JUNE 23, 1997

Mr. Chairman and members of Special Industry Committee 22: I regret that prior commitments prevent my being here to testify before you, and I appreciate the opportunity to submit this statement as you begin your deliberations on the minimum wage rate for all industries in American Samoa, as required by the Fair Labor Standards Act.

At the outset, I want to state that over the years I have become frustrated with American Samoa's lack of meaningful progress towards the goal of paying its people the same minimum wage which applies in the mainland U.S.. Five to eight cent increases add up to very little in real terms, especially for workers at the low end of the wage scale. I have yet to find an in-depth analysis which shows how the cost of living in American Samoa compares to other areas of the country -- such as Hawaii and Guam and the Virgin Islands -- where the federal minimum wage fully applies. I know from experience that the cost of fuel in American Samoa is as high as the cost of fuel in Hawaii, and this is also true of most food items. It does not appear that statistics in this area are readily available, but the most recent federal census shows that our per capita annual income is less than $3,000 and 56.5% of our families have incomes below the federal poverty level, compared to 13.5% of mainland U.S. families. The express mandate of the FLSA to bring our minimum wage rate to the national rate as rapidly as possible is a goal which seems to be receding ever farther into the future.

As an aside, I believe that a flat rate applied across the board to all industry categories, as is done in the U.S. mainland, represents a more equitable approach to the minimum wage. Then the question becomes, should the standard against which this is determined be based on regional or mainland U.S. figures?

At the same time, the Department of Labor's directive is that this Committee's recommendations be made with "due regard to economic and competitive conditions, [and that they should] not substantially curtail employment". Congress has also indicated that Industry Committees should consider a broad range of factors in assessing economic and competitive conditions, including "maximization of employment and the ability of business in American Samoa to be competitive within the Pacific region." And so, as you begin your deliberations on the various industries in the territory, it is imperative that you take into consideration the economic and competitive conditions of American Samoa and ensure that what you recommend does not result in either a loss of jobs for our people or a loss of competitive advantage for our businesses.

As in past years, American Samoa's economy continues to be fragile, lacking in diversity. We all know this. It is a familiar story, one which we recite over and over: near total dependence on three income-generating sources -- federal grants to the American Samoa Government, the sale of canned tuna and the manufacture of garments for export to the U.S. mainland -- with more than 70 percent of the work force employed in one of these areas and heavy dependence on them by our secondary industries.

We all know that the government is faced with the reality of diminishing federal assistance; that the canneries are threatened with a loss of tax incentives and ever stronger foreign competition from Thailand, Indonesia, the Philippines, Mexico, Papua New Guinea and Micronesia and that the garment industry is, as yet, too small and too fragile to absorb the jobs which may be lost in the other two sectors.

Although ASG is actively promoting diversification, we all know from long experience that it is difficult to attract outside industry to the territory. American Samoa is not on any major shipping lanes, there is a lack of regular ocean freight service and air transportation and air cargo service are limited, expensive and undependable. It is a difficult task for us to compete for foreign investment with other countries in the region when we have one of its highest wages structures -- Western Samoa has a minimum wage rate of 51 cents an hour, Fiji has a minimum wage rate in manufacturing of 65 cents an hour and in the garment industry of 37 cents an hour and Tonga has a minimum wage rate of 60 cents an hour.

There are other factors which work against attracting more outside investment as well as retaining the companies we have. The loss of Section 936 of the Internal Revenue Code and the change in U.S. Customs Country of Origin Rules reduce the incentive and the options for manufacturing companies who might wish to invest here. The increasing erosion of our canneries' economic competitiveness because of the effect of NAFTA and other international trade agreements, which are negotiated without our input and absent regard for the welfare of our people, impacts on the stability of our local tuna industry and the secondary industries it supports.

Once again this year, the canneries will recommend no or minimal increases in the minimum wage. ASG will do the same. I support ASG's position, but year after year we all keep saying the same things. We know the arguments by heart, yet we still cannot seem to find a remedy.

