Commonwealth of the Northern Mariana Islands
Managing Potential Economic Impact of Applying U.S. Immigration Law Requires Coordinated Federal Decisions and Additional Data Gao ID: GAO-08-791 August 4, 2008The United States enacted legislation in May 2008 applying federal immigration law to the Commonwealth of the Northern Mariana Islands (CNMI) subject to a transition period. The CNMI is subject to most U.S. laws but has administered its own immigration system, including admitting foreign workers, tourists, and foreign investors. The Secretary of Homeland Security, in consultation with the Secretaries of the Interior, Labor, and State, and the Attorney General, has the responsibility to establish a transition program. GAO was asked to review how the legislation's implementation may affect the CNMI economy, in particular the CNMI's (1) labor market, including foreign workers; (2) tourism sector; and (3) foreign investment. This report is based on GAO's March 2008 report (GAO-08-466) and analysis of data on the CNMI's labor market, tourism sector, and foreign investment.
The potential impact on the CNMI's labor market of the recent legislation applying U.S. immigration law will largely depend on decisions that the U.S. Departments of Homeland Security (DHS) and Labor (DOL) make in implementing a required permit program for foreign workers. The interaction of DHS and DOL decisions about, respectively, the number of permits to allocate annually and whether and when to extend the permit program past 2014 will significantly affect employers' access to foreign workers. However, federal agencies have not yet identified an interagency process to coordinate such decisions. Further, the agencies may have difficulty obtaining relevant data on the CNMI labor market. Given foreign workers' prominence in key CNMI industries, any substantial and rapid decline in permits for foreign workers would have a negative effect on the CNMI economy. However, federal agencies may reduce permits more modestly, resulting in minimal effects on the economy. At the same time, continuing declines in the garment industry, challenges to the tourism industry, and the scheduled increases in the minimum wage may reduce demand for foreign workers, lessening any potential adverse impact of the legislation on the economy. Although the legislation and the CNMI government have stated goals of preparing CNMI residents to replace foreign workers, factors such as the limited number of available CNMI residents may impede these efforts' effectiveness. Any impact of the recent legislation on the CNMI's tourism sector will depend largely on federal regulations specifying the countries to be included in a joint CNMI-Guam visa waiver program required by the legislation. For countries likely to be included in this program, such as Japan and South Korea, the impact is likely to be minimal. For countries that may not be part of the joint visa waiver program, possibly including China and Russia, applying for a visa from U.S. embassies or consulates will likely be more costly and more time-consuming than obtaining a visitor entry permit under CNMI immigration law. To the extent that any increase in the cost and time required to obtain a visa discourages tourists from visiting the CNMI, the legislation could negatively affect CNMI tourism. The recent legislation's impact on CNMI foreign investment will depend in part on DHS decisions regarding the application of U.S. nonimmigrant treaty investor status--"grandfathering"--for investors with CNMI foreign investor entry permits. However, lack of data on foreign investment in the CNMI makes it difficult to assess the likely impact of these decisions and may hamper DHS's ability to make informed decisions. Because long-term business entry permits account for a large proportion of CNMI foreign investor entry permits, more CNMI foreign investors will be grandfathered if DHS applies the status to these permit holders. Any impact on foreign investment in the CNMI will likely affect the labor market and tourism sector, and any impact on the labor market or tourism sector may also affect foreign investment.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-08-791, Commonwealth of the Northern Mariana Islands: Managing Potential Economic Impact of Applying U.S. Immigration Law Requires Coordinated Federal Decisions and Additional Data
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
August 2008:
Commonwealth Of The Northern Mariana Islands:
Managing Potential Economic Impact of Applying U.S. Immigration Law
Requires Coordinated Federal Decisions and Additional Data:
GAO-08-791:
GAO Highlights:
Highlights of GAO-08-791, a report to congressional committees.
Why GAO Did This Study:
The United States enacted legislation in May 2008 applying federal
immigration law to the Commonwealth of the Northern Mariana Islands
(CNMI) subject to a transition period. The CNMI is subject to most U.S.
laws but has administered its own immigration system, including
admitting foreign workers, tourists, and foreign investors. The
Secretary of Homeland Security, in consultation with the Secretaries of
the Interior, Labor, and State, and the Attorney General, has the
responsibility to establish a transition program. GAO was asked to
review how the legislation‘s implementation may affect the CNMI
economy, in particular the CNMI‘s (1) labor market, including foreign
workers; (2) tourism sector; and (3) foreign investment. This report is
based on GAO‘s March 2008 report (GAO-08-466) and analysis of data on
the CNMI‘s labor market, tourism sector, and foreign investment.
What GAO Found:
Labor market. The potential impact on the CNMI‘s labor market of the
recent legislation applying U.S. immigration law will largely depend on
decisions that the U.S. Departments of Homeland Security (DHS) and
Labor (DOL) make in implementing a required permit program for foreign
workers. The interaction of DHS and DOL decisions about, respectively,
the number of permits to allocate annually and whether and when to
extend the permit program past 2014 will significantly affect
employers‘ access to foreign workers. However, federal agencies have
not yet identified an interagency process to coordinate such decisions.
Further, the agencies may have difficulty obtaining relevant data on
the CNMI labor market. Given foreign workers‘ prominence in key CNMI
industries, any substantial and rapid decline in permits for foreign
workers would have a negative effect on the CNMI economy. However,
federal agencies may reduce permits more modestly, resulting in minimal
effects on the economy. At the same time, continuing declines in the
garment industry, challenges to the tourism industry, and the scheduled
increases in the minimum wage may reduce demand for foreign workers,
lessening any potential adverse impact of the legislation on the
economy. Although the legislation and the CNMI government have stated
goals of preparing CNMI residents to replace foreign workers, factors
such as the limited number of available CNMI residents may impede these
efforts‘ effectiveness.
Tourism. Any impact of the recent legislation on the CNMI‘s tourism
sector will depend largely on federal regulations specifying the
countries to be included in a joint CNMI-Guam visa waiver program
required by the legislation. For countries likely to be included in
this program, such as Japan and South Korea, the impact is likely to be
minimal. For countries that may not be part of the joint visa waiver
program, possibly including China and Russia, applying for a visa from
U.S. embassies or consulates will likely be more costly and more time-
consuming than obtaining a visitor entry permit under CNMI immigration
law. To the extent that any increase in the cost and time required to
obtain a visa discourages tourists from visiting the CNMI, the
legislation could negatively affect CNMI tourism.
Foreign investment. The recent legislation‘s impact on CNMI foreign
investment will depend in part on DHS decisions regarding the
application of U.S. nonimmigrant treaty investor status”
’grandfathering“”for investors with CNMI foreign investor entry
permits. However, lack of data on foreign investment in the CNMI makes
it difficult to assess the likely impact of these decisions and may
hamper DHS‘s ability to make informed decisions. Because long-term
business entry permits account for a large proportion of CNMI foreign
investor entry permits, more CNMI foreign investors will be
grandfathered if DHS applies the status to these permit holders. Any
impact on foreign investment in the CNMI will likely affect the labor
market and tourism sector, and any impact on the labor market or
tourism sector may also affect foreign investment.
What GAO Recommends:
GAO recommends that the Secretary of Homeland Security lead other
relevant federal agencies in identifying an interagency process to
jointly implement the legislation and that the Secretaries of Homeland
Security and Labor jointly develop strategies to obtain critical data
on the CNMI labor market and foreign investment. DHS agreed with the
findings and recommendations, Interior agreed with the findings, and
Labor had no comments. In response to the CNMI government‘s concerns
about the methodology and analysis, GAO clarified the report as
appropriate.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-791]. For more
information, contact David Gootnick at (202) 512-3149 or
gootnickd@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Recent Legislation's Potential Impact on CNMI Labor Market and Economy
Will Depend Largely on Federal Decisions, but U.S. Agencies Lack Needed
Data and Coordination Process:
Recent Legislation's Possible Impact on CNMI Tourism Depends Largely on
Federal Agency Decisions:
Recent Legislation's Impact on CNMI Foreign Investment Depends, in
Part, on Federal Decisions, but Lack of Data Hinders Assessment of
Likely Impact:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: U.S. Nonimmigrant Classes of Admission:
Appendix III: Information on the CNMI Economy:
Appendix IV: U.S. and CNMI Fees for Foreign Workers, Tourists, and
Foreign Investors:
Appendix V: Applicability of Other Legislation Provisions to CNMI
Foreign Workers:
Appendix VI: Construction of Gross Domestic Product Simulations:
Appendix VII: Dependents of Temporary Non-U.S. Citizens in the CNMI:
Appendix VIII: Country Participation in Current Waiver Programs in the
United States, the CNMI, and Guam:
Appendix IX: CNMI Immigration and Labor Expenditures:
Appendix X: Comments from the Department of Homeland Security:
Appendix XI: Comments from the Department of the Interior and GAO's
Evaluation:
Appendix XII: Comments from the Commonwealth of the Northern Mariana
Islands Government and GAO's Evaluation:
Appendix XIII: GAO Contacts and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: Key Federal Implementation Decisions Related to CNMI Foreign
Workers:
Table 2: Percentage of CNMI Foreign Workers Earning No More Than
Current Minimum Wage of $4.05 per Hour:
Table 3: Key Federal Implementation Decision Related to CNMI Tourism:
Table 4: Comparison of Current CNMI Visitor Entry Permit Program with
U.S. Visitor Visa Program, for Nonwaiver Program Visitors:
Table 5: Recent Legislation's Likely Impact on Tourists from Japan,
South Korea, China, and Russia:
Table 6: Key Federal Implementation Decisions Related to CNMI Foreign
Investors:
Table 7: The CNMI's Fiscal Condition:
Table 8: Mean Number of Children in Household by Immigration Status of
Head of Household, 2005:
Table 9: CNMI Division of Immigration Expenditures for Fiscal Year
2007:
Table 10: CNMI Department of Labor Expenditures for Fiscal Year 2007:
Table 11: Federal Expenditures on CNMI Division of Immigration and CNMI
Department of Labor Activities for Fiscal Year 2007:
Figures:
Figure 1: CNMI Garment Exports to the United States, 1995 to 2007:
Figure 2: Number of Visitor Arrivals to the CNMI, 1990 to 2007:
Figure 3: Industry Breakdown of CNMI Workforce by Immigration Status,
2005:
Figure 4: Citizenship of CNMI Workers:
Figure 5: Recent Federal Immigration Legislation's Provisions for
Foreign Workers, Tourists, and Foreign Investors in the CNMI:
Figure 6: Illustrations of Alternative DHS Decisions Regarding Annual
Reduction in CNMI-Only Work Permits for Foreign Workers:
Figure 7: Illustrations of Potential DHS and DOL Decisions' Joint
Effects on Access to CNMI-Only Work Permits for Foreign Workers:
Figure 8: Examples of Scenarios Illustrating U.S. Agency Decisions'
Potential Joint Impact on Access to CNMI-Only Work Permits for Foreign
Workers and CNMI Gross Domestic Product:
Figure 9: Percentage of CNMI Foreign Workers Who Will Be Affected by
Minimum Wage Increases, by Industry:
Figure 10: CNMI Visitors' Countries of Origin, Fiscal Year 2007:
Figure 11: Reported CNMI Visitor Arrivals by Country, 1996 through
2007:
Figure 12: Percentage and Number of Children in Each CNMI Household by
Immigration Status of Head of Household, 2005:
Figure 13: Immigration Status of Children in the CNMI, 2005:
Abbreviations:
BMS: CNMI Border Management System:
CNMI: Commonwealth of the Northern Mariana Islands:
DHS: U.S. Department of Homeland Security:
DOI: U.S. Department of the Interior:
DOL: U.S. Department of Labor:
GDP: gross domestic product:
HIES: CNMI Household, Income, and Expenditures Survey:
INA: U.S. Immigration and Nationality Act:
LIIDS: CNMI Labor and Immigration Identification and Documentation
System:
MVA: Marianas Visitors Authority:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
August 4, 2008:
The Honorable Jeff Bingaman:
Chairman:
The Honorable Pete V. Domenici:
Ranking Member:
Committee on Energy and Natural Resources:
United States Senate:
The Honorable Nick J. Rahall II:
Chairman:
The Honorable Don Young:
Ranking Member:
Committee on Natural Resources:
House of Representatives:
The Honorable Donna M. Christensen:
Chairwoman:
The Honorable Luis G. Fortuno:
Ranking Member:
Subcommittee on Insular Affairs:
Committee on Natural Resources:
House of Representatives:
The United States recently enacted legislation applying U.S.
immigration law to the Commonwealth of the Northern Mariana Islands
(CNMI),[Footnote 1] ending decades of the CNMI's control over its own
immigration system. The CNMI is subject to most U.S. laws, and the
United States has complete responsibility and authority for CNMI
defense and foreign affairs. However, since 1978, the CNMI has
administered its own immigration system under the terms of its 1976
Covenant with the United States. The CNMI has applied this flexibility
to admit substantial numbers of foreign workers[Footnote 2] from China,
the Philippines, and other countries through a permit program for non-
U.S. citizens (noncitizens) entering the CNMI. In 2005, these workers
represented a majority of the CNMI labor force and outnumbered U.S.
citizens in most industries, including the garment manufacturing and
tourism sectors, which have been central to the CNMI's economy. The
CNMI has also admitted tourists under its own entry permit and entry
permit waiver programs and has provided various types of admission to
foreign investors. The CNMI faces serious economic challenges,
including a decline in the garment industry and fluctuation in the
tourism industry.
The recent legislation amends the U.S.-CNMI Covenant to establish
federal control of CNMI immigration on June 1, 2009, with several CNMI-
specific provisions affecting foreign workers and investors during a
transition period[Footnote 3] that ends in 2014. The recent legislation
also amends U.S. immigration law[Footnote 4] to add the CNMI to an
existing visa waiver program for Guam visitors.[Footnote 5] The
legislation's stated intent is to ensure effective border control
procedures and protect national and homeland security while minimizing
the potential adverse economic and fiscal effects of phasing out the
CNMI's own foreign worker permit program and maximizing the CNMI's
potential for economic and business growth. During the transition
period, the Secretary of Homeland Security, in consultation with the
Secretaries of the Interior, Labor, and State, and the Attorney
General, has the responsibility to establish, administer, and enforce a
transition program to regulate immigration in the CNMI.[Footnote 6]
Some federal decisions require consultation with the CNMI
Governor.[Footnote 7] In addition, the legislation requires the CNMI
government to provide the Secretary of Homeland Security all
immigration records or other information that the Secretary deems
necessary to assist its implementation. The transition program includes
a program providing foreign workers temporary permits to work in the
CNMI (CNMI-only work permits); the number of these permits must be
reduced to zero by the end of the transition period or the end of any
extensions of the permit program. Federal agency decisions will
include, among others, the Department of Homeland Security's
determination of the numbers of CNMI-only work permits to issue
annually and of the countries to include in a joint CNMI-Guam visa
waiver program for visitors and the Secretary of Labor's determination
of whether and when to extend the CNMI-only work permit program for up
to 5 years at a time past 2014.
We were asked to examine factors that will affect the impact of the
recent legislation's implementation on the CNMI economy, in particular
the CNMI's (1) labor market, including foreign workers; (2) tourism
sector; and (3) foreign investment. This report is based on our March
2008 review of the then pending legislation, which was signed into law
on May 8, 2008.[Footnote 8] In addition, in response to your requests,
this report provides information on dependents of temporary non-U.S.
citizens in the CNMI (see app. VII) and on CNMI labor and immigration
expenditures (see app. IX).
In preparing this report, we reviewed relevant CNMI immigration and
labor laws; current U.S. immigration law, including the U.S.
Immigration and Nationality Act (INA)[Footnote 9] and related
regulations; and the recent legislation applying U.S. immigration law
to the CNMI, including earlier versions of the legislation. We did not
review the extent to which CNMI or U.S. laws were properly enforced or
implemented. We interviewed officials from the U.S. Departments of
Homeland Security (DHS), the Interior (DOI), and Labor (DOL). In
addition, we interviewed CNMI government officials in the CNMI and in
Washington, D.C., as well as representatives of the CNMI private sector
and foreign workers. We analyzed available CNMI administrative and
survey data, primarily from 2002 through 2007, related to the CNMI's
labor market, tourism sector, and foreign investment. In particular, we
analyzed CNMI data on the numbers and wages of workers from the Labor
and Immigration Identification and Documentation System (LIIDS);
[Footnote 10] the 2005 Household, Income, and Expenditures Survey
(HIES);[Footnote 11] and the CNMI Department of Finance's tax returns
to compare the foreign worker labor force with that of resident
workers. We analyzed tourism data from the Marianas Visitors Authority
(MVA)[Footnote 12] and the Border Management System (BMS)[Footnote 13]
to study trends in tourist arrivals, demographic information such as
tourists' countries of origin, and the cost of tour packages from
certain countries. In addition, we analyzed foreign investment entry
permit data from the CNMI Department of Commerce. To examine the
possible range of effects from differing rates of reductions in foreign
workers on the CNMI economy under the legislation, we simulated the
effect on CNMI gross domestic product (GDP) under a number of
scenarios. We did not receive some data requested from the CNMI
government, including data from LIIDS on foreign investors and on other
permit holders apart from one category of foreign workers. Moreover,
some relevant data are not collected by either the CNMI or the federal
government. While the data provided by the CNMI government had some
limitations, and we did not receive all data requested, we determined
that the available data were adequate and sufficiently reliable for the
purposes of our review. In addition, to describe CNMI economic and
political conditions, we consulted data from several U.S. government
sources. The scope of our study does not include foreign workers whose
documentation is not current or valid or those working in any
underground economy. In addition, we did not review federal agencies'
expected costs or operational needs in implementing the legislation. We
conducted this performance audit from June 2007 to August 2008 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives. See appendix I for further
details of our methodology.
Results in Brief:
Labor market. Decisions that DHS and DOL will make in implementing the
CNMI-only work permit program will largely determine the legislation's
potential impact on the availability of foreign workers and, as a
result, on the CNMI labor market and economy. DHS decisions that will
affect employers' access to foreign workers include the number of
permits to allocate each year, to be reduced to zero by the end of the
CNMI-only permit program; the distribution of the permits; their terms
and conditions; and the permit fees. DOL's decision regarding whether
and when to extend the CNMI-only permit program past 2014 will likewise
affect the availability of foreign workers. Moreover, interaction of
the rate and timing with which DHS reduces the available number of
permits and the timing of any DOL extensions of the program will
significantly impact the permits' availability. For example, if DHS
reduces the annual allocation of permits by the same number each year
and DOL extends the program frequently, the availability of permits
will decline less rapidly than if DOL extends the program less
frequently or not at all. However, federal agencies have not yet
identified an interagency process to coordinate such decisions. In
addition, because key federal sources of labor market data do not cover
the CNMI, the agencies may have difficulty in obtaining the data needed
to make decisions that minimize any adverse impact on the CNMI. Given
foreign workers' prominence in key CNMI industries, any substantial and
rapid decline in the availability of CNMI-only work permits for foreign
workers would have a negative effect on the economy, as illustrated by
our simulations of a range of possible effects of agency decisions on
CNMI GDP. However, federal agencies may make more modest reductions in
CNMI-only permits, resulting in minimal effects on the economy. At the
same time, continuing declines in the garment industry, challenges to
the tourism industry, and the scheduled increases in the minimum wage
may reduce demand for foreign workers, lessening any potential adverse
impact of the legislation on the economy. Although the legislation and
the CNMI government have stated goals of preparing CNMI
residents[Footnote 14] to replace foreign workers, factors such as the
limited number of available CNMI residents may impede these efforts'
effectiveness.
Tourism. Any impact of the recent legislation on the CNMI's tourism
sector will depend largely on DHS regulations specifying which
countries will be included in the joint CNMI-Guam visa waiver program.
The legislation's impact will be minimal for tourists from countries
included in the joint visa waiver program; however, for tourists from
countries not included in the joint program, the costs and time
associated with obtaining visitor visas will likely increase, possibly
influencing tourists to choose destinations other than the CNMI and
negatively affecting CNMI tourism. Currently most CNMI tourists are
from Japan and South Korea, both of which will probably be included in
the joint visa waiver program because they currently are included in
the Guam visa waiver program. China[Footnote 15] and Russia--the
markets most likely to be affected by the legislation because they
currently are not included in the Guam visa waiver program---account
for about 10 percent and less than 1 percent of CNMI tourist arrivals,
respectively, but are nevertheless considered important markets. If
China and Russia are not included in the joint visa waiver program,
tourists from these countries will face increased visa fees, more time-
consuming procedures, and uncertainties related to possible visa
refusal. According to CNMI tourism industry representatives, this will
reduce the CNMI's attractiveness relative to other Asia and Pacific
destinations. The likely impact on the CNMI of sharing the joint
program with Guam is unclear.
Foreign investment. The impact of the legislation on CNMI foreign
investment will depend, in part, on key DHS decisions regarding foreign
investor entry permits; however, lack of data makes it difficult to
assess the likely impact of these decisions and may hamper federal
decisions. In implementing the legislation, DHS will decide which CNMI
foreign investor permit holders will receive "grandfathered" status as
U.S. nonimmigrant treaty investors during the transition period. In
particular, DHS will determine whether the status applies only to
investors holding one of three types of CNMI foreign investor entry
permits, the perpetual foreign investor entry permit, or extend this
status to investors holding another type, the long-term business entry
permit. DHS also will determine how long the grandfathered status will
be valid. However, critical data on foreign investment in the CNMI--
such as data on overall foreign investment in the CNMI--are not
available, making it difficult to estimate the likely impact of the
legislation and limiting DHS's ability to make informed decisions
regarding the grandfathered status. Data provided by the CNMI
Department of Commerce show that long-term business entry permits
accounted for 90 percent of all long-term business and perpetual
foreign investor entry permits active and valid in July 2008. This
suggests that DHS's decision on whether to apply grandfathered status
to investors with these permits will partly determine the impact of the
legislation. Moreover, any impact on foreign investment in the CNMI
will likely affect the labor market and tourism sector, and any impact
on the labor market and tourism sector may also affect foreign
investment.
We are recommending that the Secretary of Homeland Security lead other
relevant federal agencies, including the Departments of the Interior,
Labor, and State, in identifying the interagency process that they will
use to coordinate their decisions--and consult with the CNMI government
as required--in jointly implementing the legislation. We also are
recommending that the Secretaries of Homeland Security and Labor
jointly develop strategies for obtaining critical data on the CNMI
labor market and on CNMI foreign investment.
We provided a draft of this report to officials in DHS, DOI, DOL, and
in the CNMI government for review and comment. We received written
comments on the draft report from DHS and DOI and from the CNMI
government, which are reprinted in appendixes X, XI, and XII,
respectively. We also received technical comments from DHS and DOI and
from the CNMI government. We incorporated their comments as
appropriate. DOL had no comments. In addition, we provided a draft to
the Department of State for technical review, and State had no
comments. DHS agreed with our findings and recommendations, and DOI
generally agreed with our findings. The CNMI government raised concerns
or issues about some aspects of our report methodology and analysis. It
commented that the GDP simulation methodology we used in the report is
inadequate and that the report's assessment of future demand for
foreign workers in the CNMI is faulty and ignores recent evidence of
economic recovery. By focusing on one of several scenarios developed
for illustrative purposes rather than the full range of scenarios
included in our report, the CNMI government comments also inaccurately
stated that the report predicts a substantial decline in the CNMI
economy as a result of the legislation. We believe our methodology is a
sound approach for analyzing the potential impact of federal
implementation decisions on the CNMI economy. In response to these
comments, however, we revised the body of the report to better clarify
that the GDP simulations illustrate a range of possible outcomes of
federal decisions regarding the CNMI-only work permit program--ranging
from minimal to substantial impact on the economy--without predicting
future GDP. The CNMI government also expressed concern that the
report's discussion of possible consequences to the CNMI economy could
itself harm the CNMI. However, we believe that reporting the key
decisions facing federal agencies and illustrating a range of potential
impacts that those decisions could have on the CNMI economy is
essential to effective implementation of the legislation that has now
been enacted. Fully informed and coordinated federal agencies will be
best capable of making decisions that minimize any potential adverse
consequences for the CNMI economy. The actual extent of the
legislation's impact on the CNMI economy will depend on the key federal
decisions to be made related to foreign workers, tourists, and foreign
investors identified in this report, as well as other factors in the
economy.
Background:
Political History of the CNMI:
The Northern Mariana Islands are a group of 14 islands in the western
Pacific Ocean, lying just north of Guam, 5,500 miles from the U.S.
mainland. After World War II, the U.S. Congress approved the
Trusteeship Agreement that made the United States responsible to the
United Nations for the administration of the islands.[Footnote 16]
Later, the Northern Mariana Islands sought self-government and
permanent ties to the United States.[Footnote 17] In 1976, after almost
30 years as a trust territory, the District of the Mariana Islands
entered into a Covenant with the United States establishing the island
territory's status as a self-governing commonwealth in political union
with the United States.[Footnote 18] The Covenant grants the CNMI the
right of self-governance over internal affairs and grants the United
States complete responsibility and authority for matters relating to
foreign affairs and defense affecting the CNMI.[Footnote 19] The
Covenant initially made many federal laws applicable to the CNMI,
including laws that provide federal services and financial assistance
programs.[Footnote 20] The Covenant preserved the CNMI's exemption from
certain federal laws that had previously been inapplicable to the Trust
Territory of the Pacific Islands, including federal immigration laws
with certain limited exceptions[Footnote 21] and certain federal
minimum wage provisions. However, under the terms of the Covenant, the
federal government has the right to apply federal law in these exempted
areas without the consent of the CNMI government, and it enacted the
recent federal immigration legislation under this authority.
The CNMI's Economy:
Changing Economic Conditions in the CNMI:
Between 1980 and 1995, the CNMI's employment grew by about 12.7 percent
annually, largely because of its rapidly expanding garment and tourist
sectors. Both the garment and tourist industries contributed directly
to the economy by generating employment and bringing revenue from
outside the CNMI via exports. In 1995, these two industries accounted
for about 80 percent of all employment. In addition, a 1999 study found
that garment manufacturing and tourism accounted for about 85 percent
of CNMI's total economic activity and 96 percent of its exports.
[Footnote 22] (See app. III for more detailed information regarding the
CNMI's economy). However, several recent developments in international
trade have caused the CNMI's garment industry to decline dramatically.
In January 2005, in accordance with World Trade Organization
agreements, the United States eliminated quotas on textile and apparel
imports from other textile-producing countries, exposing CNMI's apparel
industry to greater competition. Subsequently, the value of CNMI
textile exports to the United States dropped from $1.1 billion in 1998
to $317 million in 2007 (see fig. 1), and the number of licensed CNMI
apparel manufacturers decreased rapidly, from 34 firms in 1999 to 6
firms as of July 2008.
Figure 1: CNMI Garment Exports to the United States, 1995 to 2007:
[See PDF for image]
This figure is a vertical bar graph depicting the following data:
Year: 1995;
Garment Exports: $425,870.
Year: 1996;
Garment Exports: $554,707.
Year: 1997;
Garment Exports: $797,619.
Year: 1998;
Garment Exports: $1,078,202.
Year: 1999;
Garment Exports: $1,046,660.
Year: 2000;
Garment Exports: $1,024,990.
Year: 2001;
Garment Exports: $946,597.
Year: 2002;
Garment Exports: $815,311.
Year: 2003;
Garment Exports: $817,151.
Year: 2004;
Garment Exports: $807,122.
Year: 2005;
Garment Exports: $676,916.
Year: 2006;
Garment Exports: $494,724.
Year: 2007;
Garment Exports: $316,603.
Source: GAO analysis of U.D. Department of Commerce data.
Note: Dollar amounts shown are not adjusted for inflation.
[End of figure]
In addition, the CNMI economy has been negatively affected by recent
external events' impact on the tourism industry. For example, tourism
in the CNMI experienced a sharp decline in the late 1990s as a result
of the Asian financial crisis. In 2003, according to CNMI officials,
tourism slowed for several months in reaction to the SARS epidemic,
which originated in Asia, and the war in Iraq. Total visitor arrivals
to the CNMI dropped from a peak of 736,117 in 1996 to 389,354 in 2007,
a decline of nearly 47 percent (see fig. 2).
Figure 2: Number of Visitor Arrivals to the CNMI, 1990 to 2007:
[See PDF for image]
This figure is a vertical bar graph depicting the following data:
Year: 1990;
Visitor Arrivals: 435,455.
Year: 1991;
Visitor Arrivals: 429,746.
Year: 1992;
Visitor Arrivals: 505,295.
Year: 1993;
Visitor Arrivals: 545,803.
Year: 1994;
Visitor Arrivals: 596,033.
