the Dominican Republic where they could pay wages of 50 cents an hour. They moved into the San Isidro Free Trade Zone, which was built with World Bank and InterAmerican Development Bank money. Here they have 1,000 employees working three shifts. Unions are not allowed in the San Isidro zone, or in any other free trade zone in the Dominican Republic. From the Dominican Republic, American Airlines would target the U.S. market. W. Patrick Griffith, president of American's offshore data entry operation stated that American intends to attract "offshore a segment of the industry dominated by U.S. data-entry bureaus and corporate in house services." The Business International Corporation ("Improving International Competitiveness Through Sourcing in Latin America," 1989) observed that American "aggressively pursued Fortune 500 companies, primarily in travel, utility, financial and health-care industries." American "now does data-entry work under long-term contract for two dozen major U.S. corporations." Griffith noted that the "average cost of doing data entry in the Caribbean is $0.60 per thousand key strokes, versus $1.75 in the U.S." From offshore they could underprice U.S. firms. The Commerce Department referred to this American Airlines operation as a "success story."

Jobs that used to be in Tennessee are now in the Dominican Republic. American Airlines processes 40,000 medical claims a day under a contract from the Equicor Insurance Company, which is the Tennessee-based subsidiary of Cigna Insurance.



II. Behind Closed Doors

Given the above, one might well ask how such policies were being shaped? They were shaped behind closed doors. The Commerce Department, with the assistance of USAID, had brought together representatives of over 20 U.S. businesses with operations in Central America and the Caribbean to meet on a regular basis with U.S. government officials. They called it the Caribbean Basin Business Promotion Council. More recently its mandate has been extended to all of Latin America.

This was no light-weight organization. It was headed by the Director General of Commerce's U.S. and Foreign Commercial Services division, along with an officer from the U.S. Trade Representative's office. Representatives from USAID, from the Labor Department, from the Overseas Private Investment Council (OPIC), and from the State Department participated in Business Promotion Council meetings. From the private sector, major offshore producers such as Westinghouse, Sears, MacGregor Sportswear, TII Industries and Kellwood were represented. Kellwood Industries, a St. Louis-based apparel and home furnishing company with over $900 million in annual sales, is typical of the companies chosen by Commerce and USAID to sit on the Business Promotion Council. In 1981, Kellwood had 16,000 employees in 62 plants across the U.S. and had no offshore production. By 1992, Kellwood had cut its U.S. workforce by 59 percent, dropping 9,500 domestic jobs and closing over 50 plants. Today 58 percent of Kellwood's workforce is offshore. Kellwood has 8,900 offshore employees in the Dominican Republic, Honduras, Haiti and Costa Rica.

Among the U.S. government documents the National Labor Committee obtained is a 1990 letter from Milinda Keenan Wood, then Director of USAID's Trade and Investment office which explains the process by which corporations were chosen for the Business Promotion Council. Ms. Keenan Wood writes that she "took this task seriously." "I personally dedicated significant amounts of time to canvassing and recruiting appropriate CEO's for membership. During my seven months traveling to cities across the country, I have developed a list of individuals representing both geographic and sector diversity."

Commerce Department files from 1988 explain the role of the Business Promotion Council.

"The CBI (Caribbean Basin Initiative) is a key element in the Administration's strategy for safeguarding U.S. security interests in the Caribbean Basin.

"The success of continuing the CBI program is greater private sector involvement in the process. The establishment of the Caribbean Council now addresses that concern."

"[The Business Promotion Council] coincides with [our] interest in seeking increased private sector participation in Commerce Department activities.

"[CBI] relies on private sector initiative to generate economic growth and political stability in the region. Although the program provides incentives for U.S. firms to invest in or import products from the region [including duty free entry to the U.S.], the main attraction is low-cost labor...

"[The Business Promotion Council will] review individual CBI countries' investment climates and suggest improvements to existing laws and regulations to make countries more attractive to foreign investment..

"[Commerce will] assign individual Council members as 'country advisors' to track policy developments in a particular CBI country and formulate appropriate recommendations to the full council.

"[Council members would] provide comments on CBI enhancement legislation...

Council members were instructed to "develop close ties with the Caribbean private sector" since "an exchange of ideas will go far in creating an attractive business climate for Caribbean and American firms."

"[The Council] suggests ways to promote private sector investment and trade and recommends policy changes to provide additional incentives or remove disincentives to business expansion."

This was serious stuff. In 1992, then USAID Assistant Administrator James Michel "discussed the need for the Council's advice on putting limited [USAID] resources where they could be of most benefit."

Former Warneco President Goes Big Time

In effect, the very companies that had taken advantage of existing U.S. government investment and trade incentives to move their companies' production offshore, were taken on board by Commerce to help further enhance the business climate in the Caribbean Basin region. As we will demonstrate later, this collusion cost the people of Central America and the Caribbean a great deal, as it did U.S. workers faced with rising plant closings.

Using U.S. tax dollars, USAID financed trips for Business Promotion Council members to Honduras, Costa Rica, Haiti, the Dominican Republic, Guatemala, El Salvador and the Eastern Caribbean.

Cameron Clark was a member of the Business Promotion Council. He was featured in a January 1992 article appearing in Caribbean Action magazine, which is put out by Caribbean/Latin America Action, C/LAA.

C/LAA is an association of major corporations with business interests in Latin America. It is interesting to note that C/LAA has received over $1 million in USAID grants. Many of C/LAA's members are on the Business Promotion Council. The Director of C/LAA, Peter Johnson, who is also a Business Council member, spent ten years at the State Department before emerging to take over C/LAA. Bennett Marsh, who directs trade policy and legislative programs for C/LAA came directly from the United States Trade Representative's office, where he was in charge of Caribbean Basin affairs. It's a small world.

At any rate, here is how Caribbean Action describes Cameron Clark.

"For the past 14 years, Mr. Clark has been helping companies make the leap offshore, and helping free zones in the Caribbean Basin attract them. Before that, as president of Warneco during the Operation Bootstrap days, he put 14 factories employing 4,500 people into Puerto Rico. Now he predicts that 100 million square feet of new factory space will go into Mexico, the Caribbean and Central America by the end of the century. 'It will be a very dynamic period.' he says...'U.S. firms will establish two to three thousand plants throughout the Caribbean Basin and Mexico, half of them in CBI countries...' All CBI countries could share in the boom Mr. Clark says. Besides the textile and electronic assembly industries, a key industry that will be going offshore is data entry."

Cameron Clark, who sees no need for workers to organize into unions, was himself not averse to investing in free trade zones in the Caribbean region. He refers to such investments in these zones as "cash cows."

Cameron Clark, who once declared, "Guatemala is a sewing country," went on one of the Business Promotion Council trips to Guatemala. Clark joined the U.S. Ambassador to Guatemala in a 1989 meeting with the country's Finance Minister. The Ambassador and Clark pressed Guatemalan officials for "prompt passage of a free trade zone law." Before departing the country, according to Commerce Department notes on the trip, Business Promotion Council members made available to Guatemalan public officials and private sector leaders a "qualitative measurement system used by Cameron Clark's firm to determine investment climate in a given country." Back in the U.S., Clark was "reminded" by the Commerce Department to "please submit [his] recommendations for improving Guatemala's investment climate" --now get this--"which will be forwarded to the Secretary of Commerce for transmission to the U.S. Ambassador."

