Congressman Faleomavaega announced today that he has introduced H.R. 3583, the American Samoa Protection of Industry, Resources, and Employment (“ASPIRE”) Act, to ensure that everything that could be done has been done to save American Samoa’s private-sector economy, which is more than 80% dependent, either directly or indirectly, on the US tuna processing and fishing industries.
In a letter dated September 16, 2009, which was copied to the Fono, Faleomavaega informed the Governor and the Fono that H.R. 3583 was introduced today. The complete text of Faleomavaega’s letter to Governor Togiola, which was copied to US Senator Daniel K. Inouye, US Secretary of the Interior Ken Salazar, Assistant Secretary of Insular Affairs Tony Babauta, the Lieutenant Governor, President of the Senate and Senators, the Speaker of the House and Representatives, Chairman J.C. Kim of the Dongwon Corporation, Mr. Don Binotto of StarKist, Mr. Chris Lischewski of Bumble Bee, Mr. Paul Krampe of the American Tunaboat Association, and Ms. Kitty Simonds, Executive Director of the Western Pacific Regional Fishery Management Council, is included below.
Dear Governor Togiola:
Thank you for your letter of August 26, received in my office on September 3, regarding ASPIRE and the proposed draft bill I sent you on August 4. I appreciate the time you took to review the draft and for providing your views and questions. As always, you are welcome to call me at any time to discuss your concerns and share your views on pending legislation in the Congress.
However, because I believe we share a common vision and goal for American Samoa – job protection and economic development – I have introduced H.R. 3583, the American Samoa Protection of Industry, Resources, and Employment (“ASPIRE”) Act, so that I might begin the hard work of navigating the legislative process here in Washington. With one cannery scheduled to close in just a few weeks and the other struggling to hold on, time is of the essence to rebuild our tuna industry and stabilize our territorial economy.
Regarding your letter of August 26, while I would not normally break down each point in your letter, in this case I feel it is necessary to address each of your concerns one by one so that there is no misunderstanding left between us, given the importance of ASPIRE to the well-being of our economy.
In response to your comment that “The proposed bill is nowhere close to the expectations created by the general announcement you gave us on July 13th,” I am again enclosing for your reference the information I provided you on July 13 which is identical to the proposed bill I sent you on August 4. The talking points and the letter both referenced three pillars which form the basis of the entire bill. These include: 1) providing direct subsidies to tuna canneries that do business in American Samoa; 2) providing direct subsidies to boats which direct-deliver fish to our canneries; and 3) leveraging our resources to benefit American Samoa rather than allowing tuna caught in the South Pacific Tuna Treaty area to be siphoned off and sent to foreign countries like Thailand. In a press release of July 24 and in my letter to you of August 4, 2009, I also duly stated that ASPIRE would make it possible to pay our cannery workers “minimum wage rates as defined by federal law.”
Based upon your questions outlined in your letter of August 26, I believe we are in agreement on what needs to happen: maintain maximum employment for families in American Samoa, with the highest practical rate of pay. As elected officials, I am sure you would agree that not all problems must be addressed with a single proposal. We must all prioritize and address the most pressing issues first, and then move toward other issues which may be less urgent. That is not to say other problems are unimportant, but to use a medical analogy – if a patient is bleeding profusely, you don’t stop the bleeding by checking the cholesterol.
The urgent issue facing American Samoa is the pending collapse of the tuna processing and fishing industry that provides the very economic foundation for nearly all other employment in the Territory. If we lose the canneries and the boats that deliver their fish, all other employers and jobs are put at immediate peril. This is why I view an economic package aimed at the fishing industry that delivers fish directly to American Samoa processors as a territory-wide economic development package. Every dollar spent in these two symbiotic industries multiplies and works its way through the local economy – from the boatyard, to the hotels and restaurants, to the workers who spend their wages in our local groceries and retail stores. This is why I have chosen to focus my first and immediate efforts here, and I invite you to join me in this most urgent matter.
It appears from your letter and other public comments that your principal concern is linking possible increases in the subsidies to future increases in the minimum wage that are already mandated under current, federal law. The fundamental priority of ASPIRE is the preservation and retention of existing industry and employment in American Samoa. Accordingly, one aspect of ASPIRE seeks to level the economic playing field for our remaining cannery so that they may be better able to continue to manufacture in American Samoa rather than be forced to relocate to a manufacturing base where cannery workers are paid 0.60 cents and less per hour.
As you know, the issue facing the competitiveness of our canneries is not about federal minimum wage rates. The challenge before us is global wage rates. In competing countries, tuna cannery workers are paid 0.60 cents and less per hour. Therefore, no matter what the federal minimum wage rate is in American Samoa, our tuna canneries cannot remain competitive when this kind of wage disparity exists in the global marketplace. This is why ASPIRE calls upon Congress to offer tuna subsidies for American Samoa just like the U.S. Congress offers agricultural subsidies to our dairy farmers, sugar, cotton, wheat and corn growers. For your information, the U.S. Congress also has a long history of offering rum subsidies to assist Puerto Rico and the U.S. Virgin Islands.