Year: 1995;
Visitor Arrivals: 676,161.
Year: 1996;
Visitor Arrivals: 736,117.
Year: 1997;
Visitor Arrivals: 694,888.
Year: 1998;
Visitor Arrivals: 490,165.
Year: 1999;
Visitor Arrivals: 501,788.
Year: 2000;
Visitor Arrivals: 528,608.
Year: 2001;
Visitor Arrivals: 444,284.
Year: 2002;
Visitor Arrivals: 475,547.
Year: 2003;
Visitor Arrivals: 459,458.
Year: 2004;
Visitor Arrivals: 535,873.
Year: 2005;
Visitor Arrivals: 506,846.
Year: 2006;
Visitor Arrivals: 435,494.
Year: 2007;
Visitor Arrivals: 389,354.
Source: Marianas Visitors Authority data.
[End of figure]
The declines of the garment and tourism industries have taken a toll on
the overall economy.
* The overall fiscal condition of the CNMI's government steadily
weakened--government net assets of $40.6 million at the end of 2001
fell to a negative $38 million balance by the end of 2005.[Footnote 23]
* The median household income in the CNMI fell from $22,898 in 2000 to
$17,138 in 2004,[Footnote 24] and the per capita income in the CNMI
decreased from $9,151 in 2000 to $6,178 in 2004.[Footnote 25]
* The unemployment rate in the CNMI rose from 3.8 percent in 2000 to
8.3 percent in 2005.
* The percentage of people below the poverty level in the CNMI rose
from 46 percent in 1999 to 53.5 percent in 2004.
Furthermore, the CNMI continues to have lower income and higher
unemployment and poverty rates than the mainland United States.
* In 2004, median household income was 61 percent lower in the CNMI
than in the United States ($17,138 versus $44,389) and per capita
income was 74 percent lower in the CNMI than in the United States
($6,178 versus $23,848).
* In 2005, the unemployment rate in the CNMI was 8.3 percent versus 5.1
percent in the United States.
* In 2004, 53.5 percent of people in the CNMI were below the poverty
level compared with 12.7 percent in the United States.
Another factor affecting changing economic conditions in the CNMI is
the Department of Defense's plan to move 8,000 U.S. Marines and their
estimated 9,000 military dependents from Okinawa to nearby Guam over
the next several years, possibly bringing new business and tourism
opportunities for the CNMI. The Department of Defense also plans to
move other Navy, Air Force, and Army units to Guam as part of a major
realignment. The total military buildup on Guam is estimated to cost
over $13 billion and increase Guam's current population by an estimated
25,000 active duty military personnel and dependents.[Footnote 26]
CNMI Reliance on Foreign Workers:
The CNMI has used its authority over its own immigration policy to
bring in foreign workers under temporary renewable work permits and to
allow the entry of foreign business owners and their families. Largely
because of the influx of these foreign workers and entrepreneurs, the
population of the CNMI grew rapidly, increasing from about 16,800 in
1980 to 69,200 in 2000. In 2005, the population of the CNMI was 65,914,
including 33,150 (50 percent) U.S. citizens, 7,847 (12 percent)
permanent non-U.S. citizens, and 24,917 (38 percent) temporary non-U.S.
citizens. As the garment and tourist industries in the CNMI expanded
over this same period, the CNMI economy became dependent on foreign
labor. For example, in 1995, two-thirds of the working population were
temporary residents, including about 93 percent of workers in the
garment industry and slightly over 72 percent in the tourism industry.
In contrast, in the same year, U.S. citizens and permanent residents
held about 96 percent of jobs in the public sector. As a result, the
CNMI economy developed a two-tiered wage structure, with U.S. citizens
and permanent residents earning 3.5 times more than temporary residents
in 1995.[Footnote 27] In 2005, according to a household survey of the
CNMI, 46 percent of temporary residents in the labor force worked in
manufacturing, compared with 6 percent of U.S. citizens and permanent
residents, and less than 0.5 percent of temporary CNMI residents worked
in public administration, compared with 21 percent of U.S. citizens and
permanent residents (see fig. 3).
Figure 3: Industry Breakdown of CNMI Workforce by Immigration Status,
2005:
[See PDF for image]
This figure contains two pie-charts depicting the following data:
Labor Force of Temporary Workers, by Industry:
Manufacturing: 48%;
Hotel/food: 16%;
Construction: 6%;
Retail: 5%;
Social services: 2%;
Unemployed: 2%;
Public administration: 0%;
Other: 23%.
Total: 22,155.
Labor Force of U.S. Citizen and Permanent Residents, by Industry:
Public Administration: 21%;
Unemployed: 18%;
Social services: 10%;
Retail: 8%;
Hotel/food: 8%;
Manufacturing: 6%;
Construction: 3%;
Other: 26%;
Total: 14,631.
Source: GAO analysis of 2005 CNMI Household, Income, and Expenditures
Survey (HIES).
Note: "Other" represents workers in agriculture, forestry, fishing, and
mining; wholesale trade; transport, communications, and utilities;
information; finance, insurance, real estate, and rental businesses;
science; management, administrative, and waste management; arts,
entertainment, and recreation services; and other services. "Social
services" includes educational, health, and social services.
[End of figure]
The number and proportion of noncitizens in the CNMI labor force has
decreased in recent years (see fig. 4). Noncitizen workers in the CNMI
are predominantly Chinese or Filipino.
Figure 4: Citizenship of CNMI Workers:
[See PDF for image]
This figure is a stacked vertical bar graph depicting the following
data:
Citizenship of CNMI Workers:
Year: 1980;
U.S. citizen: 3,795 (62%);
Not a U.S. citizen: 2,307.
Year: 1990;
U.S. citizen: 6,685 (25%);
Not a U.S. citizen: 19,896.
Year: 1995;
U.S. citizen: 10,020 (27%);
Not a U.S. citizen: 27,520.
Year: 2000;
U.S. citizen: 9,705 (22%);
Not a U.S. citizen: 34,765.
Year: 2005;
U.S. citizen: 10,330 (27%);
Not a U.S. citizen: 28,203.
Source: GAO analysis of U.S. Census Bureau data for 1980, 1990, and
2000; 1995 CNMI Census of Population and Housing; and the 2005 CNMI
Household, Income, and Expenditures Survey (HIES).
Note: Noncitizens include temporary workers and permanent residents.
The data do not allow us to distinguish between these groups for all of
the years shown.
[End of figure]
Minimum Wage in the CNMI:
Until 2007, the CNMI's workforce was subject to a minimum wage set by
the CNMI government. At the beginning of 2007, the CNMI's minimum wage
was $3.05 per hour, substantially lower than the U.S. federal minimum
wage of $5.15 per hour but higher than wages for comparable positions
in China, the Philippines, Vietnam, and other Asian countries. In 2007,
Congress enacted a law applying the U.S. minimum wage to the CNMI,
gradually increasing the CNMI minimum wage until it meets federal
minimum wage requirements.[Footnote 28] According to the law, the CNMI
minimum wage was to increase to $4.05 per hour as of May 26, 2007.
CNMI and U.S. Immigration Law:
Current CNMI Immigration Law:
Until passage of the recent U.S. legislation, the CNMI retained
legislative authority over most aspects of immigration, regulating
entry to the CNMI through a permit system. CNMI immigration law
includes the following provisions for foreign workers, tourists, and
foreign investors. CNMI immigration law is in effect until the start of
the transition period under the federal legislation; however, federal
restrictions on the total number of foreign workers in the CNMI apply
immediately.
Foreign workers. CNMI immigration and labor rules provide for, among
other things, a worker entry permit for noncitizens entering the CNMI.
CNMI employers do not currently have the option to petition for
permanent immigrant status of workers under CNMI law. The recent
federal legislation prohibits the CNMI government from allowing an
increase in the total number of foreign workers in the CNMI between the
legislation's enactment and the effective date of the transition
period.
Tourists. According to the CNMI government, tourists from certain
countries may enter the CNMI as part of its entry permit waiver
program. The program allows eligible participants to enter for tourism
or business for up to 90 days without a visitor entry permit.
Noncitizens who are ineligible for a waiver, including citizens of
China, Russia, and Korea, may apply for a visitor entry permit, which
is valid for a single entry for up to 30 days.[Footnote 29]
Foreign investors. The CNMI offers a perpetual foreign investor entry
permit, valid for an indefinite period of time, to individuals who
maintain certain levels of investment in the CNMI, among other
requirements. In addition, the CNMI offers long-term business entry
permits (valid for 2 years at a time) with specified investment
requirements.[Footnote 30] The CNMI also offers a retiree foreign
investor entry permit requiring a minimum investment in residential
property by an applicant 55 years or older.
Current U.S. Immigration Law:
Under U.S. immigration law, noncitizens may apply for entry into the
United States as nonimmigrants or as immigrants intending to reside
permanently. The nonimmigrant categories for temporary admission
include workers who meet certain requirements, visitors for business or
pleasure, and treaty investors, among others. The immigrant categories
include permanent immigrant investor visas, as well as various
employment-based categories for admission to the United States as
lawful permanent residents permitted to work in the United States.
Foreign workers. U.S. immigration law includes several types of visas
for nonimmigrant workers and their families (H visas and certain other
visas) and sets caps for two types of H visas (H visa caps).[Footnote
31] In particular, there are limits on the number of H nonimmigrant
work visas that can be issued in each fiscal year. In addition to
nonimmigrant visas, federal law provides for permanent employer-
sponsored immigrant visas for individuals seeking to reside permanently
in the United States. (For additional information on these and other
visas available to workers, see app. V.)
Tourists. Under federal law, visitors may come to the United States for
business on a B-1 visa, for pleasure on a B-2 visa, or for business or
pleasure on a combined B-1-B-2 visa. Visitors with B visas are normally
admitted for a minimum of 6 months and a maximum of 1 year. Citizens of
the 27 countries included in the U.S. Visa Waiver Program may stay for
up to 90 days for business or pleasure in the United States without
obtaining a nonimmigrant visa.[Footnote 32] In addition, federal law
allows nationals of nine additional countries to visit Guam in B status
for up to 15 days without obtaining a visa under the Guam Visa Waiver
Program.
Foreign investors. The INA allows foreign investors to enter the United
States as nonimmigrants under treaty investor status with an E-2 visa.
Currently, federal law allows E admission for up to a 2-year period of
initial stay and allows the investor to apply for renewal.[Footnote 33]
Treaty investors must invest a substantial amount of capital in a bona
fide enterprise in the United States, must be seeking entry solely to
develop and direct the enterprise, and must intend to depart the United
States when their treaty investor status ends.[Footnote 34] Treaty
investors must be nationals of a country with which the United States
has a treaty of friendship, commerce, or navigation and must be
entering the United States pursuant to the provisions of the treaty.
The INA also allows foreign investors to seek permanent immigrant visas
(EB-5) for employment-creation purposes.[Footnote 35]
Recent Legislation Applying U.S. Immigration Law to the CNMI:
The recent legislation applies provisions of federal immigration law to
the CNMI 1 year after enactment subject to a transition period that
begins on June 1, 2009, and ends on December 31, 2014, with a
transitional provision for foreign workers that may be extended beyond
2014. The Secretary of Homeland Security has sole discretion to delay
the start of the transition period for up to 180 days, in consultation
with other federal agencies and the CNMI Governor.[Footnote 36] The
stated intent of the recent legislation is to ensure that effective
border control procedures are implemented and observed and that
national security and homeland security issues are properly addressed.
The recent legislation also states that, to the greatest extent
possible, potential adverse economic and fiscal effects of phasing out
the CNMI's foreign worker program should be minimized in order to
maximize the CNMI's potential for future economic growth. In March
2008, we described the key provisions of this legislation.[Footnote 37]
Figure 5 shows the legislation's key provisions related to foreign
workers, tourists, and foreign investors.[Footnote 38]
Figure 5: Recent Federal Immigration Legislation's Provisions for
Foreign Workers, Tourists, and Foreign Investors in the CNMI:
[See PDF for image]
This figure is an illustration of Recent Federal Immigration
Legislation's Provisions For Foreign Workers, Tourists, And Foreign
Investors In The CNMI, as follows:
Enactment of legislation: May 8, 2008;
1 year, plus possible 180-day delay, June 1, 2009, up to November 4,
2009, transition period start date;
End of initial transition period: 2014.
Foreign workers:
* CNMI-only work permit program:
Begins with transition period start date and ends December 31, 2014,
under P.L 110-229, enacted May 8, 2008. May be extended indefinitely
for up to 5 years at a time by the U.S. Secretary of Labor.
* Exemptions from certain visa caps for nonimmigrant workers:
Begins with transition period start date and ends December 31, 2014,
under P.L 110-229, enacted May 8, 2008.
* Option to apply for nonimmigrant worker visas generally available
under U.S. law:
Begins with transition period start date and continues permanently.
* Option to apply for employment-based permanent immigration status
generally available under U.S. law:
Begins with transition period start date and continues permanently.
Tourists:
* Joint CNMI-Guam visa waiver program:
Begins with transition period start date and continues permanently.
* Option to apply for U.S. visitor visas for business or pleasure
generally available under U.S. law:
Begins with transition period start date and continues permanently.
Foreign investors:
* Option for current CNMI foreign investors to convert to U.S. CNMI-
only nonimmigrant treaty investors:
Begins with transition period start date and ends December 31, 2014,
under P.L 110-229, enacted May 8, 2008.
* Option to apply for nonimmigrant treaty investor status generally
available under U.S. law:
Begins with transition period start date and continues permanently.
* Option to apply for U.S. immigrant foreign investor status generally
available under U.S. law:
Begins with transition period start date and continues permanently.
Source: GAO analysis of P.L. 110-229 and current U.S. immigration law.
[End of figure]
During the transition period, the Secretary of Homeland Security, in
consultation with the Secretaries of the Interior, Labor, and State,
and the Attorney General, has the responsibility to establish,
administer, and enforce a transition program to regulate immigration in
the CNMI. Implementation decisions by DHS will determine the extent to
which CNMI local laws and authority will be affected. Each agency must
issue regulations and implement agreements with the other agencies to
identify and assign their respective duties for timely implementation
of the transition program.[Footnote 39] The agreements must address
procedures to ensure that CNMI employers have access to adequate labor
and that tourists, students, retirees, and other visitors have access
to the CNMI without unnecessary obstacles.[Footnote 40]
Following are descriptions of the recent legislation's key provisions
related to foreign workers, tourists, and foreign investors.[Footnote
41]
Foreign workers. The recent legislation allows federal agencies to
preserve access to foreign workers in the CNMI during the transition
period and any extensions of the CNMI-only permit program, but limits
access to foreign workers afterward to those generally available under
U.S. immigration law.[Footnote 42] Key provisions regarding foreign
workers in the CNMI include the following:
* During the transition period and any extensions of the CNMI-only
permit program, employers of workers not otherwise eligible for
admission under federal law can apply for temporary CNMI-only
nonimmigrant work permits. During this period, the Secretary of
Homeland Security has the authority to determine the number, terms, and
conditions of these permits, which must be reduced to zero by the end
of the transition period and any extensions of the CNMI-only work
permit program. This program may be extended indefinitely by the U.S.
Secretary of Labor for up to 5 years at a time.
* During the initial transition period, employers in the CNMI and Guam
can petition for foreign workers under the federal nonimmigrant H visa
process, without limitation by the established numerical caps, for two
types of H visas. This exemption from the visa caps expires when the
transition period ends in 2014.[Footnote 43]
* During and after the transition period, CNMI employers can petition
for nonimmigrant worker visas generally available under U.S. law.
However, after the transition period ends, no nonimmigrant visas will
be available for workers in continuous, rather than temporary, low-
skill positions (see app. V).
* During and after the transition period, CNMI employers can also
petition for employment-based permanent immigration status for workers
under the same procedures as other U.S. employers.
Fees for the CNMI-only work permit will be determined by DHS
regulations and are not currently available. The current fees for other
U.S. worker permits range higher than the CNMI's current permit fees
for foreign workers (see app. IV).
Tourists. The recent legislation establishes a joint visa waiver
program by adding the CNMI to an existing Guam visa waiver program.
Under the joint visa waiver program, visitors from designated countries
who travel for business or pleasure to the CNMI are exempt from the
standard federal visa documentation requirements.[Footnote 44]
* The Secretary of Homeland Security will determine which countries are
included in the CNMI-Guam visa waiver program.
* Citizens of countries that do not qualify for entry under the joint
CNMI and Guam visa waiver program or other U.S. visa waiver programs
may apply for U.S. visitor visas valid for entry to any part of the
United States, which generally require in-person applications and
higher fees than the CNMI currently assesses (see app. IV).
Foreign investors. The recent legislation eliminates the CNMI's
perpetual foreign investor, retiree investor, and long-term business
entry permit programs;[Footnote 45] instead, it allows these and other
business travelers to apply to visit the CNMI under a visitor visa or
other categories in federal immigration law. The following provisions
also apply:
* Current CNMI foreign investors who meet certain requirements can
convert from a CNMI investor to a federal nonimmigrant treaty investor
during the transition period. DHS will determine to whom this
"grandfathered" status applies and how long it is valid.
* New foreign investors can apply for U.S. nonimmigrant treaty investor
status.
* New foreign investors also can petition for U.S. permanent
immigration status that is currently unavailable in the CNMI.
Recent Legislation's Potential Impact on CNMI Labor Market and Economy
Will Depend Largely on Federal Decisions, but U.S. Agencies Lack Needed
Data and Coordination Process:
Decisions that DHS and DOL make in implementing the CNMI-only work
permit program will largely determine the legislation's potential
impact on the availability of foreign workers and, as a result, on the
CNMI labor market and economy. In particular, the interaction of DHS
and DOL decisions about, respectively, the number of permits to
allocate annually and whether and when to extend the permit program
will significantly affect employers' access to foreign workers.
However, federal agencies may have difficulty in obtaining data on the
CNMI labor market on which to base their decisions. Further, the
agencies have not yet identified an interagency process to coordinate
such decisions. Given foreign workers' prominence in key CNMI
industries, any substantial and rapid decline in the availability of
CNMI-only work permits for foreign workers would have a negative effect
on the CNMI economy. However, federal agencies may make more modest
reductions in CNMI-only permits, resulting in minimal impact on the
economy. At the same time, continuing declines in the garment industry,
challenges to the tourism industry, and the scheduled increases in the
minimum wage may reduce demand for foreign workers, lessening any
potential adverse impact of the legislation on the economy. Although
the legislation and the CNMI government have stated goals of preparing
CNMI residents to replace foreign workers, factors such as the limited
number of available CNMI residents may impede these efforts'
effectiveness.
Key U.S. Agency Decisions for CNMI-Only Permit Program Will Affect
Employers' Access to Foreign Workers, but Data for Some Decisions May
Be Difficult to Obtain:
In implementing the CNMI-only work permit program mandated by the
legislation, DHS and DOL will make five key decisions that will affect
employers' access to foreign workers (see table 1).[Footnote 46]
However, CNMI-specific labor market data, which the agencies will need
to consider to minimize any adverse economic impact of their decisions,
may be difficult to obtain.
Table 1: Key Federal Implementation Decisions Related to CNMI Foreign
Workers:
Secretary of Homeland Security:
Key federal implementation decisions:
* Determine the number of permits to provide under the CNMI-only work
permit program;
* Determine the way the permits are distributed;
* Determine the terms and conditions for the permits;
Legislative requirements and authorizations:
* Reduce annual allocation of CNMI-only permits to zero by the end of
the transition period or any extensions of CNMI-only permit program; *
Attempt to promote the maximum use of U.S. citizens and, if needed,
lawful permanent residents and citizens of the Freely Associated
States, and to prevent adverse effects on the wages and working
conditions of those workers.
Key federal implementation decisions:
* Determine fees to charge employers and workers for CNMI-only work
permits;
Legislative requirements and authorizations:
* Set fees for the permits so as to recover the full cost of providing
services, including administrative costs;
* Charge employers an annual supplemental fee of $150 per permit to
fund CNMI vocational education.
Secretary of Labor:
Key federal implementation decisions:
* Decide whether and when to extend the CNMI-only permit program past
2014 (indefinitely, for up to 5 years at a time);
Legislative requirements and authorizations:
* Base decision on the labor needs of legitimate businesses in the
CNMI;
* May consider (1) workforce studies on the need for foreign workers,
(2) the unemployment rate of U.S. citizen workers in the CNMI, and (3)
the number of unemployed foreign workers in the CNMI, as well as other
information related to foreign worker trends;
* Consult with DHS, DOI, Department of Defense, and the Governor of the
CNMI.
Source: GAO analysis of P.L. 110-229, Consolidated Natural Resources
Act of 2008, May 8, 2008.
Note: During the transition period, the Secretary of Homeland Security,
in consultation with the Secretaries of the Interior, Labor, and State,
and the Attorney General, has the responsibility to establish,
administer, and enforce a transition program to regulate immigration in
the CNMI.
[End of table]
Key DHS Decisions:
DHS decisions that will affect employers' access to foreign workers
include the number of permits to allocate each year, the distribution
of the permits, the terms and conditions of the permit program, and the
fee for the permit.[Footnote 47] To minimize any adverse effects of its
decisions, DHS may consider information on the CNMI labor market.
However, DHS may have difficulty in obtaining relevant data--such as
data on the wages, occupations, and employment status of CNMI residents
and foreign workers--because the federal sources generally used to
generate such data for the United States, including the Current
Population Survey and the Current Employment Statistics program, do not
cover the CNMI.[Footnote 48]
* Number of permits. Under the legislation, DHS will determine the rate
at which it decreases the yearly allocation of CNMI-only work permits
for foreign workers, provided that zero permits are valid or available
at the end of the transition period. As shown in the examples of
alternative DHS approaches in figure 6, based on December 2007 LIIDS
data,[Footnote 49] the number of CNMI-only work permits available in
each year of the initial transition period depends on DHS's strategy
for reducing CNMI-only permits to zero. For example, if DHS uses a
linear strategy of reducing the permits to zero, the number of permits
would decline by about half by the midpoint of the initial transition
period. In contrast, DHS can apply strategies that reduce the number of
permits modestly or even minimally by the midpoint of the initial
transition period.
Figure 6: Illustrations of Alternative DHS Decisions Regarding Annual
Reduction in CNMI-Only Work Permits for Foreign Workers:
[See PDF for image]
This figure contains three line graphs depicting the following data:
Linear: Reduces the permits at a constant rate to zero:
Date: December 2007;
Number of foreign workers: 19,823.
Date: December 2008;
Number of foreign workers: 19,823.
Date: December 2009;
Number of foreign workers: 17,456.
Date: December 2010;
Number of foreign workers: 13,905.
Date: December 2011;
Number of foreign workers: 10,355.
Date: December 2012;
Number of foreign workers: 6,804.
Date: December 2013;
Number of foreign workers: 3254.
Date: December 2014;
Number of foreign workers: 1.
[End of graph]
Increasing rate: Increases the rate of reduction over the period to
zero:
Date: December 2007;
Number of foreign workers: 19,823.
Date: December 2008;
Number of foreign workers: 19,823.
Date: December 2009;
Number of foreign workers: 19,606.
Date: December 2010;
Number of foreign workers: 18,229.
Date: December 2011;
Number of foreign workers: 15,579.
Date: December 2012;
Number of foreign workers: 11,658.
Date: December 2013;
Number of foreign workers: 6,465.
Date: December 2014;
Number of foreign workers: 1.
[End of graph]
Last Month: Slight decline until sharp drop in last month to zero:
Date: December 2007;
Number of foreign workers: 19,823.
Date: December 2008;
Number of foreign workers: 19,823.
Date: December 2009;
Number of foreign workers: 19,685.
Date: December 2010;
Number of foreign workers: 19,450.
Date: December 2011;
Number of foreign workers: 19,218.
Date: December 2012;
Number of foreign workers: 18,988.
Date: December 2013;
Number of foreign workers: 18,761.
Date: December 2014;
Number of foreign workers: 1.
[End of graph]
Source: GAO analysis of CNMI Labor and Immigration Identification and
Documentation System (LIIDS) data.
Notes: Figures show numbers of CNMI-only work permits for foreign
workers after the beginning of the transition period, assuming that the
transition period begins in June 1, 2009, and that the number of
available CNMI-only work permits never increases. Our analysis does not
address the duration of the permits' validity, which DHS will
determine.
For the number of foreign workers before and at the beginning of the
transition period, we relied on CNMI LIIDS data showing 19,823 706K
foreign worker permits active as of December 31, 2007; commenting on a
draft of this report, the CNMI government stated that the number of
706K permits as of June 30, 2008, was 18,942.
In this analysis, foreign workers shown after the beginning of the
transition period on June 1, 2009, are those with CNMI-only work
permits; this analysis does not include any foreign workers allowed to
remain in the CNMI without a CNMI-only work permit. The legislation
specifies that foreign workers legally present in the CNMI as of the
transition program effective date, but who do not obtain U.S.
immigration status, may continue residing and working in the CNMI for a
limited time--2 years after the effective date of the transition
program or when the CNMI-issued permit expires, whichever is earlier.
[End of figure]
* Distribution of permits. DHS decisions regarding the CNMI-only work
permits' distribution will also affect employers' access to workers,
particularly if the demand for the permits exceeds the supply.
Following are four examples of distribution methods available to DHS:
1. DHS could decide to distribute the permits through a lottery.
Currently DHS distributes some visas, including H-1B visas, by random
assignment for valid applications submitted during set periods of time.
2. DHS might decide to distribute the permits among certain industries
based on some measure of those industries' importance to the CNMI
economy. However, because of the CNMI's changing economic environment,
DHS may have difficulty in projecting some industries' likely long-term
importance. In addition, if DHS decides to distribute permits based on
industry data current at the time, permits might then be unavailable to
businesses in any industries that subsequently developed.
3. DHS could distribute the permits in a way similar to the current
CNMI system, which distributes foreign worker permits through a
combination of permits reserved for priority businesses and a lottery.
4. DHS could use a market-based approach of permit trading,
predetermining the number of permits to be allocated annually but
allowing employers to trade permits depending on their need for foreign
workers.[Footnote 50]
* Terms and conditions of the permit program. The terms and conditions
that DHS sets for the CNMI-only work permit program will affect
employers' access to foreign workers. For example, any requirements
regarding workers' skill levels or qualifications could limit the pool
of available workers. A DHS decision to retain or end the current CNMI
requirement that employers hire a certain percentage of local residents
would also affect employers' access to foreign workers.[Footnote 51] In
addition, if DHS chooses not to make employers responsible for foreign
workers' medical costs, as current CNMI law requires, foreign workers
will become relatively more affordable. In addition, decisions
regarding the length of time that permits are valid could affect the
ability of employers to effectively use them.
* Permit fee. The fee that DHS sets for the CNMI-only work permit may
affect employers' access to foreign workers.[Footnote 52] Although the
legislation requires that DHS charge employers an annual supplemental
fee of $150 per permit to fund CNMI vocational education, it is not yet
known how the total permit fee will compare with the annual $250 fee
that employers currently pay for CNMI foreign worker permits.[Footnote
53] However, if DHS sets a higher fee for the CNMI-only permit than the
current CNMI foreign worker permit fee, this would increase employers'
costs and reduce employers' ability or incentive to hire foreign
workers instead of resident workers.
Key DOL Decision:
DOL's decision whether to extend the CNMI-only work permit program,
based on the unemployment rates of foreign workers and U.S. citizens,
as well as other CNMI-specific data, will affect the availability of
foreign workers. However, like DHS, DOL may encounter difficulty in
obtaining up-to-date information about the CNMI labor market because
the federal sources generally used to generate these data do not cover
the CNMI.
* Extension of the permit program. A decision by the Secretary of Labor
to extend the CNMI-only work permit program past 2014 would maintain
access to the permits for up to 5 years at a time. According to the
legislation, the Secretary could issue the extension as early as
desired within the transition period and up to 180 days before the end
of the transition period or any extensions of the CNMI-only permit
program. DOL's decision is to be based on the needs of legitimate
businesses[Footnote 54] in the CNMI, as well as, among other
information, the unemployment rate of U.S. citizen workers in the CNMI
and the number of unemployed foreign workers in the CNMI. Alternately,
the Secretary may decide not to extend the program, thus ending access
to the CNMI-only work permit after 2014.[Footnote 55] Representatives
of the Hotel Association of the Northern Mariana Islands and the Saipan
Chamber of Commerce said they preferred that any extension of the CNMI-
only work permit program be announced as early as possible in the
transition period or any extension of the CNMI-only permit program to
provide businesses the maximum time for planning.