USAID Throws Money at Offshore Companies

Last Fall, the National Labor Committee exposed what became known in the national media as "USAID's Jobs Export Program." We knew USAID had spent over $1.3 billion promoting and facilitating offshore production in the Caribbean Basin region. We read with great interest therefore the following comment by Council member Denyse Selesnick at a 1989 Business Council meeting.

According to the minutes of the meeting:

"Denyse Selesnick also commented that some of the 807 participants were subsidized by AID funds when it seemed apparent it wasn't necessary. She expressed displeasure that individual companies are being subsidized and felt that funding, if any, should go toward increasing general technical know-how and marketing expertise. She wondered if such subsidies 'were drowning them in riches, making them too dependent'."

The aforementioned '807' is a U.S. Custom Department provision which allows U.S. companies to ship pieces offshore for assembly. It allows U.S. companies to access low wages in Third World countries. When the assembled goods return to the U.S., the company pays no duty on the material. The 807 tariff applies only to the value added offshore, in other words the assembly cost. For example, with the 52 cent an hour wages in the Dominican Republic, the average cost to assemble a garment is 22 cents. Under 807, the U.S. company pays a tariff only on this 22 cents.

The NLC had figured this was the case, but here was the proof that USAID was directly passing U.S. tax dollars to companies offshore to help subsidize their operations.

Which companies? Someone should ask Denyse Selesnick.

USAID is not talking, and when the NLC and the Center for Constitutional Rights requested additional files from Commerce's Latin America/Caribbean Business Development Center, we were told that all the office's files prior to 1990 had been deleted.

At any rate, Denyse Selesnick's word can be trusted. She was a real insider. She is president of Denyse and Company, Inc. and an expert consultant in offshore apparel production. For example, in May of 1990, Denyse Selesnick's consulting firm, along with the Commerce Department sponsored a seminar meeting at the Miami Beach Convention Center titled "How to Source Successfully in Latin America." According to a Commerce Department magazine, the seminar "will offer an in depth look at importing textile from Latin America and the Caribbean."



III. Business Council Still Operating

The Business Promotion Council is still in existence. Even under the new Administration, both Commerce and USAID are requesting its continued operation.

The current head of the Business Promotion Council is corporate tax lawyer Burton A. Landy, whose Miami-based firm, Paul, Landy, Beiley and Harper, represents major offshore manufacturers as well as international banks and finance companies.

Oddly enough, Mr. Landy also serves as the Honorary Consul General for South Korea in the Miami area. This is interesting given that South Korean-owned maquiladora operations represent the fastest growing foreign investment in Central America and the Caribbean.

It was Sunday, September 27, 1992 when the National Labor Committee broke the story of USAID's "Jobs Export Program" on CBS's "60 Minutes" program. This was followed by two ABC "Nightline" programs on September 29 and 30. On October 4, 1992 Landy faxed the Commerce Department saying that he would be in Washington, D.C. on the night on October 5 and would be free to meet with Commerce Secretary Franklin and Thomas J. Duesterberg, Commerce's Assistant Secretary for International Economic Policy.

Landy was moving fast. Incredibly, what he wanted to discuss with Commerce, and at a Business Council meeting the next day, was:

"Role of foreign economic development organizations and recent threats (e.g. 60 Minutes, Nightline)."

"Discuss policy changes required to provide additional incentives or remove disincentives to business expansion in the hemisphere, eg. 'worker rights' etc."

At this point, we do not know exactly what transpired at the meeting, but Commerce's Duesterberg did write to Landy, whom he addresses as "Burt" afterward stating,

"We were very pleased with the outcome of the meeting and grateful to you for your significant input to the initial development of a meaningful Council workplan."

Beyond this, we do know that Commerce did raise the issue of Nafta at the Business Promotion Council meeting. According to Commerce, the free trade agreement was meant "to secure this increasingly attractive business environment for U.S. companies." In the same vein, Commerce felt that the "integration of the U.S. manufacturing base with our Western Hemisphere neighbors is central to improving our commercial competitiveness at home and in Third country markets."

Obviously, offshore companies, Commerce, USAID --none of them appreciated the NLC exposé revealing that U.S. tax dollars were being used to promote and finance the relocation of manufacturing companies offshore. Nor did they appreciate the fact that the NLC and the media caught U.S. government officials --red handed, as it were-- cooperating with U.S. assembly companies in Central America and the Caribbean in the illegal firing and blacklisting of union organizers, which violated U.S. trade law as well as internationally recognized worker rights provisions.

The National Labor Committee Goes Undercover Again

In April 1993, NLC staff went undercover to the "Bobbin Contexpo Show," an annual apparel convention held in Miami. A major focus of the show deals with sourcing apparel production to Latin America and the Caribbean. It was at a 1992 Bobbin Show that "Nightline" filmed USAID-funded investment promotion groups trying to lure U.S. companies offshore on the basis of low wages and various incentive programs. We wanted to see if this stuff was still going on.

We visited the USAID-funded Jamaican Economic Development Agency (Jampro) for a discussion with Leo Monteith, Jampro's Senior Trade Commissioner. On his own, Monteith brought up the "60 Minutes" show and described it as "grossly inaccurate." However, as we continued to talk, Monteith came up with a surprising way for both himself and us (we were posing as consultants) to make money. Monteith explained that he gets a commission whenever companies invest in Jamaica. As consultants, we, of course, would get paid to offer information and guidance on offshore opportunities to our clients. Jampro would provide us with feasibility studies tailored to our clients needs, free of charge, along with samples of garments made according to our specifications, unit prices and anything else we needed. We would then be able to pass this information on to our clients, and, should they decide to locate in Jamaica, he would get his commission while we would be paid for work Jampro provided for free.

Next Peter King, another Jampro officer, came over to tell us that in Jamaica "out of 106 apparel firms, only three are unionized." Obviously, this was an often-used selling point. King said they do not have unions because of "our traditions of harmony" and "our interest in profit."

Most if not all the USAID-funded investment promotion groups had booths at the Bobbin Conference, including FUSADES from El Salvador, CINDE from Costa Rica and GEXPRONT from Guatemala.

When we inquired at the GEXPRONT booth as to wages in Guatemala, we were handed a glossy chart which listed the minimum wage at 28 cents an hour, that is $2.28 a day, $68.37 a month.

One of the speakers invited to the Bobbin Conference was "Ambassador" Ron Sorini, who was the Chief Textile Negotiator at the office of the United States Trade Representative (USTR). Ron Sorini negotiated the apparel/textile provisions of Nafta. Manual Gaetan, president of Bobbin/Bleinheim, introduced Sorini to the conference, calling him "a real friend of the industry."

Sorini told the audience that they would have to organize and jump all over the Congress to get their story out if Nafta was to pass.