Given the history in Congress of subsidizing other workers’ income and wages in the U.S. and its territories, I do not agree with your remarks in which you state that “While we are basically supportive of the proposed subsidy to the fishing boats and to the whole processors in American Samoa for fish sold or received, we are very concerned with that part of the proposal that involves additional subsidies based on future increases in minimum wages.” In my opinion, the subsidies proposed for our canneries and boats provide the vehicle by which our own workers can enjoy a higher standard of living. By subsidizing our canneries, our canneries can in turn pay higher wages, and this is what our workers deserve. Samoan workers are and have been the backbone of the U.S. tuna industry and they should not be asked to work for sweatshop wages that competing countries allow. It is my belief that our people do not support sub-minimum wages and neither does America, and this is why the link to future increases in minimum wage is critical.
In fairness to our workers and also to incentivize StarKist and encourage other canneries to relocate to American Samoa and provide new jobs, this link must stay. Worse, without this link, there is a disincentive to any long-term commitment and investment to modernize our canneries and once again make American Samoa the cutting edge location for tuna processing. Why would any cannery stay or invest if less than a year from now they are again faced with an inability to compete against wage rates of 0.60 cents and less per hour? The answer is, they won’t – so we need to maintain this important link – but of course, if future wage increases are halted, the subsidies do not go up, either. I believe this is a fair arrangement.
You also suggest in your letter that these subsides are somehow equal to the overhead costs of doing business in American Samoa. Unfortunately, that is not an accurate assumption – indeed, the overhead cost for either of the canneries is tens of millions of dollars higher than what you suggest, and what ASPIRE proposes. So, in relation to those actual costs, this modest subsidy merely makes up the competitive disadvantage that American Samoa now faces in relation to other potential manufacturing locations that have lower labor, shipping, energy, and ingredient costs (such as the cost of metals for cans).
To be clear, the purpose of the ASPIRE processor subsidy is to attempt to level the economic playing field for tuna processors operating in American Samoa versus leaving the territory and setting up operations in Asia, South America, or elsewhere where workers are paid 0.60 cents and less per hour. My goal is to prevent our one remaining cannery from leaving and to encourage other canneries to invest in American Samoa and, in order to achieve this goal, we need to assure that any incentive provided today is not taken away or eroded over time.
You have also asked about the trust fund ASPIRE would create. The primary purpose of this trust fund is to make certain that funds intended for use by American Samoa are not siphoned off for other uses. There are three revenue streams funding the proposed trust fund: direct federal appropriations, the licensure fee for use of one of the United States’ 40 tuna treaty licenses, and the 6.25% transshipment fee that will be charged for transshipment of tuna caught under the auspices of the US tuna treaty licenses but shipped to foreign countries that process tuna. The reason these fees are justified is that the tuna licenses are a United States asset and the benefit of that asset should come back to the US and its territories, including American Samoa. As of now, tuna worth hundreds of millions of dollars is caught by our US tuna fishing fleet and sent to foreign countries to be cleaned elsewhere, and this is not fair. This is why ASPIRE also rewards boats making direct delivery of their catch to American Samoa by having these fees waived and even further rewarded with their own subsidy.
Boats delivering whole tuna to American Samoa for processing are a critical component of our tuna industry, yet many of the boats taking advantage of our fishing resources, and using American Samoa as a homeport, are transshipping their tuna catch to other countries to be cleaned at labor rates of 0.60 cents and less per hour instead of giving back to the US or its territories. Regarding the fees proposed by ASPIRE, remember, there are two fees – one is a licensure fee, and another a fee for transshipment. Both of these fees can be avoided by any tuna boat willing to make a commitment to American Samoa by simply coming to port and making direct deliveries of whole fish to our processors. This critical second pillar of the economic recovery envisioned by ASPIRE provides even more opportunity for the “multiplier effect” in our local economy. More boats means more fuel purchased, more net and boat repairs, more restaurant meals and hotel spending.
With regard to your questions numbered (1) through (6), following are answers to each:
(1) Why does the bill not require a minimum tonnage for direct delivery? First, ASPIRE does not specify a minimum tonnage to be delivered for each direct delivery because each boat varies in size and therefore tonnage. Further, the math simply does not work for boats to attempt to make partial deliveries – it is not in their economic interest to come into port with less than a full or near-full delivery due to the cost of fuel, time off the fishing grounds, and the limited number of fishing days available to them due to potential closures. Each boat will seek to minimize its expenses and maximize its revenues per delivery, and the rational way to accomplish this is to only come into port with a full or near-full delivery.