* Additionally, while other nonimmigrant and immigrant visas generally
available under U.S. law would continue to be available, we previously
reported that after the end of the transition period and after any
extensions of the CNMI-only work permit program, the legislation limits
CNMI employers' access to foreign workers, particularly low-skill
workers in continuous, nontemporary jobs.[Footnote 56] Although the
legislation contains provisions other than the CNMI-only work permit
program that will affect foreign workers--including exemptions from H
visa caps for nonimmigrant workers, the option to apply for
nonimmigrant worker visas generally available under U.S. law, and the
option to apply for employment-based permanent immigration status
generally available under U.S. law--these provisions will likely affect
a relatively small number of CNMI foreign workers (see app. V). As a
result, our following analysis focuses on foreign workers with CNMI-
only work permits.
Interaction of Agency Decisions Could Significantly Affect Access to
Foreign Workers, but No Process Exists for Coordinating Agency
Decisions under the Legislation:
The interaction of DHS and DOL decisions regarding the CNMI-only work
permit program could have a significant impact on employers' access to
permits for foreign workers. However, the agencies have not yet
identified a process for coordinating these decisions.
The rate and timing with which DHS lowers the available number of
permits and the timing of any DOL extensions of the program will
jointly determine the permits' availability. To illustrate a range of
possible rates of reduction, figure 7 shows nine examples of alternate
interactions of DHS and DOL decisions.
Figure 7: Illustrations of Potential DHS and DOL Decisions' Joint
Effects on Access to CNMI-Only Work Permits for Foreign Workers:
[See PDF for image]
This figure is a series of nine line graphs depicting the following
data:
Department of Homeland Security decisions about the rate of reduction
of CNMI-only permits:
Linear: Department of Labor decisions about whether and when to extend
CNMI-only permit program, every 2 years:
Date: December 2007;
Foreign workers: 19,823.
Date: December 2014;
Foreign workers: 6,337.
Date: December 2021;
Foreign workers: 1263.
Date: December 2028;
Foreign workers: 164.
[End of graph]
Increasing rate: Department of Labor decisions about whether and when
to extend CNMI-only permit program, every 2 years:
Date: December 2007;
Foreign workers: 19,823.
Date: December 2014;
Foreign workers: 13,851.
Date: December 2021;
Foreign workers: 7,881.
Date: December 2028;
Foreign workers: 4,087.
[End of graph]
Last month: Department of Labor decisions about whether and when to
extend CNMI-only permit program, every 2 years:
Date: December 2007;
Foreign workers: 19,823.
Date: December 2014;
Foreign workers: 18,537.
Date: December 2021;
Foreign workers: 17,043.
Date: December 2028;
Foreign workers: 15,670.
[End of graph]
Linear: Department of Labor decisions about whether and when to extend
CNMI-only permit program, every 4.5 years:
Date: December 2007;
Foreign workers: 19,823.
Date: December 2014;
Foreign workers: 3,100.
Date: December 2021;
Foreign workers: 155.
Date: December 2028;
Foreign workers: 3.
[End of graph]
Increasing rate: Department of Labor decisions about whether and when
to extend CNMI-only permit program, every 4.5 years:
Date: December 2007;
Foreign workers: 19,823.
Date: December 2014;
Foreign workers: 6,685.
Date: December 2021;
Foreign workers: 953.
Date: December 2028;
Foreign workers: 45.
Last month: Department of Labor decisions about whether and when to
extend CNMI-only permit program, every 4.5 years:
Date: December 2007;
Foreign workers: 19,823.
Date: December 2014;
Foreign workers: 18,538.
Date: December 2021;
Foreign workers: 17,044.
Date: December 2028;
Foreign workers: 15,670.
Linear: Department of Labor decisions about whether and when to extend
CNMI-only permit program, no extension:
Date: December 2007;
Foreign workers: 19,823.
Date: December 2014;
Foreign workers: 1.
Date: December 2021;
Foreign workers: 1.
Date: December 2028;
Foreign workers: 1.
[End of graph]
Increasing rate: Department of Labor decisions about whether and when
to extend CNMI-only permit program, no extension:
Date: December 2007;
Foreign workers: 19,823.
Date: December 2014;
Foreign workers: 1.
Date: December 2021;
Foreign workers: 1.
Date: December 2028;
Foreign workers: 1.
Last month: Department of Labor decisions about whether and when to
extend CNMI-only permit program, no extension:
Date: December 2007;
Foreign workers: 19,823.
Date: December 2014;
Foreign workers: 1.
Date: December 2021;
Foreign workers: 1.
Date: December 2028;
Foreign workers: 1.
[End of graph]
Source: GAO analysis of P.L. 110-229 and CNMI Labor and Immigration
Identification and Documentation System (LIIDS) data.
Notes: The thin lines represent DOL's decision to extend the CNMI-only
permit program every 2 years, the heavy gray lines represent DOL's
decision to extend the program every 4.5 years, and the heavy black
lines represent DOL's decision not to extend the program.
Figures show numbers of CNMI-only work permits, based on the
assumptions that the transition period begins on June 1, 2009, and the
number of permits never increases. Our analysis does not address the
length of the permits' validity.
For the number of foreign workers before and at the beginning of the
transition period, we relied on CNMI LIIDS data showing 19,823 706K
foreign worker permits active as of December 31, 2007; commenting on a
draft of this report, the CNMI government stated that the number of
706K permits as of June 30, 2008, was 18,942.
In this analysis, foreign workers shown after the beginning of the
transition period on June 1, 2009, are those with CNMI-only work
permits; this analysis does not include any foreign workers allowed to
remain in the CNMI without a CNMI-only work permit. The legislation
specifies that foreign workers legally present in the CNMI as of the
transition program effective date, but who do not obtain U.S.
immigration status, may continue residing and working in the CNMI for a
limited time--2 years after the effective date of the transition
program or when the CNMI-issued permit expires, whichever is earlier.
Although DOL may extend the program for 5 years or less at a time, our
analysis assumes a 5-year duration for any extensions occurring after
the transition period. Our analysis also assumes that if the program is
extended after the end of the initial transition period, the timing for
frequency of extensions will begin in January 2015.
The figures extend through 2028 to show the year in which CNMI-only
work permits approach zero for the majority of the joint decisions.
[End of figure]
* As shown in figure 7(A) and 7(B), if DHS lowers the annual allocation
of CNMI-only permits by the same number each year (a linear decline)
and DOL extends the program every 2 years, the number of permits will
decline less rapidly than if DOL extends the program every 4.5 years.
* Alternatively, as figure 7(G) shows, if DHS decides not to
substantially decrease the number of CNMI-only permits until the last
month of the 5-year period and DOL extends the program every 2 years,
the number of permits will never rapidly decline, and by 2028 will not
have substantially declined.
* In contrast, as shown in figure 7(I), if DHS decides not to
substantially decrease the number of CNMI-only permits until the last
month and DOL does not extend the program, the number of CNMI-only
permits will fall to zero in 2014.
The legislation requires DHS and DOL to coordinate their implementation
of the legislation, including the CNMI-only work permit program, with
one another and with other relevant agencies.[Footnote 57] However, the
agencies have not yet identified the interagency process that they will
use.[Footnote 58]
Rate of Decline in Availability of CNMI-Only Permits for Foreign
Workers Will Partly Determine Impact on CNMI Economy:
The rate at which the availability of CNMI-only work permits for
foreign workers declines as a result of DHS's and DOL's joint decisions
will partly determine the legislation's impact on the CNMI labor market
and therefore on the CNMI's economy. Because of foreign workers'
prominence in the CNMI labor market, any substantial and rapid
reduction in the numbers of CNMI-only permits for foreign workers would
have a negative effect on the size of the CNMI economy. However,
federal agencies may make more modest reductions in CNMI-only permits,
resulting in minimal effects on the economy.[Footnote 59] Projecting
the economic impact of a reduction in foreign workers is complicated by
the dependence of some CNMI resident workers' productivity on the
presence of foreign workers. For example, the employment of CNMI
residents as tour guides may depend on the employment of foreign
workers as hotel staff. Because some CNMI resident workers' employment
depends on foreign workers, the overall effect of the removal of
foreign workers is difficult to project.
To illustrate a range of possible impacts on the CNMI economy given
varying rates of reduction in the number of CNMI-only work permits for
foreign workers, we generated simulations, estimating the impact on the
CNMI's economy by an index representing total GDP. Figure 8 presents a
subset of the results of these simulations--these are based on the
scenarios shown in figure 7 (A), (D), and (G).[Footnote 60] Because
these simulations do not allow for other changes in the CNMI over the
coming years, they should not be considered as predictive of future
GDP. Rather, these simulations are intended to illustrate a range of
potential impacts on the CNMI's GDP that could result from some of the
joint U.S. agency decisions depicted in figure 7.
Figure 8: Examples of Scenarios Illustrating U.S. Agency Decisions'
Potential Joint Impact on Access to CNMI-Only Work Permits for Foreign
Workers and CNMI Gross Domestic Product:
[See PDF for image]
This figure is a series of six line graphs depicting the following
data:
Department of Homeland Security decisions about the rate of reduction
of CNMI-only permits:
Department of Labor decision to extend CNMI-only permit program every
two years, Scenario 1:
Date: December 2007;
Foreign workers: 19,823;
GDP index, bounds of the maximum value: 100;
GDP index, 25th to 75th percentile of results: 100;
GDP index, bounds of the minimum value: 100.
Date: December 2014;
Foreign workers: 6,337;
GDP index, bounds of the maximum value: 72.7-80.7;
GDP index, 25th to 75th percentile of results: 64.8-72.7;
GDP index, bounds of the minimum value: 55.7-64.8.
Date: December 2021;
Foreign workers: 1,263;
GDP index, bounds of the maximum value: 52.1-72.6;
GDP index, 25th to 75th percentile of results: 36.7-52.1;
GDP index, bounds of the minimum value: 20.7-36.7.
[End of graph]
Department of Labor decision to extend CNMI-only permit program every
two years, Scenario 2:
Date: December 2007;
Foreign workers: 19,823
GDP index, bounds of the maximum value: 100;
GDP index, 25th to 75th percentile of results: 100;
GDP index, bounds of the minimum value: 100.
Date: December 2014;
Foreign workers: 13,857;
GDP index, bounds of the maximum value: 90.8-94.3;
GDP index, 25th to 75th percentile of results: 87.8-90.8;
GDP index, bounds of the minimum value: 83,6-87.8.
Date: December 2021;
Foreign workers: 7,881;
GDP index, bounds of the maximum value: 78.2-84.6;
GDP index, 25th to 75th percentile of results: 71.7-78.2;
GDP index, bounds of the minimum value: 64.3-71.7.
[End of graph]
Department of Labor decision to extend CNMI-only permit program every
two years, Scenario 3:
Date: December 2007;
Foreign workers: 19,823;
GDP index, bounds of the maximum value: 100;
GDP index, 25th to 75th percentile of results: 100;
GDP index, bounds of the minimum value: 100.
Date: December 2014;
Foreign workers: 18,537;
GDP index, bounds of the maximum value: 98.1-98.9;
GDP index, 25th to 75th percentile of results: 97.5-98.1;
GDP index, bounds of the minimum value: 96.4-97.5.
Date: December 2021;
Foreign workers: 17,043;
GDP index, bounds of the maximum value: 95.9-97.6;
GDP index, 25th to 75th percentile of results: 94.5-95.9;
GDP index, bounds of the minimum value: 92.1-94.5.
[End of graph]
Source: GAO analysis of P.L. 110-229 and CNMI Labor and Immigration
Identification and Documentation System (LIIDS) data.
Notes: This analysis is based on some of the possible joint effects of
DHS and DOL decisions illustrated in figures 7 (A), (D), and (G).
Because this analysis does not allow for other changes in the CNMI over
the coming years, it should not be considered as predictive of future
GDP.
In the graphs on the left-hand side of each scenario, the lines
represent reduction in the numbers of CNMI-only work permits for
foreign workers. The graphs on the right-hand side of each scenario
represent 10,000 simulations of the CNMI GDP (indexed to be 100 in
2007) under various assumptions. The darker area represents the middle
50 percent of results, specifically the 25th to 75th percentile, while
the lighter area represents the bounds of the minimum and maximum
value.
This analysis assumes that technology, capital, and the total number of
employed CNMI residents remain constant. In addition, this analysis
treats all foreign workers as being employed in full-time positions.
Further, this analysis does not reflect potential changes in demand for
foreign workers absent the legislation. Finally, this analysis does not
account for the role of foreign workers under programs other than the
CNMI-only permit program. See appendix VI for more details.
In this analysis, foreign workers shown after the beginning of the
transition period on June 1, 2009, are those with CNMI-only work
permits; this analysis does not include any foreign workers allowed to
remain in the CNMI without a CNMI-only work permit. The legislation
specifies that foreign workers legally present in the CNMI as of the
transition program effective date, but who do not obtain U.S.
immigration status, may continue residing and working in the CNMI for a
limited time--2 years after the effective date of the transition
program or when the CNMI-issued permit expires, whichever is earlier.
Because of the nature of the functional form used, we could not use it
to evaluate the portion of those scenarios in which the number of CNMI-
only work permits is equal to zero.
[End of figure]
As the scenarios in figure 8 show, a greater decline in permits for
foreign workers leads to a larger drop in GDP, as well as a greater
range of possible effects across the simulations.
* Scenario 1 shows that a steep decline in CNMI-only permits for
foreign workers, from about 20,000 to about 1,000 by 2021[Footnote 61]-
-caused by a linear reduction in the number of CNMI-only work permits
and a renewal of the permit program every 2 years--would lower the
CNMI's GDP to a range of about 21 percent to 73 percent of its current
value by 2021.
* Scenario 2 shows that a less precipitous decline in CNMI-only permits
for foreign workers, from about 20,000 to about 8,000 by 2021--caused
by an increasing reduction in the number of CNMI-only work permits and
a renewal of the permit program every 2 years (before the years with
the steepest decline in foreign workers)--would lower the CNMI's GDP to
a range of about 64 percent to 85 percent of its current value by 2021.
* Scenario 3 shows that a much smaller decline in CNMI-only permits for
foreign workers, from about 20,000 to about 17,000 by 2021--caused by a
rapid reduction in the number of CNMI-only permits in the last month of
the program and a renewal of the permit program every 2 years (before
the month when the greatest reduction in permits occurs)--would lower
the CNMI's GDP to a range of about 98 percent to no less than about 92
percent of its current value by 2021.
Figure 8 illustrates the simulated impact on GDP related to one
possible DOL decision--renewing the CNMI-only permit program every 2
years--interacting with possible DHS decisions, as depicted in figure 7
(A), (D), and (G). Applying the GDP simulation methodology to the other
scenarios in figure 7 would yield more rapid declines in GDP,
corresponding to the more rapid declines in CNMI-only work permits for
foreign workers related to DOL decisions not to extend the CNMI-only
permit program or to extend it every 4.5 years.
Ideally, the effect of the decline in the number of foreign workers on
the CNMI GDP would be compared to a baseline of what would have
happened to the CNMI economy without the legislation. However, because
of a lack of data on the total production of the CNMI economy, we were
unable to provide a numerical projection of future GDP. For example,
the most recent estimate of CNMI GDP available was for 2002 and
presented a range of almost $250 million, with a midpoint of $875
million.[Footnote 62] Although we are unable to present a numerical
prediction, the following sections--which discuss a number of emerging
factors affecting the CNMI economy that may decrease demand in the CNMI
for foreign workers--provide a context for the GDP analysis.
Other Factors May Reduce Demand for Foreign Workers, Lessening the
Impact of the Legislation:
Although U.S. agencies' implementation of the legislation may reduce
the availability of foreign workers, continuing declines in the garment
industry and challenges to the tourism industry may lower demand for
these workers. Increases in the CNMI's minimum wage may also lower
demand for foreign workers, although the likely extent of this impact
cannot be determined. Efforts to replace foreign workers with CNMI
residents could, if successful, further mitigate any effects of the
legislation's provisions reducing the number of CNMI-only work permits;
however, factors such as the limited number of available CNMI residents
may impede these efforts' effectiveness.
Declines in Garment Industry and Challenges to Tourism May Lessen
Demand for Foreign Workers:
Continuing challenges to industries that employ foreign workers may
reduce future demand for foreign workers from their current numbers,
lessening the impact of any agency decisions to reduce the number of
foreign workers in implementing the legislation and allowing some
reductions without adverse effect.
The number of foreign workers in the CNMI has fallen in recent years
prior to the legislation's passage, owing in part to declines in the
garment industry and challenges in the tourism industry. From 2000 to
2005, the number of noncitizen workers, many of whom are foreign
workers, dropped from about 35,000 in 2000 to about 28,000 in 2005.
Moreover, based on CNMI BMS data, more foreign workers have left the
CNMI than have entered each year since 2005, indicating that their
numbers have continued to fall. Declines in the garment industry and
challenges to the tourism industry account for some of these reductions
in foreign workers. Since the elimination of textile quotas, exports
from the garment industry have fallen. The tourism sector also has
faced challenges as visitor arrivals have declined from historic
levels. Any further declines in these sectors would likely result in
reduced demand for foreign workers, allowing for some future reductions
in access to foreign workers without adverse effect from the
legislation.[Footnote 63] However, in commenting on a draft of this
report, the CNMI government stated that the MVA predicted that the
number of visitors to the CNMI will increase in the coming years.
Additionally, to the extent that the military buildup in Guam creates
opportunities for CNMI employers, it may increase demand for foreign
workers.
Other factors may reduce demand for foreign workers indirectly. For
example, reductions in the demand for workers in the garment and
tourism sectors impact demand for workers, including other foreign
workers, in other sectors in the economy.[Footnote 64] In addition,
declines in the economy and household incomes may reduce demand for
foreign workers in domestic positions, such as those in gardening and
housekeeping, currently common in the CNMI.[Footnote 65] Finally, if
the federal immigration legislation affects the tourism industry or the
CNMI's ability to attract foreign investors, it may also affect demand
for foreign workers.
Scheduled Increases in the Minimum Wage Will Further Reduce Demand for
Foreign Workers, but Extent of Likely Impact Is Not Known:
The recent and continuing scheduled increases in the CNMI's minimum
wage are likely to further reduce the demand for foreign workers. The
wage increases will affect foreign workers disproportionately; however,
the magnitude of the wage increases' impact on these workers cannot be
determined.
Based on the most recent LIIDS data, most jobs held by foreign workers
pay $4.05 per hour--the CNMI minimum wage as of May 2008--or less.
Table 2 presents, by industry, the percentage of foreign workers whose
recent contracts show wages of no more than this amount.[Footnote 66]
Table 2: Percentage of CNMI Foreign Workers Earning No More Than
Current Minimum Wage of $4.05 per Hour:
Industry: Total;
83.2%.
Industry: Private household;
99.5%.
Industry: Garment;
97.9%.
Industry: Construction;
82.5%.
Industry: Services;
77.4%.
Industry: Hotel;
66.9%.
Source: GAO analysis of CNMI Labor and Immigration Identification and
Documentation System (LIIDS) data.
Note: LIIDS data are from December 31, 2007. The total line includes
some LIIDS categories not depicted, such as banking and restaurant
workers.
[End of table]
The scheduled minimum wage increases will affect the wages of almost
all foreign workers in the CNMI and will continue to affect more
workers as the wage increases each year. As figure 9 shows, based on
December 2007 LIIDS data, almost 95 percent of foreign workers in the
CNMI do not earn more than the $7.25 minimum wage scheduled for 2015.
Figure 9: Percentage of CNMI Foreign Workers Who Will Be Affected by
Minimum Wage Increases, by Industry:
[See PDF for image]
This figure is a multiple line graph depicting the following data:
Total:
Construction:
Garment:
Hotel:
Household:
Services:
Year and minimum wage amount: 2007 ($3.55);
Total: 77%;
Construction: 74%;
Garment: 97%;
Hotel: 52%;
Household: 99%;
Services: 69%.
Year and minimum wage amount: 2008 ($4.05);
Total: 83%;
Construction: 82%;
Garment: 98%;
Hotel: 67%;
Household: 99%;
Services: 77%.
Year and minimum wage amount: 2009 ($4.55);
Total: 86%;
Construction: 86%;
Garment: 98%;
Hotel: 76%;
Household: 99%;
Services: 81%.
Year and minimum wage amount: 2010 ($5.05);
Total: 89%;
Construction: 89%;
Garment: 99%;
Hotel: 80%;
Household: 99%;
Services: 85%.
Year and minimum wage amount: 2011 ($5.55);
Total: 90%;
Construction: 91%;
Garment: 99%;
Hotel: 83%;
Household: 99%;
Services: 86%.
Year and minimum wage amount: 2012 ($6.50);
Total: 92%;
Construction: 93%;
Garment: 99%;
Hotel: 86%;
Household: 99%;
Services: 86%.
Year and minimum wage amount: 2013 ($6.55);
Total: 92%;
Construction: 95%;
Garment: 99%;
Hotel: 88%;
Household: 99%;
Services: 89%.
Year and minimum wage amount: 2014 ($7.05);
Total: 94%;
Construction: 96%;
Garment: 99%;
Hotel: 89%;
Household: 99%;
Services: 92%.
Year and minimum wage amount: 2015 ($7.25);
Total: 94%;
Construction: 96%;
Garment: 99%;
Hotel: 90%;
Household: 99%;
Services: 92%.
Source: GAO analysis of Labor and Immigration Identification and
Documentation System (LIIDS) data.
Note: The figure shows the percentage of current CNMI foreign workers
who will be affected because their wages are at or below the minimum
wage. Total line includes some LIIDS categories not depicted, such as
banking and restaurant workers. Data are from December 2007. We did not
verify that the minimum wage would apply to all of the workers included
in the figure.
[End of figure]
The minimum wage increase will likely affect U.S. citizen workers to a
lesser degree. For example, those working in public administration--
almost 33 percent of employed U.S. citizens in the CNMI based on the
2005 CNMI HIES--earn, on average, more than the current minimum wage of
$4.05 in the CNMI. Our analysis of HIES survey data shows that the
average wage for CNMI resident workers in 2004 was $8.60, whereas the
average wage for temporary non-U.S. citizens was $4.40.[Footnote 67]
According to current economic research, the minimum wage increases will
decrease the number of foreign workers demanded by CNMI employers. The
minimum wage increases may also have indirect effects resulting in firm
closures, further reducing the demand for foreign workers.
It is difficult to estimate the extent to which the minimum wage
increases might decrease the number of foreign workers demanded by
employers in the CNMI.[Footnote 68] However, the large number of CNMI
foreign workers now earning no more than the current minimum wage makes
it likely that the scheduled wage increases will have a negative effect
on the number of foreign workers employed.[Footnote 69]
Recent Legislation and CNMI Government Have Goals of Preparing Resident
Workers to Replace Foreign Workers, but Several Factors May Impede
These Efforts:
The CNMI has begun efforts to prepare CNMI residents to replace foreign
workers. If successful, these efforts could lessen any impact the
legislation may have regarding access to foreign workers. In 2007, the
Jobs Study Committee reporting to the CNMI Office of the Public Auditor
found that some desirable jobs held by foreign workers could be filled
by CNMI residents,[Footnote 70] and the CNMI has taken steps to help
residents obtain these jobs. For example, the CNMI Workforce Investment
Agency is developing a Web site to allow job seekers to quickly find
potential openings. In addition, the Strategic Workforce Action Team,
comprising government officials and local educators, has proposed to
coordinate curricula and employment opportunities. Moreover, CNMI law
has required CNMI employers to hire 20 percent of their employees from
local residents; this percentage increased to 30 percent on January 1,
2008, under the new CNMI labor and immigration law.
In addition, the recent federal legislation requires the U.S.
government to provide funding for vocational education, as well as
technical assistance to the CNMI. For example, the $150 fee charged to
employers obtaining a CNMI-only work permit is to be used to fund
ongoing vocational education curricula and program development by CNMI
educational entities. Moreover, the legislation requires the Secretary
of the Interior to provide technical assistance to the CNMI to promote
economic growth; to assist employers in recruiting, training, and
hiring U.S. citizens and, if necessary, lawful permanent residents in
the CNMI; and to develop CNMI job skills as needed.[Footnote 71]
The most recent LIIDS data from December 2007 suggest that about 20,000
foreign workers currently live in the CNMI.[Footnote 72] Although it is
too early to assess the CNMI's efforts to replace foreign workers with
CNMI residents, several factors may impede these efforts'
effectiveness.
* According to the CNMI Office of the Public Auditor, only an estimated
400 high school and college graduates seek full-time employment in the
CNMI each year.
* Moreover, according to CNMI government representatives, some CNMI
residents are leaving the CNMI for opportunities in the United States.
In addition, the attractiveness of Guam may increase if the military
buildup leads to additional jobs.
* The number of nonworking residents who might accept a job is less
than the total number of foreign workers. Specifically, there are
approximately 2,600 unemployed U.S. citizens and permanent residents in
the CNMI.[Footnote 73]
* Some foreign workers possess skills that are currently rare among
residents, such as language skills. Additionally, some foreign workers'
ability to perform professional jobs may make it difficult to replace
these workers with CNMI residents.
* According to representatives of the CNMI Chamber of Commerce and the
Hotel Association of the Northern Mariana Islands, hiring CNMI
residents is also difficult because some are reluctant to perform tasks
currently completed by foreign workers.
Recent Legislation's Possible Impact on CNMI Tourism Depends Largely on
Federal Agency Decisions:
Any impact of the legislation on the CNMI's tourism sector will depend
largely on federal regulations specifying the countries to be included
in the joint CNMI-Guam visa waiver program. For countries likely to be
included in the joint visa waiver program because they currently are
included in the Guam visa waiver program, such as Japan and South
Korea, the impact is likely to be minimal. For countries that may not
be part of the joint visa waiver program because they currently are not
included in the Guam visa waiver program, possibly including China and
Russia, applying for a visa from U.S. embassies or consulates will
likely be more costly and more time-consuming than obtaining a visitor
entry permit under CNMI immigration law. To the extent that tourists
facing increased costs and time in obtaining a visa may choose
destinations other than the CNMI, the legislation could have a negative
impact on CNMI tourism. The likely impact on the CNMI of sharing the
joint program with Guam is unclear.
DHS Will Determine Countries to Be Included in the Joint CNMI-Guam Visa
Waiver Program:
Changes in tourists' access to the CNMI will depend on DHS's decisions,
in consultation with the Department of State, DOI, and the Governors of
the CNMI and Guam, regarding the countries to be included in the CNMI-
Guam visa waiver program. One stated intent of the recent legislation
is to expand tourism and economic development in the CNMI, including
aiding prospective tourists in gaining access to the CNMI's tourist
attractions, such as memorials, beaches, parks, and dive sites. The
legislation establishes a joint visa waiver program by adding the CNMI
to an existing Guam visa waiver program.[Footnote 74] The joint program
exempts tourism and business visitors from certain countries who are
traveling to the CNMI and Guam for up to 45 days from the standard U.S.
visa documentation requirements.[Footnote 75] As shown in table 3, the
legislation states that the CNMI-Guam visa waiver country list shall
include any country from which the CNMI has received a significant
economic benefit from the number of visitors for pleasure for the year
prior to the enactment of the legislation, unless DHS determines that a
country's inclusion on the list would represent a threat to the
welfare, safety, or security of the United States or its territories,
and considering other factors.[Footnote 76] However, the legislation
does not clearly define what constitutes a "significant economic
benefit." The Senate Committee on Energy and Natural Resources and the
House Committee on Natural Resources encouraged DHS to consider
benefits measured in terms of hotel occupancy, length of stay, and
expenditures.[Footnote 77] Tourists who do not qualify for entry under
the CNMI-Guam program may apply for U.S. visitor visas for business or
pleasure, which require in-person applications and higher fees than the
CNMI currently assesses. (See app. VIII for the countries currently
included in the U.S., CNMI, and Guam waiver programs.)
Table 3: Key Federal Implementation Decision Related to CNMI Tourism:
Secretary of Homeland Security:
Key federal implementation decision:
* Determine countries to include in the CNMI-Guam visa waiver program,
in consultation with the Department of State, DOI, and the Governors of
the CNMI and Guam;
Legislative requirements and authorizations:
* Shall include any country from which the CNMI has received a
significant economic benefit from the number of visitors for pleasure
for the prior year, unless the country's inclusion would pose a
security threat;
* Governors of the CNMI and Guam may petition to have countries added.
Source: GAO analysis of P.L. 110-229, Consolidated Natural Resources
Act of 2008, May 8, 2008.
Note: The legislation does not clearly define what constitutes a
"significant economic benefit."
[End of table]
Legislation Likely Impacts a Small but Important Portion of CNMI
Tourism Market:
The application of federal immigration law may affect a small portion
of the CNMI's tourism market. Currently, approximately 80 percent of
the tourists visiting the CNMI come from Japan (55 percent) and South
Korea (25 percent), as shown in figure 10. Because Japan is included in
the current U.S. and Guam visa waiver programs and will likely be
included in the CNMI-Guam visa waiver program, the legislation is
likely to have minimal impact on Japanese tourists visiting the CNMI.