Sorini then said, "You all probably saw the '60 Minutes' piece and the Al Gore debate and can see how unions will distort information." Sorini went on to attack the "Nightline" show. He wanted to rev up the crowd to support Nafta. Again, it is a small world. Sorini, introduced as "a real friend of the industry" is now Senior Vice President for International Development and Government Relations at Fruit of the Loom, which has extensive Mexico-based production facilities. Fruit of the Loom is part of Farley Industries, which recently closed a shoe factory in Tennessee to relocate production to the Caribbean Basin region.


IV. Is the Money Still Flowing?

In Fiscal year 1993, USAID disbursed over $42 million to these same investment promotion groups in Central America and the Caribbean. And if one compares USAID's FY'92 and FY'93 funding for investment and trade-related programs in the Caribbean Basin region, more money was actually spent in FY'93. In FY'92, USAID spent $96.4 million, as compared to expenditures of $105 million in 1993.

Even more disturbing, is that despite Section 599 --which was won last year and prohibits USAID from funding offshore export processing zones, in 1993 USAID spent $8.9 million on free zone development in El Salvador. This came on top of expenditures of $9.3 million in 1992. This spending on free zone development in El Salvador would appear to be illegal.

There are over 39,000 employees at the Commerce Department, and over 11,000 employees at USAID. Perhaps the message has not reached them all yet.



Caribbean/Central American Investment Promotion Organizations Are Still Funded by USAID: FY 1993 Funding Was Over $42 Million

   FY 1993

FUSADES/El Salvador
Salvadoran Foundation for Social and Economic Development
   (funded under the following projects) 


* 519-0287: Industrial Stabilization and Recovery  


* 519-0323: Free Zone Development 


* 519-0327: Agribusiness Development 





Honduran Foundation for Investment and Development  


* 522-0207: Export Development and Services 


* 522-0312: Investment and Export Promotion 


 FIDE Total:



Jamaica's Economic Development Agency  


* 532-0135: Export Development and Investment Promotion 


 JAMPRO Total:



CINDE/Costa Rica
Costa Rican Investment and Development  


* 515-0268: Trade and Investment III


 CINDE Total:



IPC/Dominican Republic
Investment Promotion Council  


* 517-0190: Export Investment Promotion 


 IPC Total:



Export and Investment Promotion  


* 525-0309: Trade and Investment Promotion 





Promotion of Business and Exports  


* 521-0186: Investment and Export Promotion 


 PROBE Total:



National Export & Investment Promotion Program  


* 524-0317: Private Sector Support 





Export and Investment Promotion  


* 505-0027 Export and Investment Promotion 








(Note: These same investment promotion projects received $ 51,413,000 from USAID in FY 1992. Combined FY92-FY93 funding totals $94,258,000.)




U.S. Agency for International Development Investment and Trade Related Program Support Central America and the Caribbean

Fiscal Years 1992 & 1993


Project # 

Project Title 

FY 1992 

FY 1993 


Training for Productivity and Competitiveness 




Industrial Stabilization and Recovery 




Agribusiness Development 




Free Zone Development 




Occupational Health and Safety 




Training for Productivity and Competitiveness 




Subtotals for El Salvador:




TOTAL FY 1992 & 1993:





Project # 

Project Title 

FY 1992 

FY 1993 


Export Promotion and Services 




Agricultural Research Foundation 




Human Resource Development Council 




Investment and Export Promotion 



522 0325 

Policy Analysis and Implementation 




International Executive Services Corp.  




Chamber of Commerce/Cortes 




Subtotals for Honduras:




TOTAL FY 1992 & 1993: 





Project # 

Project Title 

FY 1992 

FY 1993 


Private Enterprise Development 




Entrepreneurial Development 



520 0384 

Development Planning, Training and Support 



520 0403 

Trade and Investment Expansion Program 




Subtotals for Guatemala: 




TOTAL FY 1992 & 1993: 






Project # 

Project Title 

FY 1992 

FY 1993 


CINDE/PIE, Nontraditional Exports-Technical Support 




Training for Private Sector Development 




Policy and Training Support 




Trade and Investment II 




International Executive Service Corp. 




Trade and Investment III 




Subtotals for Costa Rica: 




TOTAL FY 1992 & 1993: 





Project # 

Project Title 

FY 1992 

FY 1993 


Training for Employment 




Export and Investment Promotion 




Commercialization of Alternate Crops 




Development Training 




Subtotals for Belize: 




TOTAL FY 1992 & 1993: 






Project # 

Project Title 

FY 1992 

FY 1993 


Investment and Export 




Development Training and Support 




Subtotals for Nicaragua:  




TOTAL FY 1992 & 1993: 






Project # 

Project Title 

FY 1992 

FY 1993 


Export Agribusiness Development and Promotion 




Private Sector Initiatives 




Nontraditional Export Support 




EAI Support and Infrastructure Planning 




Subtotals for Central America:  




TOTAL FY 1992 & 1993:





Project # 

Project Title 

FY 1992 

FY 1993 


Export and Investment Promotion 




Subtotals for Panama: 




TOTAL FY 1992 & 1993: 





Project # 

Project Title 

FY 1992 

FY 1993 


Agribusiness Promotion 




Export and Investment Promotion 




Development Training 




Sugar Diversification 




Debt Conversion 




Industrial Linkages 




Economic Policy and Practice 




Investment and Trade Expansion 




 Subtotals for Dominican Republic:




 TOTAL FY 1992 & 1993:







Project # 

Project Title 

FY 1992 

FY 1993 


Export Development and Investment 



532 0164 

Policy Reform in Support of Private Investment 




Subtotals for Jamaica: 




TOTAL FY 1992 & 1993: 





Project # 

Project Title 

FY 1992 

FY 1993 


Technical Consultants and Training 




Management and Productivity Center 




Export and Investment (Promotion of Business and Exports) 




Crafts Export Center 




Subtotals for Haiti: 




TOTAL FY 1992 & 1993: 






Project # 

Project Title 

FY 1992 

FY 1993 


High Impact Agriculture Marketing & Promotion 




Investment Promotion and Export Development 




Private Sector Initiatives 




 Infrastructure Expansion and Maintenance 




Subtotals for Eastern Caribbean: 




TOTAL FY 1992 & 1993: 






Project # 

Project Title 

FY 1992 

FY 1993 


Private Enterprise Investment Packaging 




Investment Development and Packaging 




Investment and Guarantee Services 




Subtotals for Caribbean Regional: 




TOTAL FY 1992 & 1993: 





(U.S. Investment Promotion Support Programs for Central America, Caribbean and Latin America)

Project # 

Project Title 

FY 1992 

FY 1993 


Trade and Investment Project 




Subtotals for U.S. Project: 




TOTAL FY 1992 & 1993: 





FY 1992 

FY 1993 




TOTAL for FISCAL YEARS 1992 & 1993:




(Note: There is not a great deal of difference in USAID spending for investment related projects in Central America and the Caribbean despite Section 599. Also these project figures are considerably undervalued - as they do not account for host government counterpart funding, which is also drawn from USAID funds.)



V. A Criminal Case: Commerce Takes Westinghouse Offshore

Something took place between the Commerce Department and Westinghouse at one of the Business Promotion Council meetings which we find so disturbing,that the National Labor Committee and the Center for Constitutional Rights (CCR) are discussing at this moment whether a class-action law suit is not called for.