(2) Wouldn’t the funds for the trust fund dry up if the vessels meet their delivery requirements? As I’ve explained above, there are multiple streams of revenue into the trust fund. Even if all affected vessels meet the three delivery minimum for direct deliveries, thus avoiding the licensure fee, there will still be the fee associated with any transshipment. That fee is not waived. The transshipment fee is only avoided by delivering to American Samoa. Although ASPIRE has been designed to make it possible for the subsidy amount to be funded through assessment of the licensure and transshipment fee applied to our foreign competitors, the trust fund will also receive money through federal appropriations. I also make note that any cost to the federal government for this program would be minimal in comparison to the cost to the federal treasury should American Samoa have no base of employment and should the territory’s economy collapse. Indeed, the US Department of Labor estimated those annual costs to rise well into the tens of millions of dollars every year.
(3) What if the Processors can’t buy all the fish that boats want to direct deliver? The solution to this problem is partially in your hands. If a processor of light meat round fish is given the lease on the current Chicken of the Sea facility, there will be more than enough demand for every current licensed boat to make all of their deliveries to American Samoa. If you choose to award that lease to a smaller or alternate manufacturer that only wants to sends loins, not whole fish, into the territory, then there will be somewhat greater competition for the sale of direct delivery of fish to the remaining cannery. However, that said, based on the fact that there are a limited number of vessels potentially affected by the transshipment fee, and accounting for their known capacities, in conversation with the existing cannery, we anticipate that deliveries by all of those boats could be absorbed.
(4) Why would the boats not change their registration and flag to another country? Boats can do this now, but, in doing so, they lose access to prime US waters and they lose the benefit of having the US license and the trade benefits to the US mainland market. It is highly unlikely that vessels would change their registration and flag to another country to avoid ASPIRE’s transshipment fee because doing so would mean the vessels would forego the lucrative benefits of fishing under license of the South Pacific Tuna Treaty. If a more lucrative license regime exists, vessels would already have changed their country of registration. And, should a vessel decide to change, there are others who would be willing to take on the license they would be giving up so as to take advantage of these many current and new benefits.
(5) What happens if the trust fund runs out of money? The ASPIRE Act is designed to avoid a situation where there would not be sufficient money to pay for the subsidies by supplying the fund with federally appropriate monies and allowing those funds to “roll over” from year to year. And more fundamentally, the trust fund is not intended to capture the full cost of economic development initiatives for American Samoa, but to capture what is owed the people of American Samoa by those who take advantage of our natural resources. Again, the cost to the federal treasury of doing nothing and losing the economic foundation for American Samoa would be far, far greater than any cost associated with ASPIRE.
(6) Why does ASPIRE use “metric ton” rather than “short ton”? ASPIRE provides subsidies to vessels based on direct deliveries in metric tons rather than short tons because the global tuna fishing industry as a whole – the economic market in which we now must compete - works based on metric tons, not short tons.
Finally, in closing, I believe it is important to address your underlying concerns that ASPIRE does not assist ASG or our local business community in dealing with minimum wage increases. It was never the intention of ASPIRE to do so and, at no time, did I make any claims that it would. This is because our local territorial government also needs to take responsibility and offer up real solutions for the benefit of our people.
Every seven years, the U.S. government sends over one billion dollars to the residents and government of American Samoa in the form of entitlement and other program payments. The territorial government itself is also subsidized by the federal government, receiving $23 million per year for the operations of our local government, and another $10 million annually for critical infrastructure projects. With this kind of federal funding being sent to American Samoa and the territorial government, it would be my hope that our territorial government would do its part to help our local business community rather than expecting the federal government to correct all that is wrong locally.
As was recently reported by Samoa News, more than 67% of total local revenue in American Samoa, or $45.20 million, will be used to fund the Executive branch of our local government. It has also been reported that ASG collects about $67 million per year in local revenues. Given this kind of local revenue and the amount devoted to the Executive branch, how is it that ASG is unable to set aside a portion of local funds to pay our lowest-paid government workers decent wages? As you know, the federal government has waited more than 50 years for American Samoa to come up to federal minimum wage standards. And while it is true that Congress recently raised the minimum wage rate in American Samoa, for your information, Congress raised the minimum wage rate all across America, not just in American Samoa. In doing so, Congress gave American Samoa’s local employers twice as much time to come up to federal minimum wage standards. For example, Congress required employers in the States to pay workers $1.00 per hour every year until they reach $7.25 per hour while employers in American Samoa and CNMI are only required to pay 0.50 cents per hour every year until they reach $7.25 per hour.