However, new screening requirements to be implemented for countries
included in the U.S. Visa Waiver Program may pose some additional
obstacles.[Footnote 78] South Korea is currently included in the Guam
visa waiver program but is not included in the CNMI and U.S. waiver
programs; however, the United States is considering extending visa
waiver status to South Korea.[Footnote 79] If South Korea is included
in the CNMI-Guam visa waiver program, which is likely given its current
status, the legislation may have a slightly positive impact by removing
the current CNMI entry permit requirement for South Korean tourists.
[Footnote 80]
A key DHS decision will be whether to include China and Russia in the
joint visa waiver program, adding them to the existing Guam visa waiver
program. Tourists from China and Russia account for a smaller
proportion of the overall CNMI tourist arrivals--approximately 10
percent and less than 1 percent of CNMI tourist arrivals, respectively.
However, according to representatives of the CNMI tourism sector, China
and Russia are considered important markets because of their recent and
potential future growth. For example, the Chinese market has grown by a
factor greater than 15 in a decade, from 2,487 visitors in fiscal year
1997 to 41,024 visitors in fiscal year 2007. Furthermore, although
small in number, the Russian market is becoming increasingly important
because visitors from Russia tend to stay longer and spend more in the
CNMI than do tourists from other countries. According to MVA data,
Russian tourists stay an average of 9 nights, whereas tourists from
Japan, South Korea, and China stay an average of 3 to 4 nights. In
addition, according to CNMI tourism sector representatives, Russian
tourists also tend to spend more on luxury items.[Footnote 81]
Figure 10: CNMI Visitors' Countries of Origin, Fiscal Year 2007:
[See PDF for image]
This figure is a pie-chart depicting the following data:
CNMI Visitors' Countries of Origin:
Japan: 215,196 (55%);
Korea: 98,403 (25%);
China: 41,024 (10%);
Guam: 19,410 (5%);
United States: 8,546 (2%);
Philippines: 5,882 (1%);
Russia: 3,043 (1%);
Other: 3,856 (1%).
Source: GAO analysis of Marianas Visitors Authority (MVA) data.
Note: MVA began including Hong Kong tourist arrivals in data on China
as of October 2006. In this figure, "other" includes arrivals from
Taiwan (454 arrivals in 2007). The total number of visitors for fiscal
year 2007 was 395,360.
[End of figure]
New Visa Requirements for Nonwaiver Visitors Will Likely Increase Cost,
Time, and Uncertainty, Possibly Affecting CNMI Tourism:
For tourists from countries not included in the CNMI-Guam visa waiver
program, the legislation will likely increase the costs and time
associated with obtaining visitor visas. Table 4 compares the costs,
requirements, and time related to obtaining a CNMI visitor entry permit
with those related to obtaining a U.S. visitor visa.
Table 4: Comparison of Current CNMI Visitor Entry Permit Program with
U.S. Visitor Visa Program, for Nonwaiver Program Visitors:
Cost:
CNMI visitor entry permit: No fee or $100 fee if request is submitted 7
days or less from intended date of arrival;
U.S. visitor visas: $131, as well as visa issuance fees varying by
country.
Interview requirements:
CNMI visitor entry permit: None;
U.S. visitor visas: In-person interview at embassies or consulates.
Interview wait time[A]:
CNMI visitor entry permit: No interview required;
U.S. visitor visas: Depending on the post:
* China: 6 to 44 days;
* South Korea: 8 days;
* Russia: 6 to 17 days; (as of May 13, 2008, for visitor visas).
Processing time:
CNMI visitor entry permit: 7 days or less, according to the CNMI
government;
U.S. visitor visas: Depending on the post:
* China: 2 to 3 days;
* South Korea: 3 days;
* Russia: 2 to 6 days; (as of May 13, 2008, for nonimmigrant visas
overall).
Visitor entry permit/visa refusal rate[B]:
CNMI visitor entry permit: The CNMI government does not track data on
entry permit refusal rates;
U.S. visitor visas:
* China: 24.5%;
* South Korea: 3.6%;
* Russia: 15.3%; (fiscal year 2006).
Sponsorship and bonding requirements:
CNMI visitor entry permit:
* Cash bond in an amount not to exceed $1,500, returnable upon proof of
the alien's timely departure; or;
* proof that the alien, or the party sponsoring the alien, is currently
employed in a position that pays more than $20,000 per year; or;
* proof that the alien's sponsor has maintained a balance of $3,000 in
a CNMI bank account for at least 3 months prior to the visitor's
expected arrival date;
U.S. visitor visas: None.
Sources: CNMI and U.S. Department of State data.
Note: CNMI entry permit for visitors is 703A. U.S. visas for temporary
visitors are B-1 for business, B-2 for pleasure, or B1-B2 for combined
business and pleasure.
[A] Interview wait time is reported by the U.S. Department of State. We
previously found that the data are not sufficiently reliable to
determine the number of posts with 30 or more days of wait time. We
report the data above to illustrate the ranges of possible wait times.
[B] The U.S. Visa Waiver Program visa refusal rate is based on the
number of visitor (B) visa applications for short-term business or
pleasure submitted, worldwide, by nationals of each country.
[End of table]
Implementation of the U.S. visa process for the CNMI is likely to add
costs, inconvenience, and uncertainties for tourists. For example, if
China is not included in the joint visa waiver program, visa fees could
add close to 20 percent to tour package costs for Chinese tourists.
[Footnote 82] In-person visa interviews will impose additional
inconvenience and cost. However, most tourists from China will not
likely have to travel great distances to apply for visas because the
CNMI currently markets only to tourists in Chinese cities with U.S.
embassies or consulates. CNMI tourist industry representatives also
expressed concerns that some Russian tourists may need to travel long
distances to U.S. embassies or consulates to apply for visas. While
Russian tourists can apply for visas from U.S. consulates in the
region, such as the U.S. consulate in Vladivostok in Far Eastern
Russia, and do not need to travel to Moscow, others may need to travel
long distances. In addition, the new visa requirements will add
uncertainty to the application process. According to Department of
State data, 24.5 percent of visitor visa applicants from China and 15.3
percent from Russia are refused entry after paying application fees and
attending interviews.
To the extent that tourists facing increased costs and time in
obtaining a visa may choose destinations other than the CNMI, the
legislation could have a negative effect on CNMI tourism. A CNMI
tourism sector representative expressed concerns that added costs and
inconvenience would deter tourists from visiting the CNMI and would
make the CNMI less competitive with other Asian and Pacific
destinations.[Footnote 83] Currently, because Guam requires U.S. visas
and the CNMI does not, the CNMI has a competitive advantage over Guam
in attracting Chinese tourists and has far more Chinese tourists than
Guam.[Footnote 84] See table 5 for a summary of the likely impact on
tourists from Japan, South Korea, China, and Russia.
Table 5: Recent Legislation's Likely Impact on Tourists from Japan,
South Korea, China, and Russia:
Japan:
Current CNMI status: Visitor entry permit waiver; comity permit for
visitors 55 years and older;
Current U.S. status: Visa waiver;
Importance of market to CNMI tourism: Largest market for CNMI tourism
(55%);
Likely impact from legislation: Minimal impact. New screening
requirements to be implemented for U.S. Visa Waiver Program may pose
some additional obstacles.
South Korea:
Current CNMI status: No visitor entry permit waiver; comity permit for
visitors 55 years and older;
Current U.S. status: No waiver under the U.S. Visa Waiver Program, but
included in the Guam visa waiver program;
Importance of market to CNMI tourism: Second largest market for CNMI
tourism (25%);
Likely impact from legislation: Minimal and slightly positive impact if
granted visa waiver, as is likely. Minimal impact for visitors 55 years
and older. New screening requirements to be implemented for U.S. Visa
Waiver Program may pose some additional obstacles.
China:
Current CNMI status: No visitor entry permit waiver; visitor entry
permit required;
Current U.S. status: No visa waiver; visitor visa required;
Importance of market to CNMI tourism: Comprises about 10% of the
current market, but has been growing. The CNMI is on China's approved
destination list;
Likely impact from legislation: If China is not included in the CNMI-
Guam visa waiver program, the U.S. visa application process will likely
add time, cost, and uncertainty for tourists from China; Currently, the
CNMI targets a few Chinese cities. For tourists from cities with U.S.
embassies or consulates, visa application requires little travel time,
but the wait time for in-person interviews can be over 30 days; The
visa fee ($131) is a significant portion (16% to 19%) of the cost of
packaged tours from China; Visitor visa refusal rate is 24.5%.
Russia:
Current CNMI status: No visitor entry permit waiver; visitor entry
permit required;
Current U.S. status: No visa waiver; visitor visa required;
Importance of market to CNMI tourism: Comprises 1 percent of the CNMI
tourist arrivals, and considered potentially lucrative market because
Russian tourists stay longer and spend more;
Likely impact from legislation: If Russia is not included in the CNMI-
Guam visa waiver program, the U.S. visa application process will likely
add time and uncertainty for tourists from Russia;
* Some Russian tourists may need to travel long distances to U.S.
embassies or consulates;
* The visa fee ($131) may be insignificant portion of the Russian
tourists' expenditure in the CNMI. According to CNMI tourism sector
representatives, Russian tourists usually stay longer and spend more
than tourists from Japan, South Korea, or China;
* Visa refusal rate is 15.3%.
Source: GAO analysis of P.L. 110-229, U.S. and CNMI immigration laws
and procedures, Marianas Visitors Authority (MVA) data, and U.S.
Department of State data.
Note: Other countries and regions not in the CNMI's waiver program or
in the U.S. Visa Waiver Program but included in the Guam visa waiver
program are Indonesia, Malaysia, Nauru, Papua New Guinea, Solomon
Islands, Taiwan, Vanuatu, and Western Samoa. Tourists from these
regions may have increased access to the CNMI under the recent
legislation if they are included in the joint CNMI-Guam visa waiver
program. The CNMI government said in its comments on a draft of this
report that the addition of these countries was unlikely to make a
significant contribution to CNMI tourism. The CNMI government also said
that it believed the addition of Indonesia and Malaysia constituted
potential increased security risks to the CNMI.
[End of table]
Effect on CNMI of Sharing Joint Visa Waiver Program with Guam Is
Unclear:
The CNMI may lose some competitive advantage to Guam for countries that
are not currently on the Guam visa waiver list, such as China and
Russia, given that the current absence of U.S. visitor visa
requirements for the CNMI makes it easier for tourists from these
countries to visit the CNMI than to visit Guam. However, the CNMI also
may benefit from the joint visa waiver program with Guam.[Footnote 85]
For example, the joint program will facilitate travel between Guam and
the CNMI, and bundled tours of both islands may appeal to some
tourists.
Recent Legislation's Impact on CNMI Foreign Investment Depends, in
Part, on Federal Decisions, but Lack of Data Hinders Assessment of
Likely Impact:
The impact of the recent legislation on CNMI foreign investment will
depend, in part, on DHS decisions regarding foreign investor entry
permits. However, lack of data, such as data on overall foreign
investment in the CNMI, makes it difficult to assess the likely impact
of these decisions and may hamper DHS's ability to make informed
decisions. July 2008 data show that long-term business entry permits
accounted for 90 percent of all active and valid long-term business and
perpetual foreign investor entry permits. As a result, DHS's decision
whether to extend the grandfathered treaty investor status to these
permit holders will determine the numbers and types of investors likely
to be affected. Moreover, any impact on foreign investment in the CNMI
will likely affect the labor market and tourism sector, and any impact
on the labor market and tourism sector may also affect foreign
investment.
DHS Decisions Will Affect Foreign Investors' Access to the CNMI:
In implementing the legislation, DHS will make two key decisions that
will affect foreign investors' access to the CNMI. (See table 6.)
First, DHS will determine which current CNMI foreign investors will
receive the grandfathered CNMI-only U.S. treaty investor status during
the transition period. In particular, DHS will determine whether the
grandfathered status applies only to investors holding the CNMI
perpetual foreign investor entry permit or also to investors holding
the CNMI long-term business entry permit.[Footnote 86] Second, DHS will
determine the validity period of the grandfathered treaty investor
status and decide whether to extend it past the initial transition
period. Although the status can be awarded only during the transition
period, the recent legislation imposes no limit on the grandfathered
status' length of validity. If and when the grandfathered status
expires, and for new CNMI foreign investors, DHS will adjudicate
applications under the regular treaty investor status and under the
other immigrant or nonimmigrant categories generally available under
U.S. immigration law.[Footnote 87]
Table 6: Key Federal Implementation Decisions Related to CNMI Foreign
Investors:
Secretary of Homeland Security:
Key federal implementation decisions:
* Determine which current CNMI foreign investors will be
"grandfathered" as U.S. E-2 treaty investors when the transition period
begins;
Legislative requirements and authorizations:
* May provide grandfathered status to those who were admitted to the
CNMI in long-term investor status under CNMI immigration laws before
the transition program start date, who maintain the investment(s) that
formed the basis for such status, and who meet other requirements.
Key federal implementation decisions:
* Decide the validity period for the grandfathered treaty investor
status;
* Legislative requirements and authorizations: [Empty].
Source: GAO analysis of P.L. 110-229, Consolidated Natural Resources
Act of 2008, May 8, 2008.
[End of table]
Lack of Key Data on Foreign Investment in the CNMI Hinders Assessment
of Legislation's Likely Impact and May Hamper Agency Decisions:
A lack of key data makes it difficult to assess the likely impact of
the recent legislation's implementation on foreign investment in the
CNMI and may limit DHS's ability to make informed implementation
decisions. Because the legislation may not affect all foreign
investment in the CNMI, estimating the legislation's impact requires
data showing (1) current overall levels of foreign investment, (2) the
amount of investment associated with each type of CNMI foreign investor
entry permit, and (3) the extent to which investors' decisions are
affected by access to entry permits.[Footnote 88] However, these data
are currently unavailable.
* Overall foreign investment. Neither the CNMI government nor the
federal government has information on the overall level of foreign
investment in the CNMI. As a result, baseline information needed to
assess the likely impact of key agency decisions on foreign investment
is lacking.[Footnote 89]
* Investment associated with foreign investor entry permits. The CNMI
government lacks readily accessible and compiled data on the sizes and
types of permit holders' investments, which DHS needs to determine the
relative importance of each type of entry permit and the likely impact
of possible implementation decisions.[Footnote 90]
* Impact of access to entry permits. Data showing the extent to which
foreign investors' decisions are currently affected by their access to
particular entry permits are not available. Although access to the CNMI
through foreign investor entry permits may be a key factor for some
investors, others may choose to invest regardless of their ability to
obtain an entry permit. For example, some foreign investors may enter
the CNMI under its permit waiver program or obtain regular-term
business entry permits.[Footnote 91] In addition, foreign investors may
invest without entering the CNMI.
Available Data Suggest That DHS's Application of Grandfathered Status
Will Partly Determine Extent of Legislation's Impact on Foreign
Investment:
DHS's decision about the foreign investor entry permit holders to be
grandfathered will partly determine the extent of the legislation's
impact on foreign investment in the CNMI. According to available data,
if DHS restricts the grandfathering of foreign investors to perpetual
foreign investor entry permit holders, a small number of investors will
qualify for grandfathering under the new legislation.[Footnote 92]
However, if DHS extends the grandfathering provision to long-term
business entry permit holders, many more investors will qualify.
According to data from the CNMI Department of Commerce provided in the
CNMI government's comments on a draft of this report, long-term
business entry permits accounted for 90 percent (506 of 562) of all
long-term business and perpetual foreign investor entry permits active
and valid in July 2008. The data show that 94 percent (448 of 478) of
the businesses associated with these permits were for long-term
business entry permits.[Footnote 93] In addition 56 perpetual foreign
investor entry permits, associated with 30 businesses, were active and
valid in July 2008.
According to the CNMI government, approximately 18 percent of these
long-term business and perpetual foreign investor permit holders were
from countries that are not listed as a treaty nation with the United
States. Depending upon the decisions of DHS, unless these permit
holders are grandfathered under the legislation they would not qualify
to obtain a nonimmigrant treaty investor visa.
Legislation's Impact on CNMI Foreign Investment Could Affect Labor
Market and Tourism:
Any impact that the legislation's implementation has on foreign
investment may also affect the labor market and tourism. For example,
if DHS's decision about the grandfathering of foreign investor entry
permits leads to a reduction in foreign investment, causing businesses
to close, demand for foreign workers could fall. Also, available
services could diminish, lessening the CNMI's attractiveness to
tourists.
Likewise, any impact on the labor market or tourism sector will likely
affect investment, including foreign investment, in the CNMI. For
example, if DHS and DOL decisions about the CNMI-only work permit
decrease employers' access to foreign workers, investors may have less
incentive to open or operate businesses in the CNMI. In addition, some
foreign investors may be reluctant to commit to long-term business
plans when future access to foreign workers is uncertain. Similarly, if
excluding any countries from the CNMI-Guam visa waiver program causes
tourism from those countries to drop, reduced demand for tourism-
related products and services in the CNMI could lessen investors'
incentive to operate businesses that provide such products and
services.
Moreover, any reduction in access to foreign workers may negatively
affect tourism and vice versa. For example, reduced access to foreign
workers to perform tourism-related tasks, such as hotel housekeeping,
could negatively affect tourism if CNMI residents were unwilling to
take such jobs, according to CNMI tourism sector representatives.
[Footnote 94] Likewise, reductions in tourism could cause businesses to
close, reducing demand for foreign workers.
Conclusions:
The recent legislation applying U.S. immigration law to the CNMI
provides federal agencies some flexibility in preserving the CNMI's
access to foreign workers, tourists, and foreign investors during the
transition to the federal system. However, while the legislation states
that it intends to minimize potential adverse economic and fiscal
effects on the CNMI and to maximize its potential for future economic
growth, the actual impact of the legislation on the CNMI's labor
market, tourism, and foreign investment will depend on decisions made
by federal agencies in implementing the legislation. For example,
federal decisions about how many foreign workers to admit under the
CNMI-only work permit program and whether and when to extend the
program will be important in determining the extent of the
legislation's impact on the CNMI labor market and economy. In addition,
the impact of the legislation on any one of the sectors--labor market,
tourism, and foreign investment--depends, in part, on changes in the
other sectors. For example, changes in access to foreign workers could
affect the viability of the tourism sector, which in turn could affect
foreign investment.
Given the serious challenges already facing the CNMI economy, it is
critical that federal agencies implement the legislation in ways that
minimize potential adverse effects to the CNMI economy and maximize the
CNMI's potential for economic and business growth, following the
legislation's stated intent. Because the interaction of key federal
decisions involving different departments will have a significant
impact on the CNMI economy, coordination of these decisions is critical
and necessitates an established interagency process, which currently
does not exist. In addition, developing strategies for obtaining
critical data that are currently unavailable on the CNMI labor market
and foreign investment is essential to federal agencies' ability to
make appropriate and effective decisions in implementing the
legislation and fulfilling its goals.
Recommendations for Executive Action:
Because of the importance of key implementation decisions by different
federal agencies and the interaction of those decisions, we recommend
that the Secretary of Homeland Security lead other relevant federal
agencies, including the Departments of the Interior, Labor, and State,
in identifying the interagency process that will be used to collaborate
with one another--and consult with the CNMI government, as required--to
jointly implement the legislation.
Because current data gaps limit federal agencies' ability to make key
implementation decisions to best meet the goals of the legislation, we
recommend that the Secretary of Homeland Security and the Secretary of
Labor take the following two actions:
* develop a strategy for obtaining critical data on the CNMI labor
market that are not currently available on an ongoing basis, such as
data on the wages, occupations, and employment status of CNMI residents
and foreign workers; and:
* develop a strategy for obtaining critical data on CNMI foreign
investment, such as overall levels of foreign investment and the
investment amounts associated with various types of foreign investor
entry permits.
Agency Comments and Our Evaluation:
We provided a draft of this report to officials in DHS, DOI, and DOL
and in the CNMI government for review and comment. We received written
comments on the draft report from DHS and DOI and from the CNMI
government, which are reprinted in appendixes X, XI, and XII,
respectively. We also received technical comments from DHS and DOI and
from the CNMI government. We incorporated their comments as
appropriate. DOL had no comments. In addition, we provided a draft to
the Department of State for technical review, and State had no
comments. DHS agreed with our findings and recommendations, and DOI
generally agreed with our findings. The CNMI government raised concerns
or issues about some aspects of our report methodology and analysis.
DHS agreed with our findings and recommendations in its written
comments. DHS agreed with the intent of our recommendation on
interagency collaboration subject to the authority of the Secretary of
the Interior regarding the Interagency Group on Insular Areas pursuant
to Executive Order 13299 of May 8, 2003. While the Interagency Group on
Insular Areas is one coordinating process available, we believe that
DHS should lead other relevant agencies in identifying the most
effective and sustainable process possible for coordinating
implementation decisions. DHS provided new information noting that
department officials, in collaboration with DOI officials, already have
taken steps toward meeting the recommendation's intent by sending an
interagency delegation to the CNMI to consult with government officials
and the private sector on implementing the law and addressing the
related economic impact. DHS also agreed with the intent of our
recommendation on developing strategies for obtaining critical data on
the CNMI labor market and foreign investment and said that it planned
to collaborate with DOL on these matters.
DOI generally agreed with our findings in its written comments, saying
that the report presents a realistic picture of the uncertainties faced
by both the federal and CNMI governments and provides a good summary of
the mandates of the law. DOI noted that it had already begun
discussions with DHS, DOL, and the Departments of Justice and State to
assist with development of the CNMI's transition program. In addition,
it noted that coordination among federal agencies must also consider
the duties and responsibilities of the CNMI's local government
agencies. DOI identified two technical areas of the report in which it
believed clarification was necessary. First, it questioned the report's
finding that the CNMI's exemptions from H visa caps under the
legislation would not apply past the end of the transition period in
2014 and said it had concluded that the transition period end does not
apply to the cap exemptions. The department said it would request that
DHS coordinate with other federal agencies and obtain a final legal
determination. Our interpretation of the law in this report is
consistent with our March 2008 report[Footnote 95] and consistent with
the interpretation of the law by officials of DHS, the agency
responsible for implementing and administering the provisions of the
transition period under the legislation. In addition, we note that the
subsequent report of the Senate Committee on Energy and Natural
Resources on H.R. 3079 states that the Committee intends that the H
exemptions for the CNMI and Guam be extended along with any extension
of the 5-year transition period.[Footnote 96] However, we are
constrained in our analysis to the language in the bill as is, unless
amended. Second, DOI commented that our current report should note that
the law mandates that the CNMI produce and provide required information
to DHS and DOL. We revised the report to indicate that the legislation
requires the CNMI government to provide the Secretary of Homeland
Security all immigration records or other information that the
Secretary deems necessary to assist its implementation; however, the
relevant provision does not specifically mention DOL.
The CNMI government raised several concerns or issues about aspects of
our report methodology and analysis, which we have summarized in four
areas. First, the CNMI government commented that the GDP simulation
methodology used in the report is inadequate. It also contended that
the report's assessment of future demand for foreign workers in the
CNMI is faulty and ignores recent evidence of economic recovery. We
disagree. We believe our methodology is a sound approach for analyzing
and illustrating the potential impact of federal implementation
decisions on the CNMI economy. We explained our GDP simulation
methodology in appendix VI of the draft report. We further explain our
methodological choices, assumptions, and limitations in our response to
the CNMI government's letter (see app. XII). However, in response to
the CNMI government's comments, we clarified the report to further
describe our methodology and analysis. We also incorporated updated
data provided by the CNMI government in the report as appropriate.
Second, the CNMI government stated that this report should not be
published in its present form because its discussion of possible
consequences to the CNMI economy could itself harm the CNMI. We believe
it is essential to report the key decisions facing federal agencies and
to illustrate a range of potential impacts those decisions could have
on the CNMI economy. Fully informed and coordinated federal agencies
will be best capable of making decisions that minimize any potential
adverse consequences for the CNMI economy. Third, the CNMI government
inaccurately stated that the report predicts a substantial decline in
the CNMI economy as a result of the legislation, misstating our message
that the impact of the legislation on the CNMI economy will depend on
various federal decisions. Our report's GDP simulations illustrate a
range of possible outcomes of federal decisions regarding the CNMI-only
work permit program, ranging from minimal to substantial impact on the
economy. The actual extent of the legislation's impact on the CNMI
economy will depend on the key federal decisions related to foreign
workers, tourists, and foreign investors identified in our report, as
well as other factors in the economy. In addition, our report clearly
states that the GDP simulations should not be considered predictive of
future GDP. Fourth, the CNMI government provided alternative data to
that in the draft report related to foreign investor entry permits, and
we have incorporated the new data in the report. Appendix XII provides
our more detailed evaluation of the CNMI government's letter.
We are sending copies of this report to interested congressional
committees. We also will provide copies of this report to the U.S.
Secretaries of Homeland Security, the Interior, Labor, and State, and
to the Governor of the CNMI. We will make copies available to others on
request. In addition, the report will be available at no charge on the
GAO Web site at [hyperlink, http://www.gao.gov].
If you or your staffs have questions about this report, please contact
me at (202) 512-3149 or gootnickd@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made key contributions to
this report are listed in appendix XIII.
Signed by:
David Gootnick:
Director, International Affairs and Trade:
Signed by:
Tom McCool:
Director, Center for Economics, Applied Research and Methods:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
This report examines the factors that will affect the impact of recent
legislation applying U.S. immigration law to the Commonwealth of the
Northern Mariana Islands (CNMI) on the CNMI economy, in particular the
CNMI's (1) labor market, including foreign workers; (2) tourism sector;
and (3) foreign investment.
In preparing this report, we relied on our March 2008 review[Footnote
97] of relevant immigration and labor laws of the CNMI, current U.S.
immigration law, and the recent legislation.[Footnote 98] For that
report and the current report, to examine U.S. immigration law, we
reviewed the U.S. Immigration and Nationality Act (INA) and related
regulations.[Footnote 99] To examine the relationship between the CNMI
and the United States, we reviewed the CNMI-U.S. Covenant[Footnote 100]
and the law applying U.S. minimum wage to the CNMI.[Footnote 101] We
did not review the extent to which CNMI or U.S. laws were properly
enforced or implemented. We also reviewed the recent legislation,
including H.R. 3079, passed by the House of Representatives, and S.
2739, passed by the House and Senate and signed into law as P.L. 110-
229. In addition, we reviewed the House Committee on Natural Resources
Report for H.R. 3079[Footnote 102] and the Senate Committee on Energy
and Natural Resources Report for H.R. 3079[Footnote 103]. We
interviewed officials from the U.S. Departments of Homeland Security
(DHS), the Interior (DOI), and Labor (DOL). We also reviewed analyses
of the legislation and related studies by GAO, the Congressional Budget
Office, and the Congressional Research Service.
We conducted a site visit in the CNMI in September 2007 and interviewed
officials in the CNMI Office of the Governor, CNMI Department of
Immigration, CNMI Department of Labor, Marianas Visitors Authority
(MVA), CNMI Department of Commerce, CNMI Department of Finance, CNMI
Workforce Investment Agency, CNMI Public School System, and other CNMI
agencies. We conducted additional interviews with CNMI officials in
Washington, D.C. We also interviewed representatives of the CNMI
private sector and foreign workers.
Additionally, to describe the CNMI's political and economic conditions,
we consulted data from U.S. government sources, such as the Department
of Commerce and the Census Bureau.
Labor market. For information on the current numbers and wages of
foreign workers, we mainly relied on data from the Labor and
Immigration Identification and Documentation System (LIIDS)[Footnote
104] on foreign workers with 706K permits, provided by the CNMI
government. We used the LIIDS data to determine the number of foreign
workers directly affected by the minimum wage increases. However, we
did not assess the overall impact of the minimum wage increases on the
CNMI economy, including the impact on the living standards in the CNMI,
as our scope was limited to the possible effects of the minimum wage
increases on the demand for foreign workers. When possible, we
determined that average values from this data set were consistent with
other sources, such as the 2005 CNMI Household, Income, and
Expenditures Survey (HIES).[Footnote 105] However, although we used the
most recent data available from the LIIDS system, from December 31,
2007, the CNMI government informed us that some of the data may not be
current owing to administrative backlogs; therefore, these data do not
reflect the extent to which current wages comply with recent changes in
the minimum wage laws in particular cases. In addition, we did not
receive some data requested from the CNMI government, including data
from LIIDS on permit holders apart from 706K foreign workers, such as
workers with temporary work authorization (706P) and holders of the
CNMI government employee entry permit (706B). As a result, our analysis
covers 706K foreign workers, which represent the large majority of CNMI
foreign workers according to data on entries to the CNMI contained in
the Border Management System (BMS).[Footnote 106] For other information
on the foreign worker population, and for comparison with CNMI
residents and other workers, we mainly relied on the most recent
household survey conducted in CNMI, the 2005 CNMI HIES. We identified
foreign workers in the HIES survey by those who identified their status
as "not a U.S. citizen, temporary resident." However, in addition to
foreign workers, survey respondents who identified themselves as
temporary non-U.S. citizens may include other groups, such as holders
of CNMI foreign investor permits.[Footnote 107] To determine the
reliability of the survey data, we obtained written responses to
questions regarding the survey methods. To compare wages earned by U.S.
citizens and noncitizens in the CNMI, we used tax return data provided
by the CNMI Department of Finance. Because a limitation of this data
source was that we could not distinguish between noncitizens who were
permanent and temporary residents, we did not use it to obtain
information about temporary residents. In general, we determined that
available data on CNMI foreign workers were adequate and sufficiently
reliable for the purposes of our review.