We will quote at length from the transcript of a March, 1988 meeting held at Commerce with a number of corporations, including Westinghouse.

Alexander Good, Director General of Commerce's U.S. and Foreign Commercial Service Division leads the discussion. Good had also been appointed "CBI Ombudsman," in which role, according to the Commerce Department, "Good will serve as a one-stop facilitator and problem solver in Washington for Caribbean Basin and U.S. Companies pursuing business opportunities under CBI." Commerce Secretary C. William Verity and the United States Trade Representative (USTR), Ambassador Clayton Yuetter, also participated in this meeting.

[The following is a verbatim transcription of the document obtained through FOIA.]

Alexander Good has Kenneth Wilson introduce himself:

"MR. KENNETH J. WILSON: I am Kenneth Wilson, Westinghouse Electric Corporation. I am General Manager of our Offshore Manufacturing Operations activity in Mexico, Puerto Rico and the Caribbean Basin. I am heading up a group of people in the corporation who perform an inhouse consulting service to Westinghouse businesses. Our job is to motivate, facilitate and coordinate the activities in this part of the world.

"We have in the Caribbean, including Puerto Rico, a little over 4,000 employees, and a growing presence in the Dominican Republic and Mexico."

Wilson goes on:

"Everytime [sic] I attend a meeting similar to this, but not exactly this, most of the conversations deal with what is wrong with CBI... and very few conversations ever get around to the part that I am most interested in as a representative of Westinghouse Electric Corporation. We are primarily interested in electro-mechanical assembly, electronic assemblies, and very recently now, we have a very concerted effort to take advantage of the broad software potential that is available throughout, not only the Caribbean Basin, but Mexico.

"Of course, we have sort of a coordinated program in Westinghouse, and I think it is probably unique to most major corporations. We try to utilize the incentives that are available, and one of those incentives is CBI. 936 is a powerful incentive for us. 807 is a very strong incentive as is GSP. We try to blend the best with all of those to direct where one of our businesses might best be located.

"So as far as our corporation is concerned, I don't see any need to improve any of these programs. I would like to see them not diluted, but certainly, I think there is enough incentive available to manufacturers, such as Westinghouse, and not just -- I mean, we are big, but made up of many small companies. One of our smallest companies that we have in Westinghouse is one of our best known, but not best known for Westinghouse is Longine/Wittnauer. I don't know how many of you know Longine/Wittnauer is a Westinghouse company. It is not a big business to us, but well known. It takes advantage of 936 and is located in Puerto Rico.

"We have other bigger companies. One of them is Thermo King Corporation, which is a transport refrigeration. It is also a division of Westinghouse. It takes advantage of 936. It has taken advantage of 807 and CBI and we have other activities that are taking advantage of GSP. For instance, we have a big operation now that we just opened on the Mexican border in Juarez. It is not an 807 company. It is total manufacturing. We start with bare raw materials and we manufacturer [sic] and ship a transformer. It doesn't qualify under the 807 at all, but it does qualify for GSP. The biggest incentive we have in going anywhere, and in fact, this week, I came here from the Dominican Republic, and as I mentioned in my introduction, I am sort of like an inhouse consultant in Westinghouse. My job, and the people that work with me are to, and I mentioned three things, to motivate, to facilitate and to coordinate our offshore activities.

"Part of our motivational process is making people aware of what is available. We do this throughout the corporation. I speak at every session. We have a couple of management programs. One of them is called "Department Manager's Program." I will be speaking at one of those next Wednesday. They are held quarterly, at which time, most of our line management, department managers attend these. I speak at our once a year executive forum, continually promoting offshore manufacturing.

"This week, I was in, as I said, in the Dominican Republic with representatives of our subsidiary in Canada, and our defense center here in the Baltimore area. It is as if I had never talked to anybody before. They were hearing things for the first time. It is not unusual that a lot of people don't know about the Caribbean Basin and the incentives, because I must have given this talk probably 50 times, and I am talking to people for the first time this week. They were absolutely amazed at what they found.

"One of the things that I do not talk about, I do not talk about free duty or low duty. It has nothing to do with the real incentives that we have. What they are most impressed with, first of all, is labor costs, which is world class. The work force that we have in either the Dominican Republic and in Mexico in this case, it was the Dominican Republic, we feel has the productivity of second to none. So what we sell is the advantage you have, the low cost of labor and the low cost of logistics of doing business in this hemisphere. We do try to take advantage of the 936 tax incentives with our twin plan [sic] concept that we have. I think that we are very successful in that, but for a manufacturer such as Westinghouse, there is plenty of incentives right now.

"All I hear when I attend meetings like this are all the shortfalls of these programs. I think there is enough there. The question is how do we communicate it to those people that can take advantage of it today. We really discovered the Caribbean thought two people. One of them, Cameron Clark. He took me on a tour in, I think it was May of 1985, and later that eyar [sic], I met with Larry in Washington to talk about it. In January of 1986, we bought land and broke ground and built four plants in the Dominican Republic. I mean that was a very quick reaction, I think, to an opportunity, and we do have right now a fifth plant being built in the Dominican Republic.

"During that same period of time, we have built almost a quarter of a million square feet in Mexico, so we are looking at all the incentives, and we try to not force a product either into the Caribbean or Mexico or to Puerto Rico. We try to make the best fit.

"So I am here representing, I guess the Caribbean Basin, but at the same time within our corporation, if I think something belongs in Mexico, I voice my opinion to that, and probably that is where it will go. In fact, the tour that we had recently, where I went with Larry, and at this time, to Colorado and to the Far East. Larry didn't really want me talking that much about Mexico, because it was to promote the Caribbean Basin, and Puerto Rico, but I think in my part of the presentation in talking about Mexico, gave, I think, more credibility to the Dominican Republic and the Caribbean and Puerto Rico as alternatives that we as a corporation can look at all these and we are very active in this area.

"As I mentioned, we have about 3,500 people in Puerto Rico. We have almost 500 in the Dominican Republic. We will probably have about 1,000 there before the end of the year. At the same time we are growing in Mexico, all because of the icnentives [sic] that are available today.

"I know next week I will probably find somebody in our corporation that never heard of me, and never heard of CBI, so we have a continual program to communicate. I think that is one of the biggest challenges that Larry has is getting to the people and letting them know how easy it is to do business in this part of the world.

"As I mentioned, we visited this first in May of 1985. We broke ground in January of '86, and we had four plants operating by August of that year. Just a little over a year, and we were in business. It can happen.

"And so, I think, that to me, Alex, is what we have got to do is to get to the people and let them know really what the great incentives are and not just the duty free entry. You are talking about a real world class work force and world class cost. Very good work ethic, and effort. I mean it is outstanding." (Emphases added.)

The "Larry" Wilson is referring to is Lawrence Theriot, who at the time was the Director of Commerce's Caribbean Basin Information Center. (Theriot has since set up his own private consulting company, which have received USAID funding. In 1993, while on a labor delegation to Haiti, NLC staff were surprised to see Lawrence Theriot there. It would be interesting to know if Theriot still receives AID funding.)