Other U.S. Territories have used the federal minimum wage to come into more complete economic partnership with the rest of the nation. I would hope that in the very near future American Samoa will be prepared to take that step, but I think that will only happen if we are prepared to commit ourselves to some new thinking with respect to developing our economy.

Clearly, what is needed is a new model, a new strategy which does not rely on piecemeal analysis like a unilateral increase in the minimum wage to U.S. mainland standards, but which proceeds from an understanding of the whole picture, recognizes the interaction of a multiplicity of factors and actively solicits and actively reflects the views and the wishes of our people.

That is why I have introduced legislation to establish a Commission to study and make recommendations on the economic development of American Samoa. This Commission provides for our input in its very membership as well as in the mechanism of public hearings through which it will arrive at its conclusions and recommendations. This Commission will bring to bear the resources and the expertise which are available to the federal government in order to map out options for our future economic development. This Commission is an opportunity for us to work on strategies for expanding the narrow base which has, for so many years, thwarted our efforts at developing our economy.

In addition to introducing this legislation, I am also working to replace the possessions tax credit with other incentives for outside industries. I plan to re-introduce legislation designed to improve the air service we receive, I am hopeful that a federal home loan bank for American Samoa will become a reality in this Congress and I continue to raise in the Congress at every opportunity the effects on our economy of NAFTA and other international trade agreements.

On a local level, ASG needs to sell the hotel and get out of the business of pretending that tourism is a realistic solution for our stagnating economic development. I recommend that ASG seriously consider privatizing ASPA and the Office of Communications. Our Director of Communications, Mr. Aleki Sene, proposed to the previous administration that the Office of Communications be privatized. His proposal has my full support, and I would add only that ASPA, too, should be privatized. ASG could realize as much as $50 million from a properly structured sale, and this money could be used to pay off the remaining Executive Office Building Bond and the Retirement Loan. Remaining proceeds could be used to help retire the deficit and as a base for improvements to our infrastructure. A Public Utilities Commission could be created to regulate these new private sector entities and protect the interests of the public.

ASG needs to develop a standard package for outside investment -- with incentives which are scaled to the size of the investment. We should demand reciprocity from foreign investors, and we should not be afraid to insist that investors keep a certain percentage of their money in the community from which their profits derive.

In this regard, I feel very strongly that we need to correct the rampant abuses in the conduct of certain Samoan-fronted/foreign-owned businesses. These companies transact most of their business in cash. There is no reliable means of accounting for their revenues and so there is no reliable method for ensuring that they pay their fair share of taxes. Instead of being circulated in the community, their profits are shipped off-island. Yet their children go to our schools, their families receive health care at our hospitals, their trucks and their containers add to the wear and tear on our roads. These abuses are killing our local businessmen and resulting in lost revenue for ASG which is conservatively estimated at $20 million per year. This must stop. We must insist that it stop. As long as we allow these abuses to continue we are penalizing our local businessmen and depriving our government of much-needed revenue.

In closing, I commend Governor Tauese for his efforts to stabilize the local economy. He has stayed true to his principles in the face of opposition, and that takes courage. He has refused to compromise when it was important to hold the line, and that takes integrity. He has done his best to improve revenue collection and to ensure that taxes are fairly applied and collected. He has my full support, and I will do everything I can to help him in his efforts to create a better future for the people of American Samoa.

Mr. Chairman and members of the committee, I continue to support an increase in our minimum wages to the U.S. level at a time when Samoa's economy is ready to sustain such an action. When this time comes, I will aggressively pursue this issue on behalf of the working men and women of American Samoa.

In the meantime, the realities of the economic and competitive conditions of American Samoa are such that I must ask whether American Samoa can support and sustain an increase in its minimum wage structure without substantially curtailing employment, adversely affecting its competitive position and causing significant economic hardship for the people of the territory. These are important questions which I hope the committee will consider when rendering their decision.

Thank you.