To demonstrate the joint effects of decisions by DHS and DOL regarding
the CNMI-only permits, we used illustrative functions to determine the
number of permits available in any given year. For DHS decisions
regarding reductions in the CNMI-only permits available, we varied the
rates of reduction required to reach zero in 5 years, as required by
the legislation.[Footnote 108] For DOL decisions regarding whether and
when to extend the CNMI-only permit program for up to 5 years at a
time, we modeled illustrative extensions at 2 years, 4.5 years, and
never. Based on the intersection of DHS and DOL decisions, the date at
which the permits would have to be zero could change, resulting in a
new rate of reductions in permits available. This analysis assumed that
the number of permits would not increase, and it did not incorporate
the possible effect of an increase of fees on the number of permits
sought by employers.
To examine the possible range of effects from a reduction in foreign
workers, we calculated the effect on GDP under a range of assumptions
(see app. VI). Specifically, we varied the assumptions regarding the
ability of CNMI resident workers to substitute for foreign workers and
the effect of a reduction in labor on total production.
Tourism. To assess the importance of each tourist market and the trends
in tourist arrivals, we analyzed visitor arrival data from 1997 through
2007 from the MVA. MVA data are generated from scanned customs forms
and do not identify visitors by CNMI entry permit type (including the
703A tourist entry permit). We determined that MVA data were
sufficiently reliable for our purposes. We did not receive sufficient
BMS data from the CNMI government on visitors to allow us to analyze
the size of each tourist market and related trends. We interviewed MVA
representatives, who explained to us the process they use to collect
the data. We also compared the aggregate visitor numbers to the ones
from BMS, and the two are generally consistent. MVA also provided us
with information on the cost of tour packages from Japan, Korea, and
the People's Republic of China. In addition, we reviewed visa interview
wait times reported by the U.S. Department of State. We previously
found that these data are not sufficiently reliable to determine the
number of posts with 30 or more days of wait time. However, we report
these data to illustrate the ranges of possible wait times.
Foreign investment. We analyzed foreign investor entry permit data from
the CNMI Department of Commerce. The department provided data tables on
foreign investor and business entry permits issued, based on
administrative information maintained by department staff. Although the
data were limited to entry permits issued, did not give any information
on the value of investment other than category of permit issued, and
did not reflect whether entry permit holders were present in the CNMI,
we determined that they were sufficiently reliable for the purposes of
our review. We did not receive some data requested from the CNMI
government, including data from LIIDS on foreign investors. This
information would have included the current numbers of foreign
investors holding each type of entry permit and would have allowed us
to compare numbers of entry permit holders with CNMI Department of
Commerce data. Without LIIDS data on foreign investors, we were unable
to verify whether the holders of foreign investor entry permits issued
were present in the CNMI, nor did we know the total number of holders
of perpetual foreign investor permits. However, in its comments on a
draft of this report, the CNMI government said that our analysis of
data on permits issued conflicted with CNMI Department of Commerce
data. The CNMI government provided the number of active and valid long-
term business and perpetual foreign investor entry permits, as well as
the numbers of businesses associated with these permits, as of July 8,
2008, based on the CNMI Department of Commerce's manual review of its
files. These data were not previously provided to us. The new data do
not include information on issued entry permits and do not include
complete information on country of origin and other characteristics.
The information provided on the numbers of long-term business and
perpetual foreign investor entry permit holders is generally consistent
with the data on permits issued; therefore, we have replaced the
information in the draft report with the new data provided. In
addition, some data on CNMI foreign investment, including overall
levels of foreign investment, are not collected by either the CNMI or
the federal government.
In general, to establish the reliability of the data that we used for
reporting trends and statistics for the CNMI labor market, tourism, and
foreign investment, we systematically obtained information about the
way in which data were collected and tabulated. When possible, we
checked for consistency across data sources. While the data provided by
the CNMI government had some limitations, and we did not receive all
data requested, we determined that the available data were adequate and
sufficiently reliable for the purposes of our review.
The scope of our study does not include foreign workers whose
documentation is not current or valid or those working in any
underground economy. In addition, we did not review federal agencies'
expected costs or operational needs in implementing the legislation.
We conducted this performance audit from June 2007 to August 2008 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
[End of section]
Appendix II: U.S. Nonimmigrant Classes of Admission:
Foreign nationals seeking to enter the United States temporarily may
apply for entry under the following classes of admission:
Transit aliens:
Class: C-1;
Description: Aliens in continuous and immediate transit through the
United States.
Class: C-2;
Description: Aliens in transit to the United Nations Headquarters
District.
Class: C-3;
Description: Foreign government officials, attendants, servants, and
personal employees, and spouses and children in transit.
Temporary visitors for business:
Class: B-1;
Description: Temporary visitors for business.
Class: GB;
Description: Visa Waiver Program--temporary visitors for business to
Guam.
Class: WB;
Description: Visa Waiver Program--temporary visitors for business.
Temporary visitors for business:
Class: B1;
Description: Temporary visitors for business.
Class: GB;
Description: Visa Waiver Program--temporary visitors for business to
Guam.
Class: WB;
Description: Visa Waiver Program--temporary visitors for business.
Temporary visitors for pleasure:
Class: B2;
Description: Temporary visitors for pleasure.
Class: GT;
Description: Visa Waiver Program--temporary visitors for pleasure to
Guam.
Class: WT;
Description: Visa Waiver Program--temporary visitors for pleasure.
Temporary workers and trainees:
Class: H-1B;
Description: Temporary workers with "specialty occupation".
Class: H-1B1;
Description: Chile and Singapore Free Trade Agreement Aliens.
Class: H-1C;
Description: Nurses under the Nursing Relief for Disadvantaged Areas
Act of 1999.
Class: H-2A;
Description: Seasonal agricultural workers.
Class: H-2B;
Description: Seasonal nonagricultural workers.
Class: H-2R;
Description: Returning H-2B workers.
Class: H-3;
Description: Trainees.
Class: H-4;
Description: Spouses and children of H-1, H-2, or H-3 visa holders.
Class: O-1;
Description: Temporary workers with extraordinary ability or
achievement in the sciences, arts, education, business, or athletics.
Class: O-2;
Description: Temporary workers accompanying and assisting O-1 visa
holders.
Class: O-3;
Description: Spouses and children of O-1 and O-2 visa holders.
Class: P-1;
Description: Temporary workers--internationally recognized athletes or
entertainers for a specific competition or performance.
Class: P-2;
Description: Temporary workers--artists or entertainers under
reciprocal exchange programs with a similar organization of a foreign
state.
Class: P-3;
Description: Temporary workers--artists or entertainers under
culturally unique programs.
Class: P-4;
Description: Spouses and children of P-1, P-2, or P-3 visa holders.
Class: Q-1;
Description: Temporary workers in international cultural exchange
programs.
Class: R-1;
Description: Temporary workers in religious occupations.
Class: R-2;
Description: Spouses and children of R-1 visa holders.
Class: TN;
Description: North American Free Trade Agreement (NAFTA) professional
workers.
Class: TD;
Description: Spouses and children of TN visa holders.
Treaty traders and investors:
Class: E-1;
Description: Treaty traders and spouses and children.
Class: E-2;
Description: Treaty investors and spouses and children.
Class: E-3;
Description: Australian Free Trade Agreement principals and spouses and
children.
Intracompany transferees:
Class: L-1;
Description: Intracompany transferees.
Class: L-2;
Description: Spouses and children of L-1 visa holders.
Representatives of foreign information media:
Class: I-1;
Description: Representatives of foreign information media and spouses
and children.
Students:
Class: F-1;
Description: Students--academic institutions.
Class: F-2;
Description: Spouses and children of F-1 visa holders.
Class: F-3;
Description: Canadian or Mexican national commuter students--academic
institutions.
Class: M-1;
Description: Students--vocational/nonacademic institutions.
Class: M-2;
Description: Spouses and children of M-1 visa holders.
Class: M-3;
Description: Canadian or Mexican national commuter students--
vocational/nonacademic institutions.
Exchange visitors:
Class: J-1;
Description: Exchange visitors.
Class: J-2;
Description: Spouses and children of J-1 visa holders.
Other categories:
Class: A-1;
Description: Ambassadors, public ministers, career diplomatic or
consular officers, and spouses and children.
Class: A-2;
Description: Other foreign government officials or employees and
spouses and children.
Class: A-3;
Description: Attendants, servants, or personal employees of A-1 and A-2
visa holders and spouses and children.
Class: BE;
Description: Bering Strait Agreement aliens.
Class: FSM;
Description: Federated States of Micronesia nationals.
Class: G-1;
Description: Principal resident representatives of recognized foreign
member governments to international organizations, staff, and spouses
and children.
Class: G-2;
Description: Temporary representatives of recognized foreign member
governments to international organizations and spouses and children.
Class: G-3;
Description: Representatives of unrecognized or nonmember foreign
governments to international organizations and spouses and children.
Class: G-4;
Description: Officers or employees of unrecognized international
organizations and spouses and children.
Class: G-5;
Description: Attendants, servants, or personal employees of G-1, G-2, G-
3, or G-4 visa holders and spouses and children.
Class: K-1;
Description: Alien fiancés(ees) of U.S. citizens.
Class: K-2;
Description: Children of K-1 visa holders.
Class: K-3;
Description: Alien spouses of U.S. citizens.
Class: K-4;
Description: Children of K-3 visa holders.
Class: MIS;
Description: Republic of the Marshall Islands nationals.
Class: N-1 to N-7;
Description: North Atlantic Treaty Organization (NATO) aliens, spouses,
and children.
Class: N-8;
Description: Parents of international organization special immigrants.
Class: N-9;
Description: Children of N-8 visa holders or international organization
special immigrants.
Class: PAL;
Description: Republic of Palau nationals.
Class: Q-2;
Description: Irish Peace Process Cultural and Training Program aliens.
Class: Q-3;
Description: Spouses and children of Q-2 visa holders.
Class: T-1 to T-5;
Description: Victims of a severe form of trafficking and spouses,
children, parents, and siblings.
Class: U-1 to U-4;
Description: Aliens suffering physical or mental abuse as victims of
criminal activity and spouses, children, and parents.
Class: V-1 to V-3;
Description: Spouses and children of a lawful permanent resident who
has been waiting 3 years or more for immigrant visas and dependents.
Source: U.S. Department of Homeland Security.
Note: Also see GAO, Commonwealth of the Northern Mariana Islands:
Pending Legislation Would Apply U.S. Immigration Law to the CNMI with a
Transition Period, GAO-08-466 (Washington, D.C.: Mar. 28, 2008).
[End of table]
[End of section]
Appendix III: Information on the CNMI Economy:
The CNMI Economy:
During the 1990s the economy of the CNMI relied largely on the garment
and tourist sectors for most of its employment, exports, and
production. The CNMI's unique trading relationship with the United
States during this time period, its appeal as a tourist destination,
and its proximity to tourists and inexpensive foreign labor from Asia
helped the CNMI build a prosperous economy based on its garment and
tourist sectors. Specifically, as long as certain conditions were met,
garments manufactured in the CNMI could be sold to buyers in the United
States without incurring import tariffs, and there were no quotas on
imports of garments to the United States from the CNMI. In addition,
these garments could bear labels identifying them as having been made
in the United States. These features gave garment manufacturers in the
CNMI greater access to the U.S. market and, therefore, an advantage
over garment manufacturers from neighboring countries. In addition, the
CNMI's local authority over immigration and the minimum wage, as well
as other factors, meant that CNMI industry had access to a large supply
of inexpensive foreign labor.
Fueled by a rapidly growing tourism and garment industry, the CNMI had
one of the fastest growing economies in the world since 1978 and had an
employment growth rate of 12.7 percent annually between 1980 and 1995,
which was eight times that of the U.S growth rate over that period. The
number of visitors to the CNMI rose from 100,000 in 1980 to almost
700,000 in 1995. Both the garment and tourist industries contributed
directly to the economy by generating employment and bringing revenue
from outside the CNMI via exports. In 1995, these two industries
accounted for about 80 percent of all employment. In addition, a 1999
study found that garment manufacturing and tourism accounted for about
85 percent of CNMI's total economic activity and 96 percent of its
exports.[Footnote 109] In 1999, the garment industry directly employed
about 16,000 workers, including 13,500 foreign workers and 2,500 local
residents. The tourist industry directly employed about 9,600 workers
in 1995, including 6,900 foreign workers and 2,700 local residents.
However, several recent developments in international trade have caused
the CNMI's garment industry to decline dramatically. In January 2005,
in accordance with World Trade Organization agreements, the United
States eliminated quotas on textile and apparel imports from other
textile-producing countries, leaving CNMI's apparel industry to operate
under stiffer competition, especially from low-wage countries such as
China. With its trade advantage lessened, the CNMI's garment industry
has shrunk. The value of CNMI textile exports to the United States
decreased from $1.1 billion in 1998 to $317 million in 2007. As a
result, the number of employees working in the garment industry has
fallen from 21,000 garment workers in 2001 to 14,000 in 2006. According
to CNMI government officials, the number of garment workers has fallen
to 1,751 as of July 2008. In addition, there were 34 licensed CNMI
apparel manufacturers in 1999; however, as of July 2008, only 6 firms
remained in operation.
In addition to the garment industry, the CNMI economy depends heavily
on the tourism industry, which has also been negatively affected in
recent years by various external events. For example, due to the CNMI's
proximity to Asia, Asian economic trends have a direct impact on the
CNMI's economy. For example, tourism in the CNMI experienced a sharp
decline in the late 1990s due to the Asian financial crisis and due to
the cancellation of Korean Air service to the CNMI following an
airplane crash on Guam in August 1997 (see fig. 11). In addition, the
tourism industry in the CNMI faltered again with the September 11,
2001, terrorist attacks on the United States. In 2003, according to
CNMI officials, tourism slowed in reaction to the SARS epidemic, which
originated in Asia, and the war in Iraq. Tourism in the CNMI is also
subject to changes in airline practices. For example, Japan Airlines
withdrew its direct flights between Tokyo and Saipan in October 2005,
raising concerns because roughly 30 percent of all tourists and 40
percent of Japanese tourists arrive in the CNMI on Japan Airlines'
flights, according to CNMI and DOI officials. A mitigating factor is
Northwest Airlines' new daily nonstop flights between Osaka and Saipan,
which are expected to replace about 40 percent of the seats lost from
Japan Airlines' action. In addition, according to press reports,
Northwest Airlines recently announced that it will double its direct
flights between Saipan and Tokyo starting in July 2008, which is
expected to bring an additional 60,000 Japanese tourists to the CNMI.
Furthermore, the CNMI government noted in its comments on a draft of
this report that Asiana Airlines has also recently increased service
capacity to the CNMI.
Total visitor arrivals to the CNMI dropped from a peak of 736,117 in
1996 to 389,345 in 2007, a decline of nearly 47 percent (see fig. 11).
The number of visitors from Japan--which accounts for the highest
percentage of visitors--decreased 23 percent from 2005 to 2006 and 26
percent from 2006 to 2007. At the same time, the CNMI has experienced
an influx of Chinese tourists in recent years, with the potential to re-
energize the industry. The Chinese share of the CNMI's visitors
increased significantly from 0.4 percent in 1997 to 10 percent in 2007.
CNMI officials are optimistic that the number of Chinese visitors will
continue to increase in the future, especially on the island of Tinian,
which already has gambling and hotel facilities owned and operated by
Chinese interests from Hong Kong.
Figure 7: Reported CNMI Visitor Arrivals by Country, 1996 through 2007:
[See PDF for image]
This figure is a stacked vertical bar graph depicting the following
data:
Reported CNMI Visitor Arrivals by Country:
Year: 1992;
Japan: 354,941;
Korea: 37,389;
USA: 79,641;
Hong Kong & Taiwan: 18,066;
China: 0;
Others: 15,258.
Year: 1993;
Japan: 378,719;
Korea: 60,824;
USA: 78,720;
Hong Kong & Taiwan: 12,965;
China: 0;
Others: 14,575.
Year: 1994;
Japan: 387,210;
Korea: 102,275;
USA: 80,959;
Hong Kong & Taiwan: 10,661;
China: 0;
Others: 14,928.
Year: 1995;
Japan: 426,679;
Korea: 124,794;
USA: 98,593;
Hong Kong & Taiwan: 11,803;
China: 0;
Others: 14,292.
Year: 1996 (Highest yearly total: 736,117);
Japan: 438,462;
Korea: 187,881;
USA: 84,007;
Hong Kong & Taiwan: 11,270;
China: 0;
Others: 14,497;
Year: 1997 (Asian financial crisis begins; Korean Air ceases services
to Saipan after crash in Guam);
Japan: 447,882;
Korea: 141,510;
USA: 75,153;
Hong Kong & Taiwan: 11,404;
China: 2,731;
Others: 16,208;
Year: 1998;
Japan: 376,539;
Korea: 27,813;
USA: 60,566;
Hong Kong & Taiwan: 9,058;
China: 2,815;
Others: 13,374.
Year: 1999;
Japan: 380,473;
Korea: 51,150;
USA: 48,891;
Hong Kong & Taiwan: 8,269;
China: 1,828;
Others: 11,177.
Year: 2000;
Japan: 378,756;
Korea: 71,623;
USA: 51,219;
Hong Kong & Taiwan: 15,218;
China: 1,531;
Others: 10,261.
Year: 2001;
Japan: 333,911;
Korea: 56,627;
USA: 35,142;
Hong Kong & Taiwan: 8,834;
China: 2,108;
Others: 7,662
Year: 2002;
Japan: 326,735;
Korea: 90,324;
USA: 35,858;
Hong Kong & Taiwan: 4,643;
China: 10,471;
Others: 7,516.
Year: 2003;
Japan: 328,075;
Korea: 69,642;
USA: 33,840;
Hong Kong & Taiwan: 2,981;
China: 15,213;
Others: 9,707.
Year: 2004;
Japan: 382,792;
Korea: 68,302;
USA: 37,036;
Hong Kong & Taiwan: 3,258;
China: 32,463;
Others: 12,022.
Year: 2005;
Japan: 351,739;
Korea: 69,952;
USA: 37,666;
Hong Kong & Taiwan: 5,398;
China: 32,920;
Others: 9,171.
Year: 2006;
Japan: 269,780;
Korea: 82,891;
USA: 32,292;
Hong Kong & Taiwan: 1,254;
China: 38,313;
Others: 10,964.
Year: 2007 (lowest yearly total: 389,345);
Japan: 200,168;
Korea: 108,321;
USA: 27,873;
Hong Kong & Taiwan: 445;
China: 40,331;
Others: 12,207.
Source: GAO analysis of Marianas Visitors Authority (MVA) data.
[A] USA includes Guam.
Note: Effective October 2006, arrivals from Hong Kong are included with
China.
[End of figure]
According to business groups, the CNMI retains certain advantages in
attracting foreign investment compared with nearby competitors, as well
as the United States. The CNMI's relationship with the United States
provides the CNMI with political stability and the protections afforded
to businesses under the U.S. federal court system. In addition, the
CNMI's tax structure has enabled the CNMI to maintain low individual
and corporate income tax rates. For example, residents of the CNMI pay
no federal income tax on income derived from sources in the CNMI.
[Footnote 110] In addition, corporations organized in the CNMI are
generally treated as foreign corporations for U.S. tax purposes and do
not pay federal tax on income earned in the CNMI, but they are
generally subject to federal tax on any income earned in the United
States.[Footnote 111] Finally, the tropical climate and natural beauty
of the CNMI, as well as its close proximity to major Asian markets,
also create unique investment opportunities, particularly for tourism.
However, the CNMI government has identified addressing infrastructure
challenges as key to attracting new foreign investment. These
challenges include unstable electrical, water, and sewage services,
which make it more difficult to attract new investors.
At the same time that the CNMI economy has declined owing to the
collapse of the garment industry and reductions in tourism, the CNMI
has made efforts to attract future foreign investors. The CNMI has
announced successful efforts to attract large foreign investors such as
Kumho-Asiana--investing in the LaoLao Golf Resort Development project-
-and the Marianas Resort Development Co.--developing a Tinian casino
and hotel. According to press reports, in early May 2008, Kumho-Asiana
executives and local CNMI officials held the groundbreaking ceremony
for the resort. The $68.8 million LaoLao Golf Resort Development
project is the largest construction project on the island since 1997.
In addition, the CNMI government also has considered policy changes to
help attract new investors. For example, the government has explored
revising strict land lease laws that limit private leases to 55 years
and ownership restrictions that limit ownership of land to persons of
Northern Marianas descent. The CNMI also has tried to attract retirees
from Asia.
The CNMI's Fiscal Condition:
The overall fiscal condition of the CNMI's government steadily weakened
from fiscal year 2001 through fiscal year 2007. Fees collected by the
government from the garment industry have declined from $36 million in
2001 to $13 million in 2007. As a result of this deterioration of the
garment industry and other downward economic trends, as shown in table
7, the CNMI's governmental funds balance has declined, dropping from a
reported positive $17.2 million at the end of fiscal year 2001 to a
negative $153.2 million at the end of fiscal year 2007.
Table 7: The CNMI's Fiscal Condition:
Data: Federal contributions;
Fiscal year ending September 30, 2001: $49,348,134;
Fiscal year ending September 30, 2002: $71,964,627;
Fiscal year ending September 30, 2003: $57,560,034;
Fiscal year ending September 30, 2004: $63,006,595;
Fiscal year ending September 30, 2005: $64,346,950;
Fiscal year ending September 30, 2006: $78,144,241;
Fiscal year ending September 30, 2007: $61,332,039.
Data: Total revenues;
Fiscal year ending September 30, 2001: $277,057,785;
Fiscal year ending September 30, 2002: $287,615,613;
Fiscal year ending September 30, 2003: $282,972,842;
Fiscal year ending September 30, 2004: $298,761,486;
Fiscal year ending September 30, 2005: $308,530,728;
Fiscal year ending September 30, 2006: $297,327,592;
Fiscal year ending September 30, 2007: $244,308,264.
Data: Total expenditures;
Fiscal year ending September 30, 2001: $258,177,431;
Fiscal year ending September 30, 2002: $314,985,333;
Fiscal year ending September 30, 2003: $303,986,379;
Fiscal year ending September 30, 2004: $352,488,419;
Fiscal year ending September 30, 2005: $343,370,293;
Fiscal year ending September 30, 2006: $320,797,417;
Fiscal year ending September 30, 2007: $289,074,529.
Data: Revenues less expenditures [surplus/(deficit)];
Fiscal year ending September 30, 2001: $18,880,354;
Fiscal year ending September 30, 2002: ($27,369,720);
Fiscal year ending September 30, 2003: ($21,013,537);
Fiscal year ending September 30, 2004: ($53,726,933);
Fiscal year ending September 30, 2005: ($34,839,565);
Fiscal year ending September 30, 2006: ($23,469,825);
Fiscal year ending September 30, 2007: ($44,766,265).
Data: Total net other financing[A];
Fiscal year ending September 30, 2001: $6,511,003;
Fiscal year ending September 30, 2002: $3,510,667;
Fiscal year ending September 30, 2003: 0;
Fiscal year ending September 30, 2004: $39,493,350;
Fiscal year ending September 30, 2005: $7,625;
Fiscal year ending September 30, 2006: 0;
Fiscal year ending September 30, 2007: $1,895,805.
Data: Governmental funds beginning year balance[B];
Fiscal year ending September 30, 2001: $3,540,878;
Fiscal year ending September 30, 2002: $19,609,305[C];
Fiscal year ending September 30, 2003: ($4,249,748);
Fiscal year ending September 30, 2004: ($35,011,807)[C];
Fiscal year ending September 30, 2005: ($49,245,390);
Fiscal year ending September 30, 2006: ($84,077,330);
Fiscal year ending September 30, 2007: ($110,296,274).
Data: Governmental funds end of year balance;
Fiscal year ending September 30, 2001: $17,219,852;
Fiscal year ending September 30, 2002: ($4,249,748);
Fiscal year ending September 30, 2003: ($25,263,285);
Fiscal year ending September 30, 2004: ($49,245,390);
Fiscal year ending September 30, 2005: ($84,077,330);
Fiscal year ending September 30, 2006: ($107,547,155);
Fiscal year ending September 30, 2007: ($153,166,734).
Source: GAO analysis of single audit reports for fiscal years 2001,
2002, 2003, 2004, 2005, 2006, and 2007.
Notes: Financial data in table 7 reflect the CNMI's financial
statements for its governmental activities, which include most of the
CNMI's basic services. The financial data in table 7 do not include the
CNMI's fiduciary funds, because those funds cannot be used to finance
CNMI operations. The CNMI's audited financial statements received
qualified opinions from its external auditors and therefore, these
amounts are subject to the limitations cited by the auditors in their
opinions and to the material internal control weaknesses identified. In
addition, the CNMI government had unfunded pension liabilities of
$547,199,484 as of October 1, 2005.
[A] "Other financing" includes transfers in and out of other funds.
[B] Governmental funds finance most of the basic services provided by
the government.
[C] The end-of-year fund balance for the prior fiscal year may not
agree with the beginning-of-year fund balance for the succeeding fiscal
year owing to amounts being restated in subsequent financial
statements. We could not readily identify explanations for these
restatements because comparative information was not always available
or disclosures were not made in subsequent financial statements.
[End of table]
[End of section]
Appendix IV: U.S. and CNMI Fees for Foreign Workers, Tourists, and
Foreign Investors:
Foreign workers (fees paid by employers):
U.S. fee:
* Specialty workers (H-1B): $320 to $2,320 for petition (range includes
supplemental fees of $750 or $1,500 and fraud prevention fee of $500
required for some petitions); associated visa typically valid for up to
3 years;
* Agricultural (H-2A): $320 for petition and $100 plus $10 for each
additional worker for DOL labor certification (to a maximum of $1,000);
associated visa typically valid for 1 year;
* Nonagricultural (H-2B): $470 for petition ($320 plus $150 fraud
prevention fee); associated visa valid for up to 1 year;
CNMI fee:
* Foreign worker (706K): $250 per year;
Transition period fee:
* $150 fee paid annually by employers under CNMI-only permit to fund
vocational education in the CNMI;
* Other fees for CNMI-only permit to be determined by federal
regulations;
* U.S. fees that apply to existing federal programs.
Tourists (fees paid by tourists):
U.S. fee:
* Temporary visitor for business (B-1), pleasure (B-2), or combined (B1-
B2): generally, $131 visa application fee and visa issuance fees
varying by country; valid for periods ranging from 1 to 10 years;
* Visa waiver: no fee or small fee for arrivals at land borders; valid
for up to 90 days;
CNMI fee:
* Tourist (703A): no fee or $100 if submitted 7 days or less from
intended arrival; valid for up to 30 days;
* Entry permit waiver: no fee; valid for up to 90 days;
Transition period fee:
* U.S. fees that apply to existing federal visas.
Foreign investors (fees paid by investors):
U.S. fee:
* Immigrant investor status: fee of $1,435 for initial petition, plus
$131 visa application fee and visa issuance fees varying by country;
* Treaty investor (E-2): $320 for up to 2 years plus $131 visa
application fee and visa issuance fees varying by country;
CNMI fee:
* Foreign investor (706G): one-time permit fee ranging from $500 to
$2,500, depending on investment level, and one-time certificate fee of
$10,000;
* Long-term business (706N): $1,000; valid for 2 years;
Transition period fee:
* CNMI-only E-2 visa requirements to be determined by federal
regulations;
* U.S. fees that apply to existing federal petitions and visas.
Source: GAO analysis of P.L. 110-229 and information from the U.S.
Department of Homeland Security, U.S. Department of Labor, U.S.
Department of State, and the CNMI government.