So it was Commerce's Lawrence Theriot and Business Promotion Council member Cameron Clark who first took Westinghouse offshore to the Dominican Republic. That was in 1986. At that exact time Westinghouse announced it would close down its Bryant Electric plant in Bridgeport, Connecticut because of excess plant capacity. We will return to this in a minute.

In a remarkable interchange, Alexander Good responds to Ken Wilson's comments:

"Okay, Ken. Thank you. I think you brought back the focus a little bit. I think what you said, we agreed with in terms of we need to emphasize what opportunities are there as you suggest, at the same time, one of the other functions of this committee, of course, is this council is to make sure that we are promoting even a better climate, not only with our policies, but in the region as the governments respond to provide other places outside the Dominican Republic the kind of opportunity that exists now by the free zones in the Dominican Republic, and those kinds of activities. So I think your focus is a helpful focus, and we ought to emphasize the up side and I think in this proposal here is, that we do exactly that. We kind of multiply and help Larry and others in their efforts to get the Caribbean Basin initiative. Not for the initiative itself, but for the work force and labor rate, and if duty free comes in, great. If it is not a major factor that you figure is going to be in the decision makers' minds, great, but to follow. At the same time, let's figure out how we can through legislation or appropriate policies within the custom service or whatever, make he [sic] process an even better one, and certainly your testimony is a good one."

It is absolutely unbelievable, but here we have one of the highest officials in the Commerce Department admitting that the much heralded Caribbean Basin Initiative amounted to almost nothing. CBI was all hype, it providing cover for what was really going on.

What was at stake was keeping U.S. government trade and development programs in place which provided incentives to companies locating offshore. The U.S. government would pressure the countries of the region to adopt the free trade zone model developed in the Dominican Republic, a model of no taxes, no regulations, no unions, and pathetically low wages--which were actually being slashed as U.S. investments poured into the Dominican Republic's free zones.

Still, Good wanted to press on, "to make sure that we are promoting even a better climate" for companies like Westinghouse. "At the same time," Good says, "let's figure out how we can get through legislation or appropriate make the process an even better one."

As Business Promotion Council members explained many times, CBI was meant as "psychological support" for the U.S. business community, to give companies assurances that their access to low wages offshore was government-backed policy. This does not sound all that different from NAFTA.



VI. Westinghouse Lays Off 600 Workers

In 1986, right after the U.S. Commerce Department met with Westinghouse to discuss the company's move offshore to the Dominican Republic, Westinghouse management announced that they would close their Bryant Electric plant in Bridgeport, Connecticut. Four hundred and fifty union hourly workers and 150 salaried management staff would lose their jobs. The United Electrical Workers (UE) worked with the city of Bridgeport for two years in a desperate effort to keep the plant open. Westinghouse was very closed-lipped about what was really going on.

The City of Bridgeport offered Westinghouse a new incentive plan to keep the plant open. A report issued by the mayor's office described what happened:

"City staff outlined possible economic development programs available for Bryant's management to consider...These program options ranged from assistance to rehabilitate and modernize the facility or other suitable sites within Bridgeport to special tax incentives and low cost financing opportunities...Repeated calls during 1986 by both City and State economic development personnel proved fruitless in influencing Bryant's decision to relocate. Throughout the year, both City and State efforts were frustrated by a lack of information on the specific needs of Bryant Electric and its plans for the future, without which precise programmatic offers and financial estimates could not be designed or presented...To Westinghouse, the decision to close the facility is final."

Westinghouse management had the cynicism to tell Senator Christopher Dodd that they were closing the Bryant Electric plant due to "excess capacity" elsewhere.

Bridgeport Workers Suffer

According to the impact study prepared for the city of Bridgeport, the 450 production jobs at the Bryant Electric plant supported 300 additional non-manufacturing jobs in the local county area. So, even leaving aside the management positions, the Westinghouse closing cost the community at least 750 jobs.

Further, the impact study estimates that each production job at Bryant Electric generated $10,400 in personal income, $5,600 in retail sales, $4,900 in bank deposits, and $2,500 in federal, state and local tax revenues. This amounts to a $10,630,000 loss for the Bryant workers and the people of Connecticut who were linked to them.

In 1986-87-88, as the Bryant plant was closing, the state of Connecticut lost 16,900 manufacturing jobs in the electrical equipment field. Department of Labor Statistics show that when such workers eventually secured new employment it was at a 25 percent drop in pay.

Fifty-seven percent of the laid-off Bryant workers had no medical coverage upon termination of employment.

In addition, many workers' pension benefits were most likely lost, particularly if the employees had not become "vested" (by working at the plant for the 10-year period required by Westinghouse). Others were probably reduced, since most employees were forced to work for two or more different employers following their lay-off from Westinghouse, and thus had to accept "split-employer" pensions that are smaller than single employer pensions. Finally, employees terminated before retirement were forced to forgo retiree medical insurance, which often cost employers like Westinghouse several thousand dollars per year per retiree. This insurance provides benefits not covered by Medicare. These are part of the hidden costs not typically included in most plant closing impact analyses. The NLC estimates that Westinghouse "saved" $3.1 million in benefit payments alone by shifting production offshore.



VII. How Free Trade Works

What were these incentives for offshore production that Westinghouse and the Commerce Department discussed with an eye toward improving? Westinghouse runs its Caribbean Basin production out of Puerto Rico, where under the Section 936 tax loophole, the company pays no U.S. corporate taxes on its profits. Gratis from the U.S. taxpayer, Westinghouse received a $20 million tax break in 1992. It gets this every year. However, a problem developed when wages in Puerto Rico rose to around $4.25 per hour in the mid-1980s. Another incentive had to be invented for 'free trade' to keep working. So the twin plant concept was developed. It works like this. Westinghouse keeps its tax exempt status in Puerto Rico, but it can now source out the labor intensive aspects of its assembly work to low wage Caribbean Basin countries. By blending the wages in Puerto Rico with the 52 cent per hour wages the company pays in the Dominican Republic, Westinghouse arrived at a $2.25 an hour "blended wage." Westinghouse management has pointed out that this is one-fifteenth of the wages it had to pay on the U.S. mainland.

According to Westinghouse management, "For the right product lines, a combination of twin planting or complementary plant operations between a CBI location and Puerto Rico offers the best industrial incentives available in the free world."

So the circuit breakers which were once produced at Bryant Electric in Connecticut are now assembled in the Dominican Republic.

But even this seriously underestimates the incentives Westinghouse grabbed. For one thing they moved into a free trade zone in the Dominican Republic --Itabo-- which had received financing from USAID and the Overseas Private Investment Corporation (OPIC).

This is a complicated and long story, but essentially USAID put $20.8 million into the development of free trade zones in the Dominican Republic. And additional monies were used on physical infrastructure projects to support the zones, including ports, roads, electricity, water, and so on. (For example, USAID put over $1 million into a water project in the Haina district. Sounds good. One close inspection however, it turns out this Good Samaritan "water project" was to run pipes to the Itabo Free Trade Zone.

We know, of course, and we have been informed repeatedly, that the CBI program was our government's way of assisting in the development of the Caribbean Basin region. Companies like Westinghouse played their role.