Congress has also indicated that it will postpone the next minimum wage increase until the GAO releases its findings which may further slow our increases. Nonetheless, whatever Congress decides is the right thing to do for our workers, I am hopeful that, in the interim, ASG will do its part to more effectively manage the federal funds it has been given in order that our local government workers who are paid less than federal minimum wage standards can also be blessed with the opportunity to earn a living to keep up with the cost of living. This should especially be the case if ASG can increase directors’ salaries by $10,000 with no thought or consideration of minimum wage increases for the poorest among us. ASG can also do its part by lowering fuel and electricity costs in the territory for our minimum wage workers who are barely able to make ends meet.
During the week of September 1, I met with Chairman Kim of Dongwon while I was in Korea and he explained to me that fuel costs in American Samoa are as high, if not higher, than fuel costs on the high seas. Certainly our territorial government can set fairer fuel prices for our people and those of our business community who are sincere about investing and operating in American Samoa. I can assure you that Chairman Kim is sincere about making a long-term investment in American Samoa, but our territorial government must do its part and meet him half-way.
So far, StarKist has sought to secure the Chicken of the Sea lease. So has Tri-Marine, one of the largest suppliers of tuna for the major brands. While ASG has chosen to remain silent about how the negotiations are proceeding, it is my understanding that these companies have specified that their commitment to doing business in American Samoa hinges on the principles of ASPIRE becoming law. If ASPIRE becomes law, we have options to save our economy, and to protect the jobs of our workers. Without it, American Samoa will see a downsizing of our tuna industry. Given that StarKist is our largest, private sector employer and the only business willing to work with us at this time, I am puzzled as to why ASG isn’t more actively doing all it can to make sure StarKist stays. As you recall, Chicken of the Sea did not even have the courtesy of discussing its departure with us.
Finally, while it is easy to use minimum wage as an excuse for the territory’s problems, the fact is the Territory had years to act to diversify our economy long before minimum wage ever went in to effect. In 1999, at a cost of $600,000 from the U.S. Congress, a U.S. Department of the Interior Secretarial Commission was established to examine American Samoa’s economic condition and make recommendations to ASG and the Department of the Interior on how to diversify and expand American Samoa’s economy. This was the first time in American Samoa’s 100-year relationship with the United States that a Secretarial Commission was established.
This Secretarial Commission was supported by Presidents Bill Clinton and George W. Bush, chaired by the former Governor of Hawaii John Waihee, and administered by the U.S. Department of the Interior. You served as a commission member. I served as an ex officio member.
In conjunction with the people of American Samoa, the Economic Study Commission, over about a two -year time period, developed an economic plan which offered specific recommendations on how to diversify the territory’s local economy based on the will of the people. In fact, over 8,000 people were surveyed at the request of the Commission by the American Samoa Community College. In April 2002, the Secretarial Commission issued its final report. But our local territorial government never acted. No call center was put in place although I specifically set aside $500,000 to establish a computer lab at ASCC for this purpose, tourism was not developed although my office made it possible for investors to secure a $7 million loan guarantee from the USDA to build the Tradewinds hotel, and no aquaculture initiatives were undertaken although Sea Grant established a presence in American Samoa at my request. In addition to these missed opportunities, now there seems to be an active effort underway to oppose or delay local support for ASPIRE, our only chance at keeping our economy afloat.
In good conscience, I cannot turn my back on our largest employer and the more than 2,000 cannery workers who are counting on our elected leaders to do right by them. While ASG continues to use minimum wage as an excuse to cover up the Territory’s problems, the reality is our tuna industry and workers are caught up in an economy that is the worst that America has seen since the Great Depression. Our people understand this. Congress understands this, and this is why I have introduced ASPIRE, so that I can be assured that everything that could be done has been done to save our private-sector economy, which is more than 80% dependent, either directly or indirectly, on the US tuna processing and fishing industries.
While ASPIRE may not be the most perfect bill and while I am disappointed that you have stated that “the Territorial Government cannot support this legislation proposal as proposed,” we cannot afford to let perfection be the enemy of the good. And since ASG has offered no alternative of its own, I believe ASPIRE is our best chance of saving the jobs of more than 2,000 of our cannery workers and of protecting our economy for future generations. For this reason, ASPIRE was introduced today, a copy of which is enclosed for you and our Fono members.
Yesterday, I met with Paul Krampe, Executive Director of the American Tunaboat Association, and in the coming weeks I will be meeting with Chris Lischewski, CEO, of Bumble Bee. My office has also been in contact with Ms. Kitty Simonds, Executive Director of the Western Pacific Regional Fishery Management Council. I have informed all interested parties, and by way of this letter am also informing you, that I remain committed to making necessary adjustments to the bill as it makes its way through Congress in order to create a win-win situation for everyone. What I will not do is sit idly by and do nothing, especially when ASG has no real plan of action of its own.