Note: Also see GAO, Commonwealth of the Northern Mariana Islands:
Pending Legislation Would Apply U.S. Immigration Law to the CNMI with a
Transition Period, GAO-08-466 (Washington, D.C.: Mar. 28, 2008).This
table includes only petition fees and some visa or permit application
fees, as of January 2008. U.S. fees include DHS petition fees,
Department of State visa fees, and DOL fees for labor certification.
Some fees may be waived. The table omits renewal and status adjustment
fees; biometric fees; fees for expedited service; user fees, such as
immigration inspection fees included in the cost of airline tickets;
and legal costs. H-1B petition renewal fees are generally the same as
the initial petition fees; however, the $500 fraud prevention and
detection fee is required only the first time a petitioner files for a
worker. The table omits other costs that may be associated with hiring
a foreign worker, such as costs related to worker health examinations
and care, transportation, and benefits. It also omits nongovernment
fees that may be associated with tourist visas, such as those charged
by travel agencies. In addition to the employer fees listed above,
foreign workers may be responsible for U.S. visa fees. U.S. visa fees
generally include a $131 application fee and may include an issuance
fee, depending on the country. Foreign workers in the CNMI are
responsible for an annual alien registration fee of $25.
[End of table]
[End of section]
Appendix V: Applicability of Other Legislation Provisions to CNMI
Foreign Workers:
In addition to the CNMI-only work permits, the recent legislation
contains other provisions that will affect foreign workers, including
exemptions from H visa caps for nonimmigrant workers, the option to
apply for nonimmigrant worker visas generally available under U.S. law,
and the option to apply for employment-based permanent immigration
status generally available under U.S. law.[Footnote 112] However, these
provisions will likely affect a relatively small number of CNMI foreign
workers.
Background:
U.S. immigration law includes several types of visas for nonimmigrant
workers and their families and sets caps for two of these types of
visas.[Footnote 113] In particular, the H-1 category includes highly
skilled workers coming to the United States temporarily to perform in
specialty occupations.[Footnote 114] H-1B visa holders may be admitted
for an initial period of 3 years that can be renewed for a total of 6
years, and they can work in employment of varied duration, depending on
the terms of the visa. The H-2 category includes H-2A visas for foreign
workers providing temporary or seasonal agricultural labor services, as
well as H-2B visas for other temporary workers who can perform short-
term service or labor in a job for which unemployed U.S. workers cannot
be found. Both H-1B and H-2B visas are capped--only 65,000 H-1B visa
holders and 66,000 H-2B first-time visa holders may be issued visas in
each fiscal year.[Footnote 115]
Other nonimmigrant visas available for foreign workers include, among
others, L visas for intracompany transfers; O visas for individuals of
extraordinary ability or achievement; P visas for artists, athletes,
and entertainers; and R visas for religious workers. In addition to
nonimmigrant visas, the INA contains permanent employer-sponsored
immigrant visas for individuals seeking to reside permanently in the
United States.
Exemptions from H Nonimmigrant Worker Visa Caps:
Although access to foreign workers in the CNMI will be available
through exemptions from the usual caps on H nonimmigrant worker visas
during the initial transition period, in addition to the CNMI-only work
permit program, few CNMI foreign workers are likely to meet the
requirements for these visas. During the initial transition period, DHS
will review and adjudicate applications for H nonimmigrant work visas,
uncapped under the legislation.[Footnote 116] The exemption from the
caps is an advantage to the CNMI, as the demand for the H-1B and H-2B
visas has exceeded the capped supply in recent years. For example, in
2008 DHS received approximately 160,000 petitions for the 65,000 H-1B
visas available. After the initial transition period ends in 2014, the
H caps will apply.[Footnote 117]
However, few foreign workers currently in the CNMI are likely to
qualify for the uncapped H nonimmigrant visas due to education and
skill requirements and to restrictions regarding the type of jobs to
which H visas apply. First, few foreign workers in the CNMI are likely
to qualify for the H-1B visa. H1-B visas are designed to give U.S.
employers the opportunity to hire foreign professionals if a U.S.
citizen or resident is not available. Based on a 2005 household survey
of CNMI residents, about 20 percent of foreign workers have a college
degree or higher, which is generally required for the H-1B.[Footnote
118] However, the H1-B visa may be applicable to workers who hold
positions that are difficult to fill with CNMI residents. For example,
some workers holding professional positions, such as accountants, may
meet the H-1B requirement.[Footnote 119]
Nor are current CNMI foreign workers likely to qualify for H-2B visas
despite the exemptions on these visa caps. H-2B visas are available for
temporary workers who can perform short-term service or labor in a job
for which unemployed U.S. workers cannot be found.[Footnote 120] H-2B
visa holders may be admitted for an initial period of 1 year. No
nonimmigrant visa categories are currently available for workers
performing continuous, rather than temporary, work who do not meet the
high-skill requirements of the H-1B visas. However, based on the 2005
CNMI HIES survey, about 70 percent of noncitizens employed in the CNMI
entered in 2002 or earlier, indicating that many were employed on a
nontemporary basis.[Footnote 121]
H-2A visas are not capped and would be available for foreign workers
providing temporary or seasonal agricultural labor both during and
after the initial transition period.[Footnote 122] However, based on
the most recent LIIDS estimate, there were only 555 foreign workers
engaged in private farming, about 3 percent of total foreign workers
with 706K visas.
In addition, the exemptions from the H visa caps no longer apply after
the initial transition period ending in 2014. Foreign workers applying
for H nonimmigrant status are then subject to the numerical limitations
set out in federal law, and as noted above, demand for the H-1B and H-
2B visas has exceeded the capped supply in recent years.
Moreover, current H visa fees range higher than the current CNMI fees
for foreign workers, making them less desirable to employers. The
current CNMI worker fee is $250 per year; existing U.S. fees for H visa
petitions range from $107 to $773 per year (also see app. IV).[Footnote
123] The legislation neither requires nor prohibits DHS from
establishing different fees for the uncapped CNMI and Guam H visas than
for H visas in general, so it is not clear what the uncapped H visa
fees will be. As with higher CNMI-only fees, increases in the cost of
hiring foreign workers would translate into increased labor costs and
reduced incentives for employers to use the H-visa program. For
example, a fee difference of $500 per year would be equivalent to a
wage increase of approximately $0.25 per hour. However, H visas may be
more desirable to foreign workers because, unlike other nonimmigrant
categories, H-1B and H-1C visa holders may seek to become lawful
permanent residents of the United States at the end of the authorized
nonimmigrant stay.
Nonimmigrant Worker Visas Generally Available under U.S. Law:
In addition to H nonimmigrant worker visas, all INA nonimmigrant
categories would be available to qualified foreign workers attempting
to enter the CNMI during and after the transition period and after any
extensions of the CNMI-only permit program. Some workers can apply for
L visas for intracompany transfers, but these visas are available only
to managers and executives, workers with specialized skills, and their
spouses and children. Also, L visa holders must have spent at least 1
continuous year abroad with a qualifying organization prior to entering
the United States. Other nonimmigrant visas available for foreign
workers are for specialized work--such as O visas for individuals of
extraordinary ability or achievement; P visas for artists, athletes,
and entertainers; and R visas for religious workers--and thus, are not
likely to apply to substantial numbers of CNMI workers.
Employment-Based Permanent Immigration Status Generally Available under
U.S. Law:
When federal immigration law becomes applicable to the CNMI on the
transition program effective date, CNMI employers will be able to
petition to bring workers to the CNMI as employment-based permanent
immigrants under the same procedures as other U.S. employers. Each
fiscal year, about 140,000 employment-based immigrant visas are
available for workers to enter the United States on a permanent basis.
Up to 28.6 percent of these visas may be available for skilled
nontemporary and nonseasonal workers, for professionals with
baccalaureate degrees, and for qualified workers capable of performing
unskilled nontemporary and nonseasonal labor for which qualified
workers are not available in the United States. For the unskilled
laborers, up to 10,000 visas may be issued each fiscal year to
qualified immigrants after DOL certifies that qualified workers are not
available in the United States. The limited number of visas available
for nontemporary and nonseasonal workers suggests few CNMI workers will
be able to obtain them.
[End of section]
Appendix VI: Construction of Gross Domestic Product Simulations:
The effect on the CNMI economy of a reduction in the availability of
needed foreign workers is uncertain. Generally, the size of the effect
is expected to be based on the degree to which any reduction in overall
needed labor causes production to decrease and on the effect of a
reduction in foreign workers on the productivity of resident workers.
In order to illustrate a range of possible effects on production from a
specific reduction of foreign workers, we generated simulations of
production in the CNMI economy, measured as gross domestic product
(GDP), under a range of assumptions regarding the effect of a reduction
of labor on production and the ability of the CNMI resident workforce
to substitute for the foreign workers in production.[Footnote 124]
Because we were unable to obtain a recent estimate of the CNMI's GDP,
the simulations were conducted using 2007 as a base year, with an index
value of 100.[Footnote 125]
As noted in the above report section on the labor market, existing
trends within the CNMI may affect the demand for foreign workers within
the coming years. Therefore, because these simulations did not control
for such potential changes in the CNMI over the next 12 years, they
should not be considered predictive of future GDP. Rather, they are an
attempt to illustrate a range of effects of the reduction in needed
foreign workers, leaving all other factors constant.
Model:
Production Function:
This analysis relies on the application of a combination of the
commonly used Cobb-Douglas production and Constant Elasticity of
Substitution functions to the CNMI economy.[Footnote 126]
(1) Y = AKA(eFW-R+(1-e)RW-R)-(1-A)/R:
where Y is output, K is capital, A is a constant, FW is the foreign
workforce, and RW is the resident workforce.[Footnote 127] Using this
function, total labor is not simply the sum of resident and foreign
labor, but the weighted and exponential sum of ((eFW-R+(1-e)RW-R)-1/R).
Because this model raises the number of workers to a negative power, we
could not use it to examine the case in which the number of foreign
workers is equal to zero. The parameters that control both the
substitutability and the factor shares of resident and foreign labor
are r and e. In addition, the elasticity of output with respect to
"total labor" is given by (1-a).
In the particular case in which r = -1 and e = .5, foreign and resident
workers are perfect substitutes and can be exchanged on a one-to-one
basis. In this case, the production function approaches the Cobb-
Douglass function, although with a different constant:
(1a) Y = A1KAL(1-A):
where L = (FW+RW). However, by increasing the r parameter and allowing
the e parameter to change we can decrease the one-to-one
substitutability of foreign and resident workers.[Footnote 128]
Method:
To apply the equation (1), we created scenarios varying the elasticity
of output with respect to total labor (1-a) and the substitution
parameters r and d. Specifically, we allowed both these parameters to
change according to pre-determined probability distributions, which
were generated through a review of economic literature and existing
CNMI data. The rate of departure of foreign workers was chosen by
assumption, to account for the various options of federal agencies.
Then, with initial conditions of the foreign and resident workforce, we
simulated the changes in the GDP of the CNMI based on the departures of
foreign workers. We generated 10,000 random scenarios. The model was
run to simulate scenarios through December 2021.
Initial Conditions:
Any analysis of this type must specify the initial values from which
the trajectory stems. Because an exact estimate of GDP was not
available we chose an arbitrary GDP "base" of 100.
The initial foreign worker population was chosen to be 19,823 (based on
the most recent LIIDS estimate from December 2007). Unfortunately, a
similar estimate was not available for the resident worker population.
However, based on the household survey done in 2005, resident
employment was approximately 60 percent of the foreign worker
population. If that ratio applied today, there would be approximately
11,500 employed residents, which we chose as the initial condition.
Rate of Exit of Foreign Workers from the CNMI:
The number of CNMI foreign worker permits that will be available in the
future is currently unknown and is dependent on many different
decisions. The Secretary of Labor will have the ability to extend the
CNMI-only work permit program indefinitely. The Secretary of Homeland
Security will have the ability to restrict the number of permits.
Because of this uncertainty, we used three illustrative possible
scenarios, beginning in June 2009, in order to present a range of
possible reductions:
1. Linear decline with renewal every 2 years. Assumes that the rate of
decline in the number of permits chosen by DHS is linear, and that the
Secretary of Labor extends the CNMI-only permit program every 2 years.
2. Accelerating decline with renewal every 2 years. Assumes that the
rate of decline in the number of permits chosen by DHS accelerates, and
that the Secretary of Labor extends the CNMI-only permit program every
2 years.
3. Last month with renewal every 2 years. Assumes that the rate of
decline in the number of permits is very slight, with a steep decline
in the last month, and that the Secretary of Labor extends the CNMI-
only permit program every 2 years.
Distribution of Elasticity of Output with Respect to Labor:
The economics of growth literature includes varying values of
elasticity of output with respect to labor. In an analysis of the
growth rates of East Asian nations, Alwyn Young refers to the
"standard" assumption of about two-thirds.[Footnote 129] In a recent
paper by Louis Kuijs of the World Bank and Tao Wang of the
International Monetary Fund, the authors use an elasticity of .5 in a
model explaining China's economic growth over the past 25 years.
[Footnote 130] Robert Hall assumes an elasticity of .7 for the United
States.[Footnote 131]
Based on this range, we assumed that the elasticity could be anywhere
from .5 to .75, with a peak of probability at .625, and the simulations
assumed a triangular distribution over that range.
Substitutability of Foreign and Resident Labor Forces:
The greater the degree to which CNMI resident workers are substitutes
for foreign workers in production, the less the effect of any
restriction. While some simulations of the U. S. labor market assume
perfect substitutability between immigrant and nonimmigrant labor,
[Footnote 132] this is unlikely in the case of the CNMI. Given that the
CNMI economy supports greater numbers of foreign workers than resident
workers, the difference in the relative wages can be used to determine
the elasticity of substitution. Foreign worker wages that are only
slightly less than resident wages would indicate a high degree of
substitutability in the CNMI market. However, in the CNMI, the average
wages of foreign workers and resident workers are very different; data
from the 2005 CNMI HIES--the most recent available--suggest that the
average foreign worker had a wage of $4.40 in 2004,[Footnote 133] while
the average resident had a wage of $8.60.[Footnote 134] By itself, this
would suggest substantial nonsubstitutability in production, with an
elasticity of .72 at the 2005 levels of foreign and resident workers
(and a r equal to .39).[Footnote 135]
However, the substitutability of the foreign and resident workers may
also be a product of regulation. For example, under recent CNMI labor
law, firms were required to maintain staffs of 20 percent resident
workers; this requirement was increased to 30 percent as of January
2008. Moreover, many jobs, such as some in government, are closed to
foreign workers. Some of the regulations regarding the labor market may
not have analogues in federal immigration law. This might suggest that
under the recent legislation there will be more substitutability
between foreign and resident labor than the current levels of wages and
number of workers indicates.
We assumed that the foreign and resident labor force had some degree of
substitutability but were not perfectly substitutable. Specifically, we
allowed the substitution parameter, r, to take any value from .5 to -1
with equal probability,[Footnote 136] a uniform probability over that
range. Similarly, the factor share, e, was allowed to range from .35 to
.65 with a uniform distribution.
[End of section]
Appendix VII: Dependents of Temporary Non-U.S. Citizens in the CNMI:
In order to estimate the extent to which CNMI foreign workers support
dependent children, including U.S. citizens, we analyzed data on
temporary non-U.S. citizens[Footnote 137] from the 2005 CNMI HIES, the
latest year data is available.[Footnote 138] HIES does not provide data
on the individual citizenship of children according to the citizenship
status of their parents, but it provides information on the citizenship
status of all children in the CNMI, as well as the citizenship status
of the heads of households in which CNMI children reside. According to
the 2005 survey, the total population of the CNMI is about 66,000, with
over 40 percent, about 28,000 people, living in households headed by a
temporary non-U.S. citizen.[Footnote 139] Households headed by a
temporary non-U.S. citizen on average have a total of 3.19 people
living in the households, including 1.28 children per household,
compared to an average of 1.97 children for all CNMI households (see
table 8).
Table 8: Mean Number of Children in Household by Immigration Status of
Head of Household, 2005:
Citizenship status of head of household: U.S. citizen;
Mean number of children in household: 2.35;
Number of children in household: 10,797.
Citizenship status of head of household: U.S. citizen; Born in the
CNMI;
Mean number of children in household: 2.5;
Number of children in household: 8,711.
Citizenship status of head of household: U.S. citizen; Naturalized U.S.
citizen;
Mean number of children in household: 1.99;
Number of children in household: 913.
Citizenship status of head of household: U.S. citizen; Born in U.S. or
U.S. territory;
Mean number of children in household: 1.82;
Number of children in household: 1,100.
Citizenship status of head of household: U.S. citizen; Other U.S.
citizen;
Mean number of children in household: 1.59;
Number of children in household: 73.
Citizenship status of head of household: Non-U.S. citizen;
Mean number of children in household: 1.55;
Number of children in household: 8,485.
Citizenship status of head of household: Non-U.S. citizen; Permanent
non-U.S. citizen;
Mean number of children in household: 2.13;
Number of children in household: 3,757.
Citizenship status of head of household: Non-U.S. citizen; Temporary
non-U.S. citizen;
Mean number of children in household: 1.28;
Number of children in household: 4,728.
Citizenship status of head of household: Total;
Mean number of children in household: 1.97;
Number of children in household: 19,282.
Source: GAO analysis of CNMI 2005 Household, Income, and Expenditures
Survey (HIES).
[End of table]
There are 19,282 children under the age of 18 living in the CNMI, and
4,728 of these children are living in a household headed by a temporary
non-U.S. citizen. Thus, one quarter of all children in the CNMI under
the age of 18 are living in a household headed by a temporary non-U.S.
citizen (see fig. 12).
Figure 12: Percentage and Number of Children in Each CNMI Household by
Immigration Status of Head of Household, 2005:
[See PDF for image]
This figure is a pie-chart depicting the following data:
Percentage and Number of Children in Each CNMI Household by Immigration
Status of Head of Household, 2005:
Born in the CNMI (U.S. citizen): 8,711 (45%);
Temporary non-U.S. citizen: 4,728 (25%);
Permanent non-U.S. citizen: 3,757 (19%);
Born in U.S. territory (U.S. citizen): 1,100 (6%);
Naturalized citizen (U.S. citizen): 913 (5%);
Other U.S. citizen: 73 (0%).
Source: GAO analysis of 2005 Household, Income, and Expenditures Survey
(HIES) data.
[End of figure]
In addition, 92 percent of children living in the CNMI are U.S.
citizens (see fig. 13). Therefore, there are between 3,217 and 4,728
children who are U.S. citizens living in households headed by a
temporary non-U.S. citizen, or between 68 and 100 percent of all
children living in households headed by a temporary non-U.S. citizen
are themselves U.S. citizens.[Footnote 140]
Figure 13: Immigration Status of Children in the CNMI, 2005:
[See PDF for image]
This figure is a pie-chart depicting the following data:
Immigration Status of Children in the CNMI, 2005:
Born in the CNMI (U.S. citizen): 16,801 (88%);
Permanent non-U.S. citizen: 886 (5%);
Temporary non-U.S. citizen: 625 (3%);
Born in U.S. territory (U.S. citizen): 807 (4%);
Naturalized citizen (U.S. citizen): 67 (0%);
Other U.S. citizen: 96 (0%).
Source: GAO analysis of 2005 Household, Income, and Expenditures Survey
(HIES) data.
[End of figure]
[End of section]
Appendix VIII: Country Participation in Current Waiver Programs in the
United States, the CNMI, and Guam:
Andorra;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Australia;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Austria;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Belgium;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Brunei;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Denmark;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Finland;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
France;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Germany;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Hong Kong[C];
U.S. Visa Waiver Program[A]: No;
CNMI entry permit waiver program[B]: No;
Guam visa waiver program: Yes.
Iceland;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Indonesia[C];
U.S. Visa Waiver Program[A]: No;
CNMI entry permit waiver program[B]: No (limited for shipping);
Guam visa waiver program: Yes.
Ireland;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Italy;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Japan;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Liechtenstein;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Luxembourg;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Malaysia[C];
U.S. Visa Waiver Program[A]: No;
CNMI entry permit waiver program[B]: No (police clearance);
Guam visa waiver program: Yes.
Monaco;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Nauru[C];
U.S. Visa Waiver Program[A]: No;
CNMI entry permit waiver program[B]: No;
Guam visa waiver program: Yes.
Netherlands;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
New Zealand;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Norway;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Papua New Guinea[C];
U.S. Visa Waiver Program[A]: No;
CNMI entry permit waiver program[B]: No;
Guam visa waiver program: Yes.
Portugal;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Republic of Korea[C];
U.S. Visa Waiver Program[A]: No;
CNMI entry permit waiver program[B]: No;
Guam visa waiver program: Yes.
San Marino;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Singapore;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Slovenia;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Solomon Islands[C];
U.S. Visa Waiver Program[A]: No;
CNMI entry permit waiver program[B]: No;
Guam visa waiver program: Yes.
Spain;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Sweden;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Switzerland;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Taiwan[C];
U.S. Visa Waiver Program[A]: No;
CNMI entry permit waiver program[B]: No;
Guam visa waiver program: Yes.
United Kingdom;
U.S. Visa Waiver Program[A]: Yes;
CNMI entry permit waiver program[B]: Yes;
Guam visa waiver program: Yes.
Vanuatu[C];
U.S. Visa Waiver Program[A]: No;
CNMI entry permit waiver program[B]: No;
Guam visa waiver program: Yes.
Western Samoa[C];
U.S. Visa Waiver Program[A]: No;
CNMI entry permit waiver program[B]: No;
Guam visa waiver program: Yes.
Source: GAO analysis of U.S. and CNMI immigration laws.
Notes: Also see GAO, Commonwealth of the Northern Mariana Islands:
Pending Legislation Would Apply U.S. Immigration Law to the CNMI with a
Transition Period, GAO-08-466 (Washington, D.C.: Mar. 28, 2008).
[A] In July 2006, we reported that DHS and the Department of State were
consulting with 13 countries, including the Republic of Korea, seeking
admission into the U.S. Visa Waiver Program. The other countries were
Bulgaria, Cyprus, Czech Republic, Estonia, Greece, Hungary, Latvia,
Lithuania, Malta, Poland, Romania, and Slovakia. In August 2007,
Congress passed legislation that provides DHS with the authority to
admit countries with refusal rates for business and tourism visas
between 3 and 10 percent under the Visa Waiver Program if the countries
meet certain conditions and if DHS implements certain security
measures. The Republic of Korea's refusal rate in fiscal year 2007 was
4.4 percent. See GAO, Process for Admitting Additional Countries into
the Visa Waiver Program, GAO-06-835R (Washington, D.C.: July 28, 2006)
and GAO, Visa Waiver Program: Limitations with the Department of
Homeland Security's Plan to Verify Departure of Foreign Nationals, GAO-
08-458T (Washington, D.C.: Feb. 28, 2008). While Canada is not included
in the U.S. Visa Waiver Program, nationals of Canada may also, in most
circumstances, qualify for visa-free travel to the United States,
including Guam.
[B] An order of the CNMI Attorney General dated March 23, 2004,
includes the Republic of Korea, Hong Kong, and Canada in the CNMI's
permit waiver program, but CNMI officials said that this order was no
longer in effect. The officials said that the CNMI currently waives
permit requirements only for visitors from countries included in the
U.S. Visa Waiver Program. They could not identify any document
specifically revoking the 2004 order, and an official said the CNMI
planned to issue clarification to the policy in the near future.
[C] Indicates countries for which visa waiver participation for tourism
or business differs among the United States, the CNMI, and Guam. Under
U.S. visa waivers, visitors may enter for up to 90 days. Under CNMI
entry permit waivers, the length of admission is also up to 90 days.
Under Guam visa waivers, visitors may enter for up to 15 days, except
that citizens from countries eligible for the U.S. Visa Waiver Program
may enter for 90 days. This table does not include the Freely
Associated States--the Federated States of Micronesia, Republic of the
Marshall Islands, and Republic of Palau--whose citizens are permitted
to work in the CNMI and elsewhere in the United States under the
Compacts of Free Association.
[End of table]
[End of section]
Appendix IX: CNMI Immigration and Labor Expenditures:
In order to provide information relevant to federal agencies assuming
responsibility for immigration functions in the CNMI, we requested
information from the CNMI government on its own expenditures on
immigration-related activities for fiscal year 2007. The CNMI
government reported that its Division of Immigration in the Office of
the Attorney General had total expenditures of $2,379,529 for fiscal
year 2007 (see table 9).
Table 9: CNMI Division of Immigration Expenditures for Fiscal Year
2007:
Description: Total Labor and Immigration Identification and
Documentation System (LIIDS) expenditures;
FY 2007 expense: $287,073.
Description: Total Labor and Immigration Identification and
Documentation System (LIIDS) expenditures; Personnel expenditures,
LIIDS;
FY 2007 expense: $226,430.
Description: Total Labor and Immigration Identification and
Documentation System (LIIDS) expenditures; All other expenditures,
LIIDS;
FY 2007 expense: $60,643.
Description: Total Immigration expenditures, Saipan;
FY 2007 expense: $1,498,948.
Description: Total Immigration expenditures, Saipan; Personnel
expenditures, Saipan;
FY 2007 expense: $1,422,947.
Description: Total Immigration expenditures, Saipan; All other
expenditures, Saipan;
FY 2007 expense: $76,001.
Description: Total Immigration expenditures, Tinian;
FY 2007 expense: $172,137.
Description: Total Immigration expenditures, Tinian; Personnel
expenditures, Tinian;
FY 2007 expense: $136,519.
Description: Total Immigration expenditures, Tinian; All other
expenditures, Tinian;
FY 2007 expense: $35,618.
Description: Total Immigration expenditures, Rota;
FY 2007 expense: $190,339.
Description: Total Immigration expenditures, Rota; Personnel
expenditures, Rota;
FY 2007 expense: $173,598.
Description: Total Immigration expenditures, Rota; All other
expenditures, Rota;
FY 2007 expense: $16,741.
Description: Total Immigration expenditures, alien deportation;
FY 2007 expense: $102,234.
Description: Total Immigration expenditures, alien deportation;
Personnel expenditures, alien deportation;
FY 2007 expense: $14,017.
Description: Total Immigration expenditures, alien deportation; All
other expenditures, alien deportation; FY 2007 expense: 88,217.
Description: Total alien deportation--PL 11-66;
FY 2007 expense: $115,417.
Description: Immigration services, uniforms;
FY 2007 expense: $13,381.
Description: Total Division of Immigration expenditures;
FY 2007 expense: $2,379,529.
Source: CNMI Department of Finance.
[End of table]
The CNMI government also reported that the CNMI Department of Labor had
expenditures of $2,246,953 in fiscal year 2007 (see table 10).
Table 10: CNMI Department of Labor Expenditures for Fiscal Year 2007:
Description: Total Secretary of Labor expenditures;
FY 2007 expense: $763,621.
Description: Total Secretary of Labor expenditures; Personnel
expenditures, Secretary of Labor;
FY 2007 expense: $251,357.
Description: Total Secretary of Labor expenditures; All other
expenditures, Secretary of Labor;
FY 2007 expense: $512,264.
Description: Total Labor expenditures, Saipan;
FY 2007 expense: $338,164.
Description: Total Labor expenditures, Saipan; Personnel expenditures,
Saipan;
FY 2007 expense: $334,209.
Description: Total Labor expenditures, Saipan; All other expenditures,
Saipan;
FY 2007 expense: $3,955.
Description: Total Labor expenditures, Tinian;
FY 2007 expense: $368,327.
Description: Total Labor expenditures, Tinian; Personnel expenditures,
Tinian;
FY 2007 expense: $253,218.
Description: Total Labor expenditures, Tinian; All other expenditures,
Tinian;
FY 2007 expense: $115,109.
Description: Total Labor expenditures, Rota;
FY 2007 expense: $355,046.
Description: Total Labor expenditures, Rota; Personnel expenditures,
Rota;
FY 2007 expense: $291,270.
Description: Total Labor expenditures, Rota; All other expenditures,
Rota;
FY 2007 expense: $63,776.
Description: Total Administrative Hearing Office expenditures;
FY 2007 expense: $105,359.
Description: Total Administrative Hearing Office expenditures;
Personnel expenditures, Administrative Hearing;
FY 2007 expense: $104,410.
Description: Total Administrative Hearing Office expenditures; All
other expenditures, Administrative Hearing;
FY 2007 expense: $949.
Description: Total Labor enforcement fund;
FY 2007 expense: $316,436.
Description: Total Administrative Hearing Office expenditures;
Personnel expenditures, enforcement fund;
FY 2007 expense: $312,562.
Description: Total Administrative Hearing Office expenditures; All
other expenditures, enforcement fund;
FY 2007 expense: $3,874.
Description: Total Department of Labor expenditures;
FY 2007 expense: $2,246,953.