Westinghouse paid its 52 cent an hour wages in the Dominican Republic. It also demanded overtime, most often without overtime pay. Workers who were trying to better themselves by going to night school after work were given a simple choice by Westinghouse. Either they forget school and put in the overtime, or they no longer had a job.

The ILO recognizes the right to organize as the most fundimental internationally recognized right of workers. Westinghouse wanted no part of it, and whenever the workers at its plants in the Dominican Republic attempted to organize they were immediately fired and their names placed on a blacklist which was circulated openly among free zone companies.

The U.S. government, of course, knew all this was going on. In fact, a startling study commissioned by USAID in 1984 laid out the whole free trade strategy the agency was to pursue in the Caribbean Basin.

According to the AID study: "Simply stated, factors that benefit the industrialist simultaneously contribute to the overall success of the zone as a generation of economic benefits."

Next step: "A large pool of inexpensive and unskilled labor is a vital ingredient in national policy to develop successful industrial free zones. Fortunately, the cost of labor in the Dominican Republic is competitive with the Caribbean region and productivity of the workforce is excellent."

Moving on: "Many firms relocate overseas to avoid restrictive labor laws. Management objects to legislation like job security laws that are perceived to impinge on management prerogatives, to be meddlesome or to conflict with normal business procedures. Zones located in countries with restrictive legislation often find firms reluctant to invest there; succesful zones eliminate such barriers where possible."

Of course: "Disruptive union actions, and militant labor union activities adversely affect zone development projects...Many countries sponsoring free zones have implemented special legislation protecting zone-based firms from strike action."

The Dominican Republic has its own way: "Labor problems in the Dominican Republic industrial free zones are non-existant, primarily because the government prohibits unions in the zones."

This was all drawn verbatim from a USAID-financed study in 1984. Today, November, 10, 1993, there is still not one single union in any of the free zones in the Dominican Republic, which employ 170,000 maquiladora workers producing for the U.S. market. From 1984 onward, every attempt to organize has been met with mass firings and then the blacklisting of organizers.

Westinghouse has said it has no intention of allowing its workers in the Dominican Republic to organize. If they wanted a union, Westinghouse management has said, they would return to the U.S.

Nor is it just Westinghouse. Dominican workers attempting to organize GTE, GE, Hanes, Baxter Healthcare Corp., Abbott Laboratories, Best Form and many others have all been crushed.

At Best Form, women workers are strip-searched for the enjoyment of management. At Carter-Galvis, which produces clothing for Gitano, married women applying for a job must submit proof of sterilization.

Welcome to the world of free trade.



VIII. The Worker Rights Hoax

U.S. and Caribbean Basin trade is, by law, conditioned on respect for internationally recognized worker rights. Some people took this very seriously. Dominican workers raised outcry after outcry about the continued violation of their rights. Americas Watch, the AFL-CIO and the International Labor Organization (ILO) all condemned massive labor rights violations in the Dominican Republic. They petitioned the U.S. Trade Representative (USTR) to suspend the Dominican Republic's GSP benefits granting duty-free entry to the U.S. market until internationally recognized worker rights were respected.

Here's how they system operated. As the controversy heated up in 1990, the President of the Dominican Republic declared that all workers in the free zones had the right to organize. Furthermore, that right would be protected by the state.

At Westinghouse the workers immediately reorganized their union. That was on October 29, 1990. On November 16, 1990, Westinghouse simply fired the entire leadership of the union and, as was the custom, passed their names on to the blacklist. It also fired about half of the union membership.

Then in February 1991, Westinghouse illegally fired the rest of the union workers. The timing here is critical. On February 8, 1991, the Deputy Chief of Mission at the U.S. Embassy in Santo Domingo wrote to Commerce Secretary Robert Mosbacher, requesting that Mossbacher meet with the Vice President of the Dominican Republic, Carlos Morales Troncoso and Manual Enrique Tavares, who owned the Itabo Free Trade Zone and was also President of the Association of the Dominican Free Trade Zones (Adozona).

The request from the U.S. Embassy in the Dominican Republic stated that Morales Troncoso and Manuel Tavares "would like very much to meet with you to discuss the investigation into worker rights in the Dominican Republic by the GSP Subcommittee." It's not hard to guess whose side the Embassy was on.

As mentioned, Tavares owned the Itabo Free Trade Zone where Westinghouse had its operations. In the very month that this meeting was requested, Westinghouse was illegally firing union organizers and members at its plant.

What is more, the Vice President of the Dominican Republic is also the former Vice President of Gulf & Western in the Dominican Republic. When the Fanjul family took over Gulf & Western's sugar cane operation, the Vice President was taken on as one of Fanjul's earliest shareholders. Alfonso Fanjul was a good friend of Mosbacher. According to the Washington Post, Fanjul contributed $100,000 to George Bush's 1988 campaign. In 1990, Fanjul and his wife were dined at the White House by Mr. and Mrs. Bush.

The Mosbachers often vacationed with the Fanjuls, as they did in 1989 and 1990, when they were flown around on one of Fanjul's helicopters, free, of course. When Mosbacher's counselor at Commerce, Wayne Berman, decided to open his own private merchant bank, Fanjul was there to finance the deal.

Fanjul also owned 160,000 acres of sugar fields in Florida, where he had the worst labor rights record in the state, cheating his workers by paying below minimum wage and benefits that were required by law. It is estimated that Fanjul, who is worth $500 million, supplied the U.S. with 15% of its sugar cane.

When Mosbacher receives a request from the Embassy to meet with the Vice President of the Dominican Republic--with his connection to Mosbacher's friend Fanjul--and from the owner of the free trade zone where Westinghouse is illegally firing its workers, it matters. After all, it is a small world, and like Alexander Good, Ron Sorini and the rest, Mosbacher will need people when he leaves Commerce to enter the private sector.

It came as no surprise then. In April 1991, George Bush declared that the Dominican Republic was taking steps to protect the internationally recognized rights of its people, and, therefore, its trade benefits with the U.S. would continue.

Worker Rights Don't Fare Well With the World Bank Either

In 1989, the World Bank gave $31,000,000 to the Dominican Republic to finance free trade zone development. The money came with a few stipulations, declared necessary to "rationalize" the process of expanding the zones. An internal World Bank report explained what "rationalize" meant. It told the government of the Dominican Republic not to build its free trade zones so close together. If they did, the crowding effect would cause wages to rise as companies completed over scarce workers. Corollary to this, such conditions might lead to the formation of unions.

The World Bank believes that successful free trade zones require that decent housing, recreation, health and educational facilities be made available --not to the workers, they are never mentioned-- but for management.

U.S. taxpayers have put $1.9 billion into the World Bank. Is this the sort of "rational" development we want to support? The World Bank is quite clear: the free trade zones in the Dominican Republic are a "free trade regime" in the making.



IX. Where Did the Money Go?

Between 1980 and 1992, the U.S. poured over $840 million in aid into the Dominican Republic. USAID was quite clear. We would not fund public health or education. Rather we would support the private sector which would, in turn, create jobs. Ninety-seven percent of USAID funding went to the private sector. We were told that when people got jobs they would be free to purchase the health care and education they wanted. If AID was throwing all this money at the private sector, they also had to show some results. So, periodically, AID would monitor that growth. According to AID about 75% of the jobs they created in the Dominican Republic were in the country's fast expanding free trade zones. In fact, between 1980 and 1993, over 150,000 maquiladora assembly jobs producing goods for the U.S. market were created in the Dominican Republic. In 1980, there were 16,000 free trade zone workers. By 1983, the number had grown to over 170,000.