Source: CNMI Department of Finance.
Note: Some but not all CNMI Department of Labor expenditures were
related to foreign workers. However, the CNMI government did not
provide information about the extent to which the above expenditures
were related to foreign workers.
[End of table]
In addition, CNMI officials provided us with the federal expenditures
on CNMI Division of Immigration and CNMI Department of Labor activities
related to immigration, which totaled $412,519 for fiscal year 2007
(see table 11).
Table 11: Federal Expenditures on CNMI Division of Immigration and CNMI
Department of Labor Activities for Fiscal Year 2007:
Description: Labor and Immigration automation;
FY 2007 expense: $14,831.
Description: CNMI Attorney General;
FY 2007 expense: $58,232.
Description: Department of Labor, Administrative Hearing;
FY 2007 expense: $20,825.
Description: Department of Labor, personnel training;
FY 2007 expense: $3,000.
Description: Immigration and Alien Labor Reform, personnel;
FY 2007 expense: $185,961.
Description: Immigration and Alien Labor Reform, hearing officer;
FY 2007 expense: $85,562.
Description: Translation services;
FY 2007 expense: $24,277.
Description: Enforcement training;
FY 2007 expense: $19,831.
Description: Total Federal Expenditures;
FY 2007 expense: $412,519.
Source: CNMI Department of Finance.
Note: Some but not all of federal expenditures on CNMI Department of
Labor activities were related to foreign workers. However, the CNMI
government did not provide information about the extent to which the
above Department of Labor expenditures were related to foreign workers.
[End of table]
[End of section]
Appendix X: Comments from the Department of Homeland Security:
U.S. Department of Homeland Security:
Washington, DC 20528:
July 15, 2008:
Mr. David Gootnick:
Director, International Affairs and Trade:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Mr. Thomas McCool:
Director, Center for Economics, Applied Research and Methods:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Messrs. Gootnick and McCool:
RE: Draft Report GAO-08-791, Commonwealth of the Northern Mariana
Islands: Managing Economic Impact of Applying U.S. Immigration Law
Requires Coordinated Federal Decisions and Additional Data, (GAO Job
Code 320514):
The Department of Homeland Security (DHS) appreciates the opportunity
to review and comment on the draft report referenced above. The
Government Accountability Office (GAO) recommends that the Secretary of
Homeland Security lead other relevant federal agencies, including the
Departments of the Interior, Labor, and State, in identifying the
interagency process that will be used to collaborate with one another--
and consult with the Commonwealth of the Northern Mariana Islands
(CNMI) government as required-- to jointly implement the legislation.
GAO also recommends that the Secretary of Homeland Security and the
Secretary of Labor (1) develop a strategy for obtaining critical data
on the CNMI labor market that are not currently available on an ongoing
basis, and (2) develop a strategy for obtaining critical data on CNMI
foreign investment.
We agree with the intent of the first recommendation subject to the
authority of the Secretary of the Interior regarding the Interagency
Group on Insular Areas pursuant to the Executive Order 13299 of May 8,
2003. DHS officials in collaboration with officials from the Department
of the Interior already have taken steps towards meeting the
recommendation's intent by sending an inter-agency delegation to the
CNMI to consult with government officials as well as the private sector
on implementing the law and addressing the related accompanying
economic impact. This delegation includes personnel from various DHS
offices and components and the Department of the Interior. We have been
working with the Department of the Interior's Office of Insular
Affairs, which has primary general authority and expertise in matters
involving territorial governments.
We also agree with the intent of the other two recommendations.
Officials at DHS intend to collaborate with Department of Labor
officials on the specific matters relating to their expertise as we
seek to address the recommendations directed to both agencies. The
Department is committed to continuing an inter-agency consultative
process with CNMI authorities.
Technical comments have been provided under separate cover.
Sincerely,
Signed by:
Jerald E. Levine:
Director:
Departmental GAO/OIG Liaison Office:
[End of section]
Appendix XI: Comments from the Department of the Interior and GAO's
Evaluation:
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
The Associate Deputy Secretary Of The Interior:
Washington:
July 11 2008:
Mr. David Gootnik:
Director, International Affairs and Trade:
United States Government Accountability Office:
Washington, D.C. 20548:
Dear Mr. Gootnik:
Thank you for the opportunity to review and comment on the Government
Accountability Office Draft Report No. GAO-08-791 entitled,
Commonwealth Of The Northern Mariana Islands, Managing Economic Impact
of Applying US. Immigration Law Requires Coordinated Federal Decisions
and Additional Data. The Department of the Interior agrees that there
are numerous challenges related to the transition to full applicability
of U.S. immigration laws to the Commonwealth of the Northern Mariana
Islands. In addition, with no history of Federal involvement in the
development of the current CNMI immigration rules and regulations there
is a great deal of uncertainty with regard to the potential impacts and
how to quantify them.
The Department's Office of Insular Affairs has already begun
discussions with the Federal Departments of Homeland Security, Labor,
Justice, and State to assist with the development of the transition
program as required in Title VII of Public Law 110-229, the
Consolidated National Resources Act of 2008. At the forefront of the
discussions is the awareness that forthcoming regulations and processes
may greatly affect the CNMI's economy by impacting worker availability
and CNMI tourism.
Coordination among Federal agencies must also consider the duties and
responsibilities of the CNMI's local government agencies. For example,
currently operating in the CNMI are several law enforcement agencies,
both local and Federal, with an undefined jurisdictional role related
to border control in the CNMI Responsibilities such as enforcement, the
imposition of fees and fines, and public education must be clearly
defined by the various agencies.
The Department believes the Report presents a realistic picture of the
uncertainties faced by both the Federal and CNMI governments and
provides a good summary of the mandates of the Public Law. However,
there are two areas of the Report in which the Department believes
clarification is necessary.
1. The Report states throughout that the exemption from the numeric
caps on H workers will not apply during any extensions of the
transition period. Based on discussions with DHS officials, the Office
of Insular Affairs concludes that the stated transition period end date
of December 31, 2014. in Public Law 110-229, Section 702(a), the new
Section 6(a)(2), does not apply to programs referenced as (b) and (d)
in this section. Therefore, programs under the referenced (b) and (d),
including programs related to H workers may be extended as authorized
under the Public Law. The Department will request that the DHS
coordinate with other Federal agencies and obtain a final legal
determination. [See comment 1]
2. The Report references the difficulty that Federal agencies face in
obtaining data needed to make decisions such as labor and economic
statistics. Although various Federal agencies assist the CNMI in
gathering data, the Department believes it is important that the Report
emphasize that the Public Law mandates the CNMI to produce and provide
the required information to the DHS and the DOL. [See comment 2]
Thank you again for the opportunity to comment on the Draft Report. If
you have any questions concerning the response, please communicate with
Nikolao Pula, Director of Insular Affairs, at (202) 208-4736.
Sincerely,
Signed by:
James E. Cason
The following are GAO's comments on DOI's letter dated July 11, 2008.
In addition to generally agreeing with our findings, DOI identified two
technical areas of the report in which it believed clarification was
necessary.
GAO Evaluation:
1. DOI questioned the report's finding that the CNMI's exemptions from
H visa caps under the legislation would not apply past the end of the
transition period in 2014 and said it had concluded that the transition
period end did not apply to the cap exemptions. The department said it
would request that DHS coordinate with other federal agencies and
obtain a final legal determination. Our interpretation of the law in
this report is consistent with our March 2008 report.[Footnote 141] DOI
and DOL raised no concerns about our interpretation of this provision
during agency interviews or in commenting on our March 2008 report.
Moreover, our interpretation is consistent with the interpretation of
the law by officials of DHS, the agency responsible for implementing
and administering the provisions of the transition period under the
legislation. As we state in our March 2008 report, we interpret the
legislation as allowing for an extension of the CNMI-only work permit
program beyond 2014 at the discretion of the Secretary of Labor, but
not to allow for an extension beyond 2014 of other provisions of the
transition program, including the exemptions from the numerical
limitations on H visas. Subsection 6(a)(2) of H.R. 3079 establishes a
transition period "beginning on the transition program effective date
and ending on December 31, 2014, except as provided in subsections (b)
and (d)." Subsection 6(b) authorizes aliens to enter the CNMI with H
visas without counting against the numerical caps established by law
for H visas but confers no specific authority for extending this
exemption beyond 2014. Subsection 6(d) authorizes CNMI-only work
permits to be issued to employers for nonimmigrant workers who are not
otherwise admissible under federal law. Subsection 6(d)(5) allows the
Secretary of Labor to ascertain the labor needs of the CNMI and
"determine whether an extension of up to 5 years of the provisions of
this subsection is necessary to ensure an adequate number of workers"
are available in the CNMI. The "provisions of this subsection" refers
only to the provisions of subsection 6(d), the authorization for the
CNMI-only work permit, and not to other programs available during the
transition period. As the exemption from the numerical limitation on H
visas is contained in subsection 6(b), the exemption could not be
extended beyond 2014 without further legislation. In addition, we note
that the subsequent report of the Senate Committee on Energy and
Natural Resources on H.R. 3079 states that the Committee intends that
the H exemptions for the CNMI and Guam be extended along with any
extension of the 5-year transition period.[Footnote 142] However, we
are constrained in our analysis to the language in the bill as is,
unless amended.
2. DOI said it was important for the report to note that the law
mandates that the CNMI produce and provide the required information to
the Departments of Homeland Security and Labor. We have revised the
report to clarify that the legislation requires the CNMI government to
provide the Secretary of Homeland Security all immigration records or
other information that the Secretary deems necessary to assist its
implementation; however, the relevant provision does not specifically
mention DOL.
[End of section]
Appendix XII: Comments from the Commonwealth of the Northern Mariana
Islands Government and GAO's Evaluation:
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
Commonwealth Of The Northern Mariana Islands:
Benign R. Fitial, Governor:
Timothy P. Villagomez, Lieutenant Governor:
Caller Box 10007:
Saipan, MP 96950:
Telephone: (670) 664-2200/2300:
Facsimile: (670) 664-2211/2311:
July 9, 2008:
Comments Of The Commonwealth Of The Northern Mariana Islands On Draft
GAO Report 08-791:
"GAO Predicts 50% Decline in CNMI Economy as a Result of
Federalization!" That will be the headline in the Commonwealth papers
and elsewhere if this draft report is published in its present form.
[See comments 1 and 2] This confirmation by a prestigious federal
agency of such a serious economic impact on the Commonwealth of the
Northern Mariana Islands will have a devastating affect on our small
islands, our businesses, our present and potential investors, our
30,000 United States citizens, and all of our residents. No such report
regarding the United States economy, or any State or city economy,
would be published without extensive peer review by professional
economists and political clearance at the highest level because of the
obvious human suffering and property loss that would result from its
dissemination. [See comment 3] The Commonwealth requests the Government
Accountability Office to defer publication of this draft report because
the adverse consequences associated with its distribution far outweigh
any possible benefits to the U.S. Congress, the Commonwealth of the
Northern Mariana Islands, or the American public.
In support of this request, the Commonwealth respectfully submits the
following reasons:
1) Publication of the report before Congress enacted Public Law 110-229
as originally requested would have informed Congress of the proposed
legislation's serious deficiencies and provided an opportunity for
constructive amendments - an objective that no longer can be achieved.
2) The report's emphasis on the lack of relevant data and its
identification of alternative courses to be considered by the
implementing federal agencies without recommendation provides no useful
information or guidance for agency personnel fully capable of
understanding Public Law 110-229 with the assistance previously
provided by GAO in its report (GAO-08-466) dated March 2008.
3) The report's assessment of economic impact on the Commonwealth
economy will be accepted as accurate and widely publicized despite the
obvious limitations of GAO's methodology and the assumptions used by
the staff in applying it.
4) The report's assessment of future demand for foreign workers in the
Commonwealth is faulty, ignores recent evidence of economic recovery,
and fails to address the fundamental issue arising from the small
United States citizen population in the Commonwealth.
5) The report reflects a basic misunderstanding of the CNMI workforce
and contains outdated information and factual errors.
Discussion:
1. Publication of the report before Congress enacted Public Law 110-229
as originally requested would have informed Congress of the proposed
legislation's serious deficiencies and provided an opportunity for
constructive amendments - an objective that no longer can be achieved.
[See comment 4]
Publication of this report by the Government Accountability Office
before Congress acted on Public Law 110-229 would have been of
substantial assistance to the Members of Congress and the Commonwealth
of the Northern Mariana Islands. The six Members of Congress who
requested this study by letter dated May 4, 2007, asked that additional
information be provided by GAO "as the Congress considers whether
federal immigration and minimum wage laws should be extended to the
CNMI" and requested that the agency "discuss how different applications
of federal immigration authority could affect the local economy." [See
comment 4] GAO's written definition of the scope and methodology of the
study confirms the objective of providing Congress with relevant
information before any legislation would be enacted applying federal
immigration authority in the Commonwealth. It stated that the purpose
of the study is to provide information on "the current laws and
procedures regarding non-citizens in CNMI and how the application of
federal immigration authority would affect CNMI's laws and procedures."
It committed the agency to provide "information related to the
potential application of federal immigration authority." The methods to
be used in conducting the study were to include an analysis of
"proposed legislation expanding federal immigration authority to CNMI."
[Footnote 143]
The Government Accountability Office has not produced the report
requested by the Members of Congress or described in its own definition
of the study's scope and methodology. After consultations with the
responsible Congressional staffers, the GAO study team decided (and so
advised CNMI representatives) to redefine its assignment. Rather than
trying to assist the Members in deciding whether the proposed
legislation should be adopted, GAO decided that its mission would be
limited to provide information to assist the responsible agencies in
the law's "implementation." We are unaware of any public statement by
the six signatories of the May 4 letter approving this critical
redefinition of the GAO's assignment. [See comment 4]
Notwithstanding its many limitations, the GAO report persuasively
documents the fundamental flaws in this legislation. The Report
repeatedly emphasizes the absence of the necessary economic data based
on which the implementing federal agencies might fairly assess the
impact of their decisions on the economy and people of the
Commonwealth. The report illustrates the wide range of discretionary
decisions entrusted by the Congress to the federal agencies in the
absence of any detailed legislative criteria. Lastly, the report
applies a seriously deficient methodology to examine the law's impact
on the Commonwealth economy and concludes, even with the most favorable
(and unrealistic) assumptions, that the law's implementation will
likely result in a 50% decline in the economic output (or GDP) of the
Commonwealth by 2021 if not sooner. If this proposed legislation had
been considered on its merits by Congress in light of this GAO report,
one can assume that the Members would not have decided to inflict this
devastating injury on the Commonwealth. [See comments 2, 9, and 10]
Even if the new Congress in January 2009 decides to revisit this
legislation, this report will be of little value. By that time, the
corroding and depressing impact of this report (if published) on
consumer sentiment and investor behavior will already have been felt.
Any amendment of the law would then be considered in light of the
actual or proposed implementation of the law by the Department of
Homeland Security and the Secretary of Labor. [See comment 5] The
current GAO report will have little relevance to future Congressional
deliberations regarding the Commonwealth's immigration and labor laws.
If published in its present form, it will be cited in the future only
as an example of the needless damage that a well-intentioned but
deficient GAO report can cause to a distant island community of United
States citizens in the Western Pacific, lacking even non-voting
representation in the U.S. Congress. [See comment 1]
2. The report's emphasis on the lack of relevant data and its
identification of alternative courses to be considered by the
implementing federal agencies without recommendation provide no useful
information or guidance for agency personnel fully capable of
understanding Public Law 110-229 with the assistance previously
provided by GAO in its report (GAO-08-466) dated March 2008. [See
comments 5 and 6]
The GAO report repeatedly identifies critical data deficiencies,
beginning with its introduction's comment that the implementing
agencies may have difficulty in obtaining data on the CNMI labor market
on which to base their decisions. The GAO makes 45 references to data
problems in its 109-page report[Footnote 144] There is no reason to
doubt that the Department of Homeland Security and the Department of
Labor are equally aware of the data needed to perform their
responsibilities under this or other laws.
The federal government has consistently ignored the insular areas
(except for Puerto Rico) in the systematic collection of population and
economic data of the kind available to the States. While State
governors have readily at hand current data showing the state of their
economies virtually week by week, the Governor of the CNMI is denied
comparable data. The problem has recently come to light as Congress
considered the application of the federal minimum wage levels to
American Samoa and the Commonwealth. During hearings on the subject
which required appraisal of a Department of Labor study, the attending
Members of the Senate Committee on Energy and Natural Resources
acknowledged that it was virtually impossible to made sensible and
informed decisions with respect to these insular areas in the absence
of the kind of data that is routinely collected with respect to the
States, counties, and communities in the 50 States.
A provision in the Iraq War Supplemental Funding bill signed on June
30, 2008, seeks to address this problem for the first time. It requires
federal agencies to include the CNMI and American Samoa in regular
studies done for the 50 States. The requirement applies to the U.S.
Department of Labor's household and establishment surveys, the Bureau
of Economic Analysis' gross domestic data reports, and the Census
Bureau's population estimates and demographic profiles. It also directs
GAO to study the impact of the first two minimum wage increases in
these two insular areas, specifying that the study should include an
examination of how the rate increases have affected the rates of
employment and the living standards of workers. The GAO study is due
between March 15, 2009, and April 25, 2009.[Footnote 145] [See comment
7]
Regardless of whether critical data is available or not, the GAO draft
report observes that the impact of the law will depend (largely or in
part) on decisions by the implementing agencies in writing appropriate
regulations.[Footnote 146] With respect to each of the three areas
discussed in the report - labor market, tourism, and foreign
investment - the report identifies the relevant provisions of the law
as it had done previously in its earlier report. In each area it then
focuses on the decisions that need to be made by the responsible
agencies, in some instances providing examples of possible outcomes,
but scrupulously avoiding any substantive recommendation. [See comment
6] Large sections of the report are basically descriptive in nature;
the report offers virtually no qualitative judgments or expertise to
assist the agencies in making the decisions required by the law. The
most important exception to the report's self-imposed reticence is its
effort to measure the economic impact on the Commonwealth of the
mandatory removal of all its foreign workers (18,942 as of June 30,
2008) from the community by December 31, 2014, or possible later dates.
[See comment 8]
3. The report's assessment of economic impact on the Commonwealth
economy will be accepted as accurate and widely publicized despite the
obvious limitations of GAO's methodology and the assumptions used by
the staff in applying it. [See comments 10, 11, and 12]
The report's discussion of economic impact resulting from the required
removal of all foreign workers by the end of 2014, or perhaps some
later date (pp.24-38), summarizes, as GAO had discussed in its earlier
report, the decisions to be made by the Secretary of Homeland Security
and the Secretary of Labor under the new law. It then focuses on
Homeland Security's discretion in deciding how many permits will be
issued to employers for foreign workers each year and the Secretary of
Labor's decision whether and when to grant an extension of the
transition period. [See comment 8]
On the assumptions that Homeland Security would reduce the number of
permits annually at a constant rate and that the Secretary of Labor
would grant an extension of the transition period every two years, the
GAO report estimates the projected impact on the Commonwealth's GDP
(nominally set at 100 in 2007) by a methodology which assessed the
impact of various assumptions on GDP using 10,000 simulations. The
range of impact by the year 2021 was between a 25% reduction in GDP to
a 75% reduction in GDP, with the middle 50 percent of the results
showing a 50-60% reduction in GDP. It is this projection of substantial
injury to the Commonwealth that prompts our request that publication of
this report be delayed.[Footnote 147] [See comment 1]
We believe that the methodology used in the draft report is inadequate
in the following respects:
1. The report does not demonstrate how the overall CNMI economy would
be affected in such familiar economic terms such as production,
employment, wages and salaries, personal income, population, labor
force, and others. It provides no baseline against which impacts might
be evaluated, and it does not take into account what would be occurring
in the rest of the economy during the impact period.
2. The impacts on the CNMI economy would better have been estimated by
utilizing a more conventional economic framework rather than general
statistical techniques. The results of the agency's simulations
indicate that restricting the number of foreign workers would cost CNMI
ten to seventy-five percent of its economy. Apart front providing a
meaningless range of impacts, the analysis is based on a very simple
model with no empirical underpinnings.
3. The report does not demonstrate how the impacts would affect the
likelihood or length of economic recovery especially in imposing such
economic and social instability on the CNMI.
4. The report states that these GDP impact estimates are not predictive
of future GDP because they did not take into account other changes
occurring in the CNMI economy (p. 36). GAO suggests that it is rather
an attempt to determine the effect of the removal of foreign workers on
GDP. However, this too is a GDP prediction. If the GDP simulations are
not predictive of GDP, then they are not predictive of how GDP would be
affected by the removal of foreign workers. They are both based on the
same GDP predictions. [See comment 9]
The scenarios used by the draft report in assessing impact reflect an
incorrect reading of the law. Figure 6 on page 27 and most of the
components of Figure 7 on page 33 fail accurately to reflect the law's
provisions. It is clear that no mandatory reductions can be implemented
before the beginning of the transition program on June 1, 2009, unless
it is extended by 180 days. The charts fail to recognize, however, that
the law permits all foreign workers to remain for two full years after
this date, or June 1, 2011, if the worker's permit so provides. The
Commonwealth labor law provides that workers whose contracts expired
during the period from June 1, 2008 to June 1, 2009, could get
extensions so that they would be eligible for new contracts shortly
before June 2009. In addition, the law provides for two-year contracts.
This means that most employers will provide such contracts for all of
their foreign workers that they wish to retain for as long as possible.
As a result, very few contracts will expire before June 1, 2011.
Accordingly, it cannot be assumed that any meaningful reduction of
foreign workers under the new federal law can begin until that date.
This means that all of the curves shown in Figures 6 and 7 are wrong.
[See comment 10]
If this report is ever published, GAO needs to revise its scenarios
accordingly, especially the version that contemplates that the
Secretary of Labor will grant an extension for five years every two
years. In light of the circumstances described above, it would be most
unrealistic to assume that the Secretary would seek an extension on or
about June I, 2011, the very date on which significant reductions of
foreign workers as mandated by the law would commence. More likely than
not, under this scenario the Secretary would have to wait at least one
year before conducting an analysis of the factors listed in the law on
the basis of which he is to make his determination. Because many of
these factors appear to rely on non-existent data, the Secretary might
well conclude that no such determination could be made until sometime
in 2012, when the results of the 2010 census are published and
available for analysis. [See comment 11]
The report's use of the methodology with only a single scenario
provides incomplete information for the implementing agencies. If this
report is to be published, we believe that the GAO report should apply
its methodology to the two other scenarios identified relating to the
Secretary of Labor's authority to extend the transition period. The
current draft uses only the scenario in which the Secretary grants an
extension every two years - the scenario most likely to produce the
least adverse economic impact on the CNMI. In the interest of
completeness and fairness, GAO should apply the same simulations
approach to the scenario in which no extension is granted, and to the
scenario in which an extension is granted four and one-half years into
each five-year extended transition period, in order to help inform the
Secretary of Labor of the possible impacts of the available
alternatives. [See comment 12]
4. The report's assessment of future demand for foreign workers in the
Commonwealth is faulty, ignores recent evidence of economic recovery,
and fails to address the fundamental issue arising from the small
United States citizen population. [See comment 13]
After forecasting this drastic economic result of Public Law 110-229,
the draft report blandly asserts that this impact might be lessened by
the projected decline in the demand for foreign workers resulting from
additional garment factory closures, "challenges" in the visitor
industry, and continued increases in the minimum wage. GAO's efforts in
this regard fall far short of providing any comfort to those who care
about the Commonwealth. Indeed, the report's discussion of these issues
leaves the impression that with the recent changes in trade rules,
external events that have affected the visitor industry, and increasing
minimum wage rates, the CNMI economy is likely to decline so severely
that the effects of the new law will be mitigated. [See comment 13]
Apparel Factory Closures: The figures regarding the apparel industry
(p. 10) need to be updated. We have previously advised GAO that as of
December 2007 there were only seven apparel factories operating in the
CNMI. With the closure of one additional factory in May 2008, the
Commonwealth now has six factories, with total employment of 1751, of
which about 1500 are foreign workers. From 1998 to 2002, the CNMI
collected, on average, $38 million per year in user fees from this
industry. The figure fell to $13.4 million in fiscal 2007 and is
estimated to total about $7 million for fiscal 2008. [See comment 13]
It is very unlikely that the recent closures will have any further
impact on the overall demand for foreign workers in the Commonwealth
for two reasons.
First, most of the workers previously employed by recently-closed
factories have repatriated voluntarily to their home countries and
these departures are generally reflected in the current LIIDS figures
with respect to foreign workers presently in the CNMI. Our most recent
LIIDS data, calculated as of June 30, 2008, show a total of 18,942
contract workers in Immigration Category 706(k). There have been no
advance announcements as required by CNMI law by any of the six
factories presently in operation regarding their anticipated closure
within 60 days. Two of these factories have been adding new employees
to their operations. [See comment 13]
Second, the new CNMI labor law and implementing regulations provide for
a secondary preference for on-island workers which gives these workers
preference for available jobs (after the primary preference for U.S.
and FAS citizens) over new hires from off-island. In addition, the new
CNMI Department of Labor website displays all available jobs in the
CNMI, thereby giving displaced foreign workers a much better source of
information about alternative opportunities. The placement of on-island
workers is much more efficient than it has been in past years. [See
comment 13]
Renewed Growth in Visitor Industry: It is true that the visitor
industry has declined over the past few years. GAO prefers to use the
term "challenges," but most economists would be more explicit and
acknowledge a decline in output. Visitor arrivals in fiscal 2007
amounted to 395,360 - the lowest number in more than 15 years. [See
comment 13] However, since GAO representatives visited the CNMI in
September 2007, both Asiana and Northwest Airlines have increased their
seat capacity to serve the Commonwealth and lessen the adverse impact
of Japan Airlines' departure from the market in 2005. As a result, the
Commonwealth is now experiencing a significant increase in arrivals and
is projecting about 437,832 arrivals for fiscal 2008 - an increase of
10.7% over 2007. The Marianas Visitors Bureau projects a further
increase in arrivals, perhaps as high as 535,940 - an increase of
22.4% - for fiscal 2009. This increase in arrivals has already been
reflected in small increases in hotel occupancy and room rates,
although the dramatic increase in energy costs in the Commonwealth
during the past year has adversely affected the ability of many CNMI
hotels to operate profitably. [See comment 13]
We believe that favorable developments as well as "challenges" should
be included in the text of the report. [See comment 13] In this
connection, we believe that the report should include references to the
major projects underway on both Saipan (LaoLao Golf Resort expansion
and Palms Resort renovation) and Tinian (MRDC and Bridge Investment
construction projects). Together with the projected increases in
visitor arrivals, these large development projects require a revision
of the current draft to reflect the possibility that the demand for
foreign workers in the CNMI may increase (rather than decrease) in the
next few years. [Footnote 148] The Commonwealth's recovery from its
current economic depression, impossible if the new law is implemented
as written, might also enable CNMI businesses to absorb the minimum
wage increases that have already been put in place without the
reduction in the demand for foreign workers assumed by the draft report
(pp. 40-42). [See comment 14]
Limited Size of U.S. Citizen Workforce: The draft report never squarely
confronts the fact that the 30,000 United States citizens in the
Commonwealth- men, women, and children - cannot provide the workforce
of approximately 30, 000 workers (currently including 18,942 foreign
workers) needed to support the CNMI economy and produce the standard of
living promised by the Covenant (properly capitalized). The report
acknowledges some efforts in the Commonwealth to increase the number of
U.S. citizens in the private sector (pp. 43-44).[Footnote 149] The
report recognizes, however, that "several factors may impede these
efforts' effectiveness" - such as the limited number (400) of high
school and college graduates who seek full-time employment in the CNMI
each year, the departure of U.S. citizens from the CNMI for better
economic opportunities in other U.S. locations, the need for language
skills in some jobs, and a reluctance among U.S. citizen workers to
perform some of the unskilled jobs currently held by foreign workers
(pp. 44-45). Even if all the unemployed U.S. citizens and FAS citizens
were to take jobs held by foreign workers, that would still leave some
17-18,000 jobs unfilled if all foreign workers were forced to leave the
Commonwealth. This is the "challenge" that the draft report declined to
face and, in so doing, ignored the history of the Commonwealth and the
more objective and practical assessment of the situation by GAO's
earlier report on the CNMI in February 2000. [See comment 15]
The negotiations that produced the Covenant are replete with references
to the need for foreign workers to develop the future Commonwealth
economy. The economist for the Marianas Political Status Commission in
1973 projected a substantial increase in the number of foreign workers
(from 1,500 to 7,500) by 1981 to staff the hotels that he predicted
would exist at that time. The negotiators for both the Northern
Marianas and the United States recognized that the Commonwealth would
not have sufficient workers from the U.S. citizen population to support
an economy that could produce a decent standard of living in the
Commonwealth. Although the negotiators did advance different
projections regarding the desired pace and extent of the area's
economic development, the United States representatives never suggested
that the future United States citizens in the Commonwealth would be
limited in the pursuit of their economic goals by some fixed limitation
on the number of foreign workers that might be lawfully employed in the
CNMI. [Footnote 150] [See comment 15]
The report of the Government Accountability Office, dated February
2000, regarding the Commonwealth's economy grasped the essential nature
of the situation with more realism and candor than the current draft
report.[Footnote 151] It emphasized the critical importance of the
economic tools provided the CNMI by the Covenant, including control
over immigration, to grow and support an economy that would meet the
needs of this small island community. It referred to the historic fact
that "local representatives recognized that the native labor pool of
the Northern Marianas was too small and did not have all the skills
needed to support economic development."[Footnote 152] It properly
described the use of the Commonwealth's control of immigration to bring
in foreign workers "under temporary, but renewable, work permits" and
added that "Many foreigners have entered the CNMI to work or to open
and operate businesses."[Footnote 153] The 2000 GAO report acknowledged
that "The garment and tourist industries are dependent on foreign
workers for much of their workforce because the labor pool of local
residents, even including those currently unemployed, is insufficient
to support an economy of the size and scope that exists in the CNMI."