Besides this, there's little else to show for USAID's money. In the zones, real wages were slashed by 46 per cent. Poverty increased and income disparity widened. the Dominican Republic, which was USAID's model of development, spends less on health care and education than any other country in the world, except one.




X. What Do We Get Out of Free Trade?

The retailers who promote free trade tell us it is all for the good of the U.S. consumer who deserves lower prices once tariffs can be done away with.

As mentioned, the NLC has come into the possession of quite a quantity of internal company documents dealing with production costs in the Dominican Republic. We are analyzing these documents right now.

We know, for example, that the Lee Company produces women's pants at the Moca Free Trade Zone in the Dominican Republic. They contract the work out to a company called Vega Textiles.

Lee Women's pants, (Style#460-0250, "Relaxed Fit"/Wrinkle resistant, 100% cotton, khaki, pleated) cost $34.00 when recently purchased at a Sears store on Long Island. The pants weree assembled in the Dominican Republic.

It is interesting to compare the price we pay with the offshore cost of production for Lee. The fabric for Lee's pants cost $2.24. The trim, including everything from the zipper to the waistband, buttons, pocket flashers, etc. cost 69 cents. Assembly time takes about 18 minutes, for which the worker gets paid about 45 cents. However, when you throw in overhead and the contractors profit, total assembly cost is $1.95 If you add up $2.24, 69 cents, and $1.95 you get $4.88. Not bad to sell $4.88 pants for $34.00 in the U.S. Let's be honest though. There is also round trip inland and sea freight which costs about 26 cents per pair of pants. Then there is the U.S. duty which would bring the total price up to $5.54. This still leaves a 614% mark up somewhere along the free trade zone trail. It would be interesting to question the Lee company about this.

Also along the way, Lee Company shut down eight plants in the US and threw 2820 workers out of their jobs since 1988.



Partial Survey

USAID-Funded Investment and Export Related Projects
In the Dominican Republic, Beginning in 1980

Total Funding - $ 349,212,188

Project # 

Project Title 



Export and Investment Promotion (1985-1992) 



Total Funding Planned:




(USAID description: "Project to strengthen the Dominican Republic's Investment Promotion Council (IPC) as a mechanism to coordinate public and private efforts to increase investment and export opportunities. The project will improve the investment/export (I/E) climate, strengthen institutional support for I/E, and promote export business in key sectors. IPC will have these main roles: (1) to improve the Dominican I/E climate...through changes in economic policy, tax structure, and exchange rates and the development of incentives for both domestic and foreign investors; (2) to help public and private organizations involved in I/E services, and (3) to promote business opportunities, particularly in agribusiness and free zone manufacturing, by targeting key sectors in crucial foreign markets (mainly in the U.S.). While IPC will be the main exporting agency, several other private and public institutions - such as CEDOPEX, the American chamber of Commerce, and the Association of Exporters (ADOEXPO) - will also be involved through contracts and subgrants in project implementation. TA and training will be provided to enable IPC and other organizations to: conduct policy analyses, seminars, and other activities to improve the policy climate; conduct investment and export promotion programs in foreign markets; contract for specialized assistance in locating and accelerating business networks; and provide services to existing Dominican businesses, export trading companies, and financial institutions so that joint ventures can be formulated and new markets developed. Also, an existing cooperative agreement with the Chicago Association of Commerce and Industry will be extended two years. IPC's Santo Domingo office will be expanded and a U.S. office will be established in the Dominican Embassy in Washington, DC with long term advisors on both sides. "...Amendment of 1/31/90 extends project two years to 12/31/92, refocusing it somewhat to emphasize areas of greatest success (investment promotion)...")


517 0263 

Investment and Trade Expansion (1992-1995)  


Total Funding Planned: 




(USAID description: "Program to provide balance of payments assistance and support for Government of the Dominican Republic's (GODR) efforts to stabilize macroeconomic financial structures and address critical sectoral bottlenecks that constrain the country's development. The foreign exchange provided will finance imports critical to the GODR's development strategy. The GODR will provide counterpart local currencies which will be jointly programmed by A.I.D and the GODR to support priority social and economic development activities.")


517 0171 

Private Enterprise Development (1983-1985) 


Total Funding Planned: 




(USAID description: "Program to provide balance of payments relief to the Government of the Dominican Republic (GODR) and to promote development of the private sector. The GODR will receive a loan of $41 million in Economic Support Fund (ESF) monies to import U.S. spare parts, capital goods, and industrial agricultural imports for the private sector. Equivalent counterpart funds will be targeted for private sector development in three areas: promotion of exports and agribusiness; institutional development and training; and investment in productive infrastructure needed for private sector expansion. Amendment of 9/29/83 increases loan-funded balance of payments support from the ESF by $8 million. Equivalent counterpart funds will be allocated to the private sector export expansion (including the development of free zone facilities) and for productive infrastructure needed to accelerate execution of IDB, IBRD, and A.I.D. projects aimed at private sector investment. Amendment 12/26/83 provides the GODR with a $40 million grant from ESF... PAAD of 4/22/87 provides a $19.835 million grant for FY87 to provide balance of payments support. Dollar funds will be used for private sector imports of raw materials, spare parts, machinery and equipment; local currency will support free zone development...")


517 0255 

Economic Support Fund (1988)  


Total Funding Planned:  




(USAID description: "Cash grant of $13.835 million from the Economic Support Fund to provide the Government of the Dominican Republic (GODR) with immediate balance of payments support. The GODR will deposit... the peso equivalent of the dollar grant in the special account in the Central Bank for use in investments and development activities jointly agreed upon by GODR and A.I.D.")


517 0252  

Industrial Linkages (1989-1994)  


Total Funding Planned: 




(USAID description: "Project to help local manufacturers in the Dominican Republic to increase their sales to manufacturers located in the Industrial Free Trade Zones (IFTZ), and eventually to other offshore markets. It will be implemented by the Association of Industries of the Dominican Republic (AI) and the Association of Dominican Free Trade Zones (ADOZONA), with help from an institutional contractor.

Through the Investment Promotion Council or other channels, the project will pursue direct dialogue with the government... The project will also fund direct TA for local firms in such areas as production, quality control, packaging and marketing, and will sponsor a series of workshops on production issues.")


517 0186 

Agribusiness Promotion (1985-1992)  


Total Funding Planned: 




(USAID description: "Project to provide credit and TA to new and expanding agribusiness in the Dominican Republic and to improve the mechanism and policy framework for promoting and financing agribusiness. The project will be implemented mainly by the Central Bank (FIDE) and the Dominican chapter of the private-sector Joint Agricultural Consultative Corporation (JACC/DR). JACC/DR will...(1) help potential agribusiness investors analyze their credit needs and prepare feasibility and business plans; (2) conduct market and technical studies for clients and provide problem-related TA; (3) help potential foreign and domestic AB investors to conduct preinvestment studies and develop investment strategies; and (4) work with other organizations to provide management training and to promote policies favorable to agribusiness...A special fund (operated by the Development Bankers Association) will finance the feasibility studies and business plans mentioned above, while a grant to the Trade and Development Program will assist potential U.S. investors.")


517 0188 

Policy Analysis Training (1980-1984)


Total Funding Planned: 




(USAID Description: "Project to train a cadre of economic and business sector analysts in the Dominican Republic. The private and public sectors of the Dominican Republic strongly support the Carribbean Basin Initiative. As the Dominican Republic begins to articulate its new economic policies, it finds itself constrained by a critical shortage of trained, competent, and experienced senior economists, business analysts, and international development affairs specialists...Further, foreign expertise is extremely expensive and sometimes not available when needed. There is, therefore, acceptance and recognition of the need to train a cadre of senior economic and business advisors who would recommend for the policy makers short- and long-term development strategies and their implementation schemes based on rigorous analyses."

517 0262  

Public Policy Reform (1992-1996)  


Total Funding Planned: 




(USAID description: "Project to develop strong support within the Dominican society and capacity within the Government of the Dominican Republic (GODR) for sustained implementation of internationally sanctioned economic policies and programs. First, it will encourage debate and discussion in the private sector by supporting private organizations that promote a market economy. Assistance will be provided through such activities as seminars, roundtable discussions, and special studies to aid groups with the sector, including importer, exporter, domestic manufacturer, and labor groups, to carry out dialogue with each other and the government. Second, the project will help the GODR analyze policy-level issues and design required reforms. Third the project will help the GODR design the institutional strengthening activities required to implement the selected policy reforms. To provide a forum for project implementation, the mission will propose the creation of a joint public/private council with representatives of the key government economic policy bodies, private business and community groups, and specialized non-governmental organizations.")


517 0237 

Debt Conversion (1988-1992)  


Total Funding Planned: 




(USAID description: "Project to generate increased private U.S. and domestic equity investment in the Dominican Republic by establishing a debt/equity conversion mechanism within the Central Bank (CB). While the project strategy focuses on CB institution building, a promotion campaign is also funded... A promotional campaign will be implemented by the Investment Promotion Council to attract potential investors and creditors. The project is expected to generate as many as 30 debt/equity conversions, accounting for some $500 million in new investments... A few of the debt/equity transactions will involve the transfer of GODR assets to investors, but most will involve the transfer of local currency. The GODR will provide the equivalent of at least U.S. $100 million to finance the conversions."


517 0216 

Development Training (1986-1994)  


Total Funding Planned: 




(USAID description: "Project to train professional managerial, and technical personnel in the Dominican Republic in priority, export oriented, private sector areas. The project...will be implemented by the National Council of Businessmen (CNNR). The training will be tailored to specific job, enterprise, and for private sector needs. Group training programs will also be designed to respond to sector - or area - specific training needs. Partners of the Americas, under a subsequent agreement with CNNE, will arrange a tailored course of U.S. study and observational visits... Amendment of 8/24/88 more than doubles project funding in order to expand training to cover needs not currently met by USAID/DR projects. Priority areas, in addition to export promotions...")


517 0157  

Corporate Management Training (1983-1991)  


Total Funding Planned: 




(USAID description: "To offer graduate programs in business and public administration, to train public and private sector executives which will be assisted by an Advisory Council of key Dominican business leaders...and housed in a new building funded under a separate A.I.D. loan.")


517 0146 

Training Advisory Center for Women (1980-1984)  


Total Funding Planned: 




(USAID Description: "...Skills training and human development training programs to ensure that young women possess the skills to perform their jobs safely and efficiently while simultaneously carrying out their home responsibilities.")


517 0236 

Sugar Diversification (1987-1992)  


Total Funding Planned: 




(USAID description: "Grant to the Dominican Republic's State Sugar Council (CEA) to implement a sugar diversification program. The project, to be implemented by CEA's Agro-industrial Operations Division (DACEA) will...promote private investment in diversification projects... Private investment will be promoted through a variety of activities, including visits to international trade shows and conferences, observational tours to other countries, in-country seminars, field trips for members of the press, radio and TV announcements, and the distribution of brochures and other promotional materials. DACEA will also work closely with the Joint Agricultural Consultative Committee and the Investment Promotion Council to promote foreign investment in diversification.

Note: All project description quotations are drawn from USAID program abstracts available on
CD Rom (emphasis added).




1. Fax letter from Thomas E. Wilde, Jr., Commerce Department to Bill Mc Neil, MapLink. Similar letters were sent by the Commerce Department to over 1000 U.S. Businesses.

2. Testimony of Mr. Kenneth Wilson, Westinghouse in Commerce Department Proceedings "In the Matter of Caribbean Basin Business Promotion Council" March 11, 1998.

3. "MAPS Project Inventory" of U.S. - funded private sector oriented projects in the Dominican Republic.

4. Partial Durvey of USAID - Funded Investment and Export Related Projects in the Dominican Republic beginning in 1980.

5. Patial List of U.S. Companies that have increased their Production in the Dominican Republic and Eliminated Jobs in the U.S.

6. Investment Promotion Advertisements found in U.S. trade journals.

7. Bibliography of Dources used in "Free Trade's Hidden Secrets."

8. Data Tables and Charts:

Real Dominican Minimum Wage/Zone Employent 1979-1991

Cost of Living for a D.R. Family/Zone Wage

Analysis: Minimum Wage/ Cost of Living

Export Processing Jobs/Dominican Immigration to U.S.

D.R. Real Wage/Immigration to U.S.

Monthly Dominican Free Zone Wage

Dominican Exports Not Including Exports from Zones

Infant Mortality in D.R. and U.S.

U.S. Apparel Trade Deficit 1979-1992

U.S. Apparel Employment/Apparel Trade Deficit 1979-1992

U.S. Displaced Apparel Workers: Re-employment, Wage Levels

Trade Deficit: U.S. Shoe Industry

U.S. Shoe Industry: Trade Deficit, Employment 1979-1992

U.S. Electronics Imports, Exports

U.S Electronics Industry Employment 1979-1992

U.S. Workers Below Poverty Line, 1987, 1992

Table: Plant closing Legislation in the U.S. and Europe



1. Fax from Thomas E. Wilde, Jr., Latin America/Caribbean Business Devleopment Center to Bill Mc Neil, MapLink, Richardson, TX, August 29, 1991. (Obtained through Freedom of Information Act). Copy of the letter is included in full as Appendix.

2. Response to the Commerce Department from Mr. Horton, President, Imput of Texas, Inc. (Obtained through FOIA).

3. New York Times, 11/5/93.

4. New York Newsday, 11/2/93.

5. U.S. Employment 1979-1992 Annual Averages, Bureau of Labor Statistics.

6. New York Times, 9/17/93

7. "Building the Value Factory: A Program Report for U.S. Manufacturing" by Jay S. Kim, Jeffrey G. Miller, School of Management, Boston University, October 1992.

8. New York Times, 10/31/93.

9. Earning Tables, Bureau of Labor Statistics