[Footnote 154] The current draft report's failure even to mention its
earlier analysis suggests an institutional reluctance (or inability) to
defend the very different approach being taken in the current report.
[See comment 15]
These basic facts regarding the needs of the CNMI economy and the
limitations of the United States citizen workforce are as true today as
they were in 2000. Indeed, the significant reductions in the number of
foreign workers (from about 34,000 to 18,942) and the overall
population in the CNMI (from 69,000 to probably less than 60,000), as
well as the increase in minimum wage levels, should have led to a more
objective assessment of the current CNMI economy than is contained in
this draft report. [See comment 16] At page 13, for example, the draft
report relies on 1995 figures to support the proposition that "the CNMI
economy developed a two-tiered wage structure, with U.S. citizens and
permanent residents earning 3.5 times more than temporary residents in
1995." This particular indictment of the Commonwealth, whatever
economic significance it may have, was effectively rebutted in the 2000
GAO report, which analyzed the difference between wages earned by those
born in the CNMI and those born is Asia within four occupational
categories. It concluded that "a greater percentage difference exists
between local and foreign workers' wages in less skilled occupations -
such as the service industries and operators, fabricators, and laborer
[sic]-than in the more skilled positions - such as managerial and
professional or technical, sales, and administrative positions."
[Footnote 155] The GAO's complaint about a two-tier system that existed
in the CNMI in 1995 is outdated, overstated, and irrelevant to this
economic study. A similar two-tier wage structure could be readily
found in Washington DC, where professionals working for the United
States Government with advanced degrees earn several times more than
the unskilled workers engaged in construction or garden maintenance.
[See comment 16]
5. The report reflects a basic misunderstanding of the CNMI workforce
and contains outdated information and factual errors. [See comment 17
and 18]
We are attaching to these Comments an appendix containing numerous
proposed corrections to the draft report for GAO's consideration. On a
more fundamental matter, we believe that the draft report inaccurately
describes the status of foreign national workers in the CNMI economy
and that this, in turn, may reflect a misunderstanding of some
considerable importance. [See comment 17]
GAO's definitions of the terms "foreign worker" and "CNMI resident
worker" are inaccurate and should be changed. The draft report (p.1,
fn.1) defines "foreign worker" to mean persons "who are not U.S.
citizens or lawful permanent residents." All foreign workers are lawful
residents of the CNMI and the courts have consistently so held. GAO
borrows the term "foreign worker" from the current CNMI labor law, but
the GAO assumes that "foreign worker" is the equivalent of "temporary
worker" or "temporary resident." (e.g. pp. 3, 13, 15, 70, 97). This is
not correct. Foreign workers in the Commonwealth have entered and
remained in the CNMI legally under a system unique to the Commonwealth
that provides for an indefinite, not temporary, stay. So long as a
worker is employed and complies with Commonwealth law, the worker is
entitled to remain in the CNMI, working for his current or another
employer. There is nothing "temporary" about this workforce. We
recognize that this is a system different from the prevailing United
States system and had assumed that GAO would acknowledge these
differences rather than seek to equate the Commonwealth foreign worker
program with the United States "temporary worker" programs. [See
comment 18]
Whether the permits are considered "temporary" because they have to be
renewed each year or not, this does not mean either that the jobs
filled by the foreign workers are "temporary" or that the workers are
"temporary non-U.S. citizens." (pp. 13, 16). If a worker is employed
and obeys Commonwealth law, he or she may stay in the CNMI for as long
as desired and thousands of foreign workers have been in the
Commonwealth for more than ten years. It is incorrect to state as GAO
does (p. 16) that the CNMI Department of Labor certifies non-citizens'
eligibility for "temporary work." The Department does not certify
anyone; it grants an entry permit, which is good for one year and is
renewable. The work for which entry permits are granted is not
"temporary." The job must be substantial and the position must be
advertised, No advertisement for any of these positions ever says
"temporary." The situation with respect to foreign workers is
essentially the same as for foreign investors. As recognized by GAO (p.
17), foreign investors may renew their permits as long as they maintain
certain levels of investment and obey Commonwealth law. [See comment
18]
We suggest that GAO change its terminology so as to focus on
citizenship rather than residence, which leads to some of the confusion
and inaccuracy of concern to us. There are "U.S. citizen" workers;
there are "FAS citizen" workers; and there are "foreign national"
workers. All of these persons who live in the CNMI are "residents" of
the CNMI. It would be clearer to the reader to use these terms and to
footnote the category of "US and FAS citizen worker" to include the few
foreign nationals who established permanent residence under Trust
Territory law and under local CNMI law briefly in effect during the
early 1980s. In our view, residence has nothing to do with the
distinction among categories of workers, whereas citizenship and
nationality can be used to increase the accuracy and utility of the GAO
report. [See comment 18]
The draft report's reference (pp. 5, 72) to "undocumented foreign
workers" is also incorrect. Every foreign worker in the Commonwealth is
documented. No one walks across the border in the Commonwealth to enter
illegally as millions of aliens have done in the United States. The use
of the term is very prejudicial, suggesting that the CNMI suffers from
the same problem with illegal aliens as does the United States. There
are foreign workers in the CNMI whose documentation is not current, but
the Commonwealth has their photos, passport images, and all of the
information that they provided in support of their application for a
permit. The number of foreign workers in the Commonwealth without
current permits has been reduced substantially within the last year as
a result of the elimination of the various case backlogs at the
Department of Labor. We recommend that the phrase "undocumented foreign
workers" be deleted from the text of the report. [See comment 19]
Conclusion:
The Commonwealth is very concerned about this draft report and the
injury its publication will do to our community. We request that these
Comments be considered carefully and that GAO withhold publication of
the report at this time.
Signed by:
Howard P. Willens, Special Legal Counsel:
The following are GAO's comments on the CNMI government's letter dated
July 9, 2008.
GAO Evaluation:
1. The CNMI government stated that this report should not be published
in its present form because its discussion of possible consequences to
the CNMI economy could itself harm the CNMI (see letter pages 1, 3, and
5). We believe it is essential to report the key decisions facing
federal agencies and to illustrate a range of potential impacts those
decisions could have on the CNMI economy, rather than concealing the
possible consequences of implementation. Fully informed and coordinated
federal agencies will be best capable of making decisions that minimize
adverse consequences for the CNMI economy. Furthermore, the CNMI
government itself has asserted that the legislation would harm the CNMI
economy, as stated publicly in press releases and congressional
testimony.[Footnote 156]
2. The CNMI government inaccurately stated that the report predicts a
substantial decline in the CNMI economy as a result of the legislation,
misstating our message that the impact of the legislation on the CNMI
economy will depend on various U.S. agency decisions (see letter pages
1 and 3). Our report's GDP simulations illustrate a range of possible
outcomes of various federal decisions regarding the CNMI-only work
permit program, ranging from minimal to substantial impact on the
economy. We found that varying rates of reduction in CNMI-only permits
for foreign workers resulting from the agencies' decisions could
decrease CNMI GDP to a range of about 98 percent (minimal impact) to 21
percent (substantial impact) of current levels, holding other factors
constant. The 50 percent reduction in GDP noted by the CNMI government
represents only one possible outcome in this range. The scenario
producing this outcome is neither unrealistic nor the most favorable,
as the CNMI government contended; rather, it includes the steepest
decline in CNMI-only work permits of the scenarios illustrated. The
actual extent of the legislation's impact on the CNMI economy will
depend on the key federal decisions related to foreign workers,
tourists, and foreign investors identified in our report, as well as
other factors in the economy. In addition, our report clearly states
that the GDP simulations should not be considered predictive of future
GDP because they do not allow for other changes in the CNMI over the
coming years. Ceteris paribus--holding all else constant--is a common
and necessary assumption in many economic analyses. The simulation
illustrations should be considered in conjunction with other findings
in this report on industry trends and the scheduled minimum wage
increases.
3. The CNMI government expressed concern that the report has not
received extensive peer review by professional economists or political
clearance at the highest level (see letter page 1). GAO has a rigorous
internal review process, and this report received the input and review
of numerous economists and analysts, as well as senior GAO officials.
GAO also has an external agency comment process, providing affected
officials--in this case senior officials of various federal agencies
and the CNMI government--with an opportunity to comment on the report's
methodology and technical accuracy, among other topics. We considered
these comments in the course of finalizing the report and addressed
them as appropriate. In addition, our work was conducted in accordance
with generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions.
4. The CNMI government incorrectly described the scope and evolution of
our work as agreed with Congress (see letter page 2). We consulted with
our congressional requesters as we developed the report, and the report
we produced is consistent with our agreement with the requesters. Our
scope and methodology as agreed with the requesters did not include an
agreement to issue a report prior to the legislation's consideration,
nor did it include an assessment of whether the legislation should be
enacted. We addressed the research objectives included in the scope and
methodology both in our March 2008 report and the current report, as
agreed with our requesters. The scope and methodology language that the
CNMI government cites in its letter reflected the fact that the
legislation was pending at the time the study was initiated, not that
it necessarily would be pending when the report was issued.
5. The CNMI government stated that the report does not provide useful
information to federal agencies and that the report will have little
relevance to future congressional deliberations regarding the CNMI's
immigration and labor laws (see letter page 3). We disagree. Moreover,
we note that the federal agencies that reviewed a draft of this report
agreed with our findings and recommendations and said that the report
was useful.
6. The CNMI government also incorrectly stated that the report provides
no recommendations (see letter pages 3 and 4). We disagree. In fact, we
make recommendations to DHS and DOL. We recommend that the Secretary of
Homeland Security lead other relevant federal agencies, including the
Departments of the Interior, Labor, and State, in identifying the
interagency process that they will use to coordinate their decisions--
and consult with the CNMI government as required--in jointly
implementing the legislation. We also recommend that the Secretaries of
Homeland Security and Labor jointly develop strategies for obtaining
critical data on the CNMI labor market and on CNMI foreign investment.
7. The CNMI government incorrectly stated that the 2008 Supplemental
Appropriations Act[Footnote 157] requires federal agencies to include
the CNMI and American Samoa in regular studies conducted for the 50
states (see letter page 4). It also incorrectly stated that the law
mandates a GAO study on minimum wage increases in the CNMI and American
Samoa. These provisions were included in earlier versions of the bill
but not in the enacted law.
8. The CNMI government inaccurately stated that the report included
"discussion of economic impact resulting from the required removal of
all foreign workers by the end of 2014, or perhaps some later date"
(see letter pages 4 and 5). Our report does not state that all foreign
workers will be removed. The legislation requires that CNMI-only work
permits be reduced to zero by the end of 2014 or any extensions of the
permit program, but it does not require the removal of all foreign
workers--for example, workers with valid H visas and other U.S. work
visas would be permitted to remain.
9. The CNMI government raised concerns about the report's methodology,
including the GDP simulation methodology (see letter pages 3, 5, and
6). We believe our methodology is a sound approach for analyzing the
potential impact of federal implementation decisions on the CNMI
economy. The CNMI government raised several specific concerns:
* The CNMI government expressed concern that the report does not
demonstrate how the CNMI economy would be affected in terms of
production, employment, wages and salaries, personal income,
population, labor force, and other factors. As the report notes,
although we could have attempted to estimate other aspects of the
effect of the reduction of foreign workers on the CNMI economy, such as
the average earnings of CNMI residents, we selected total GDP, a
measure of both production and national income, to measure the effect
of reductions in foreign workers on the overall economy--and the basis
of CNMI government tax revenue--rather than on any particular group.
* The CNMI government stated that the report provides no baseline
against which impacts might be evaluated and does not take into account
factors in the rest of the economy. However, the report accounts for
factors including industry changes and minimum wage increases in the
section following the GDP simulations.
* The CNMI government stated that the analysis is based on a simple
model with no empirical underpinnings. We disagree. The simulation is
based on the number of foreign workers relative to the number of CNMI
resident workers, according to the 2005 Household, Income, and
Expenditures Survey (HIES)--an empirical underpinning. As noted in the
report, the production function we use in the GDP simulations has been
used prominently in published, peer-reviewed economic studies to model
contributions of different groups of workers in an economy.
* The CNMI government stated that the report did not demonstrate how
the impact of the legislation would affect the likelihood or length of
CNMI economic recovery. We agree. The scope of this report is limited
to the factors that will affect the impact of the legislation's
implementation on the CNMI economy, and the likelihood or length of
CNMI economic recovery is beyond the scope of our review.
* The CNMI government comments also inaccurately stated that the report
predicts a substantial decline in the CNMI economy as a result of the
legislation. As noted above, these scenarios are illustrative of a
range of possible outcomes depending on the interaction of DHS and DOL
decisions and do not predict or estimate the likelihood of each
scenario.
10. The CNMI government stated that figures 6 and 7 reflect an
inaccurate reading of the law because they do not recognize that the
legislation allows current CNMI foreign workers to remain in the CNMI
for a limited time after the start of the transition period (see letter
pages 5 and 6). However, figure 6 notes that while the figure is
limited to current CNMI foreign worker permits (706K) before and at the
beginning of the transition period and to CNMI-only work permits after
the transition period begins, under the legislation, foreign workers
legally present in the CNMI as of the transition program effective date
but who do not obtain U.S. immigration status may continue residing and
working in the CNMI for a limited time--2 years after the effective
date of the transition program or when the CNMI-issued permit expires,
whichever is earlier. We have added the same note to figures 7 and 8.
Incorporating this provision in the figure would not change the message
of our report; rather, it would result in steeper rates of reduction in
CNMI-only work permits and a delay of 2 years or less in the start of
the illustrated reductions.
11. The CNMI government contended that it is unrealistic to consider an
extension of the CNMI-only work permit program by the Secretary of
Labor around June 2011 given gaps in available data on the CNMI labor
market (see letter pages 3, 5, and 6). The report illustrates a range
of options available to DOL without predicting the department's
decisions related to the extensions. DOL reviewed the draft report and
expressed no concerns regarding the figures or the possible timing of
department decisions. In addition, implementation of our recommendation
that the Secretaries of Homeland Security and Labor jointly develop
strategies for obtaining critical data on the CNMI labor market, as
well as on foreign investment, would help address data gaps.
12. The CNMI government suggested that we apply the GDP simulation
methodology to the scenarios in figure 7 depicting no extension of the
CNMI-only permit program and extensions every 4.5 years (see letter
pages 5 and 6). We have added to the report discussion of these
scenarios' likely effects on GDP. Applying the GDP simulation
methodology to the other scenarios would yield more rapid declines in
GDP, corresponding to the more rapid declines in CNMI-only work permits
for foreign workers related to DOL decisions not to extend the CNMI-
only permit program or to extend it every 4.5 years. In addition, we
can provide additional simulations to congressional requesters or
federal agencies if they request them. However, because of the nature
of the functional form used, we cannot use it to evaluate the case in
which the number of CNMI-only work permits is equal to zero. We note
this limitation in appendix VI, which provides additional information
about the GDP simulations.
13. The CNMI government contended that the report's assessment of
future demand for foreign workers in the CNMI is faulty and ignores
recent evidence of economic recovery (see letter pages 7 and 8). The
CNMI government said that the recent garment factory closures are
unlikely to further impact the overall demand for foreign workers in
the CNMI. We updated data in the report on the number of CNMI garment
factories in operation. However, the CNMI government provided no
convincing evidence that the CNMI's loss of jobs related to the garment
industry has ended. Furthermore, this statement contradicts interview
statements from CNMI officials and press accounts regarding the decline
in the garment industry. The CNMI government noted that the CNMI has a
preference for on-island foreign workers over off-island foreign
workers (after the primary preference for U.S. citizens and Freely
Associated States citizens). However, this preference does not
contradict our findings regarding the demand for foreign workers. The
CNMI government also incorrectly stated that the report said the CNMI
economy was likely to decline substantially without regard to the new
law. The report discusses possible impacts of industry trends and
minimum wage increases on demand for foreign workers but does not
provide projections about the future CNMI economy. The CNMI government
also stated that although the CNMI had experienced recent declines in
visitor arrivals, the Marianas Visitors Authority [Footnote 158] is
projecting increases in fiscal years 2008 and 2009. It suggested
including these and other favorable developments in the report. We have
noted the projected visitor increases in the report, and recent
development projects are already mentioned in appendix III. In
addition, any positive economic developments should be considered by
DHS and DOL in their decisions regarding the CNMI-only work permit
program.
14. The CNMI government stated that the CNMI's recovery from its
current economic depression might enable CNMI businesses to absorb the
minimum wage increases without reductions in the demand for foreign
workers (see letter page 8). However, the CNMI Governor testified in
February 2008 that the CNMI was in its third year of a serious economic
depression and that the minimum wage increase would seriously impede
the CNMI's efforts to strengthen its economy over the next 12 to 18
months. [Footnote 159]
15. The CNMI government also stated that the report fails to address
the fundamental issue arising from the small U.S. citizen population in
the CNMI (see letter pages 8 and 9). However, as the CNMI government
notes in its comments, our report already discusses this issue and
finds that several factors impede the effectiveness of efforts to
replace foreign workers with CNMI residents. In addition, federal
agencies can and should consider the availability of CNMI residents in
their decisions regarding the CNMI-only work permit program. The CNMI
government also said GAO's February 2000 report more accurately
described the CNMI's reliance on foreign workers. The findings of the
reports are consistent and complementary, and both reports are
available to assist federal agencies in understanding the CNMI economy
and implementing the legislation.
16. The CNMI government objected to the report's use of the term "two-
tier wage structure" to describe the CNMI's 1995 labor market (see
letter pages 9 and 10). However, this descriptive statement is accurate
based on CNMI data. In addition, as stated in the report, our analysis
of 2005 HIES data shows that the average wage for CNMI resident workers
in 2004 was $8.60, whereas the average wage for temporary non-U.S.
citizens was $4.40. The differential in the wages of these groups is
relevant because it results in the minimum wage increases
disproportionately affecting foreign workers. This is likely to
decrease the number of foreign workers demanded by CNMI employers.
17. The CNMI government contended that the report contains outdated
information and factual errors (see letter page 10). The report is
based largely on the data that we were able to obtain from the CNMI
government. In its comments, the CNMI government provided some
additional or corrected information that we have incorporated as
appropriate.
18. The CNMI government objected to our definition of foreign workers
as "workers in the CNMI who are not U.S. citizens or lawful permanent
residents," saying that all foreign workers are lawful residents of the
CNMI (see letter pages 10 and 11). The CNMI government also objected to
the term "temporary" to describe foreign workers in the CNMI. Our use
of the term "lawful permanent resident" is consistent with U.S. law,
and we have not revised it. In addition, we used these terms in our
March 2008 report, and the CNMI government expressed no concerns in its
review of the report. While we generally use the term "foreign worker,"
we are constrained by the terms used by cited data sources. For
example, the CNMI's 2005 HIES includes data on respondents who
identified their status as "not a U.S. citizen, temporary resident." We
have clarified the terms where possible.
19. The CNMI government objected to the term "undocumented foreign
workers," saying that the CNMI has documentation on all of its foreign
workers but has foreign workers whose documentation is not current (see
letter page 11). We have revised the term to "foreign workers whose
documentation is not current or valid."
20. In its technical comments, the CNMI government suggested we add
information to the report regarding the immediate relatives of foreign
workers, tourists, and foreign investors in the CNMI. We requested
information from the CNMI Office of the Governor on immediate relatives
from the Labor and Immigration Identification and Documentation System
(LIIDS) beginning in October 2007 but did not receive it. In addition,
appendix VII includes information on dependents of temporary non-U.S.
citizens in the CNMI based on 2005 HIES data.
21. In its technical comments, the CNMI government disagreed with
several graphics based on data on issued foreign investor entry
permits, previously provided by the CNMI Department of Commerce. The
CNMI government provided alternative data that we have incorporated in
the report. These include the number of active and valid long-term
business and perpetual foreign investor entry permits, as well as the
numbers of businesses associated with these permits, as of July 8,
2008, based on the CNMI Department of Commerce's manual review of its
files. However, the new data do not include information on issued entry
permits and do not include complete information on permit holders'
countries of origin and other characteristics. As a result, we removed
several graphics and related discussion that were included in the draft
report. The CNMI government also said that the 2002 U.S. Economic
Census, which the letter refers to as the 2002 CNMI Economic Census,
provided a source of foreign investment data. While the 2002 Census
includes information on CNMI businesses by owner citizenship status, we
are not able to use the data in this report because they are
incomplete.
[End of section]
Appendix XIII: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
David Gootnick, (202) 512-3149 or gootnickd@gao.gov. Tom McCool, (202)
512-2642 or mccoolt@gao.gov.
Staff Acknowledgments:
In addition to the contacts named above, Emil Friberg, Assistant
Director, Mark Speight, Assistant General Counsel, Marissa Jones,
Ashley Alley, Diana Blumenfeld, Benjamin Bolitzer, Ming Chen, Reid
Lowe, and Eddie Uyekawa made key contributions to this report.
Technical assistance was provided by Shirley Brothwell, Michael
Hoffman, Michael Kendix, Rhiannon Patterson, Diahanna Post, Berel
Spivack, and Seyda Wentworth.
[End of section]
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722T]. Washington, D.C.: May 1, 2008.
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Apply U.S. Immigration Law to the CNMI with a Transition Period.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-466]. Washington,
D.C.: March 28, 2008.
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bin/getrpt?GAO-07-746T]. Washington, D.C.: April 19, 2007.
Commonwealth of the Northern Mariana Islands: Serious Economic, Fiscal,
and Accountability Challenges. [hyperlink, http://www.gao.gov/cgi-
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Challenges. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-119].
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Process for Admitting Additional Countries into the Visa Waiver
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Washington, D.C.: July 28, 2006.
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Compact of Free Association: Negotiations Should Address Aid
Effectiveness and Accountability and Migrants' Impact on U.S. Areas.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-270T]. Washington,
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Northern Mariana Islands. [hyperlink, http://www.gao.gov/cgi-
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Merchandise. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-00-
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Northern Mariana Islands: Garment and Tourist Industries Play a
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[End of section]
Footnotes:
[1] Consolidated Natural Resources Act of 2008, Pub. L. No. 110-229,
Title VII, 122 Stat. 754, 853 (May 8, 2008).
[2] In this report, we use the term "foreign workers" to refer to
workers in the CNMI who are not U.S. citizens or U.S. lawful permanent
residents. Other sources sometimes call these workers "nonresident
workers," "guest workers," "noncitizen workers," "alien workers," or
"nonimmigrant workers." We do not use the term to refer to workers from
the Freely Associated States--the Federated States of Micronesia,
Republic of the Marshall Islands, and Republic of Palau--who are
permitted to work in the United States, including the CNMI, under the
Compacts of Free Association (48 U.S.C. § 1901 note, 1921 note, and
1931 note). In addition, some of the data sources cited in the report
refer to temporary workers or other groups, and we have used terms
consistent with source definitions.
[3] The Secretary of Homeland Security has sole discretion to delay the
start of the transition period for up to 180 days, in consultation with
the Secretaries of the Interior, Labor, and State, the Attorney
General, and the CNMI Governor. Unless otherwise noted, "transition
period" refers to the period beginning no later than 18 months after
the legislation's enactment and ending on December 31, 2014.
[4] U.S. immigration law includes the Immigration and Nationality Act
(INA) and all laws, conventions, and treaties of the United States
relating to the immigration, exclusion, deportation, expulsion, or
removal of aliens (8 U.S.C. § 1101(a)(17)). The INA defines an alien as
any person who is not a citizen or national of the United States. Any
changes to U.S. immigration law subsequent to the legislation's
enactment will also be applicable to the CNMI.
[5] The legislation includes several provisions related to Guam,
including the expansion of options for nonimmigrants to enter and work
in Guam. Guam is an unincorporated U.S. territory south of the CNMI in
the western Pacific.
[6] While this report focuses on key decisions by the Secretaries of
Homeland Security and Labor, as well as technical assistance to be
provided by the Secretary of the Interior, the Secretary of State and
the Attorney General also have consultative and other roles in
implementing the legislation.
[7] Decisions requiring consultation with the CNMI Governor include,
among others, whether to delay the start date of the transition period
by up to 180 days and which countries to include in the CNMI-Guam visa
waiver program.
[8] GAO, Commonwealth of the Northern Mariana Islands: Pending
Legislation Would Apply U.S. Immigration Law to the CNMI with a
Transition Period, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-
466] (Washington, D.C.: Mar. 28, 2008). Our report reviewed the then
pending S. 2739 and H.R 3079. S. 2739, signed into law as P.L. 110-229,
differs minimally from H.R. 3079 originally passed by the House. In
particular, S. 2739 provides for a transition period ending in 2014
rather than 2013 and adds the Secretary of Defense to those with whom
the Secretary of Labor must consult in deciding whether to extend the
CNMI-only permit program. S. 2739 also contains the text of other bills
unrelated to immigration law in the CNMI.
[9] 8 U.S.C. §1101 et. seq.
[10] LIIDS is a CNMI government administrative data system used to
enforce CNMI labor laws that contains information on the individuals
that have entered the CNMI for employment and other purposes.
[11] The CNMI 2005 HIES was conducted by the Central Statistics
Division of the CNMI Department of Commerce, with funding from DOI's
Office of Insular Affairs and assistance from consultants including a
former U.S. Census Bureau employee, to provide a demographic profile of
the CNMI. The scope of the survey was the three most populated islands
in the CNMI--Saipan, Tinian, and Rota.
[12] MVA and the Hotel Association of the Northern Mariana Islands
track and provided us with data on CNMI tourism, including hotel
occupancy rates, the number of visitors from each country, length of
stay, and cost of various tour packages from different countries.
[13] The BMS database contains information on persons' entries to and
exits from the CNMI, for the purpose of supporting border security.
Data are collected primarily through automated passport readers.
[14] In this report, we use the term "CNMI residents" to refer to U.S.
citizens and U.S. lawful permanent residents who live in the CNMI.
[15] In this report, "China" refers to the People's Republic of China.
[16] In 1947, the United Nations gave the United States authority to
administer the Trust Territory of the Pacific Islands, which included
the Northern Mariana Islands. The trusteeship over the Northern Mariana
Islands was formally dissolved in 1986.
[17] Howard P. Willens and Deanne C. Siemer, An Honorable Accord: The
Covenant between the Northern Mariana Islands and the United States
(Honolulu, Hawaii: University of Hawaii Press, 2002).
[18] Covenant to Establish a Commonwealth of the Northern Mariana
Islands in Political Union with the United States of America (Pub. L.
No. 94-241, § 1, 90 Stat. 263 (Mar. 24, 1976), 48 U.S.C. § 1801 note).
[19] Under the Covenant, the U.S. government may enact legislation in
accordance with its constitutional processes that will be applicable to
the CNMI. To respect the CNMI's right of self-government under the
Covenant, certain provisions of the Covenant may be modified only with
the consent of both the federal government and the CNMI government.
These provisions include those relating to the political relationship
between the United States and the CNMI; the CNMI Constitution,
citizenship, and nationality; the application of the U.S. Constitution
to the CNMI; and the land ownership rights of CNMI citizens. Most other
provisions of the CNMI Covenant may be modified by the federal
government without the consent of the CNMI government, and local CNMI
laws that were not inconsistent with federal laws or treaties of the
United States when the Covenant was enacted remain in effect. In
addition, international treaty obligations between the United States
and other countries apply to the CNMI through the Covenant.
[20] The Covenant also made certain provisions of the Social Security
Act, the Public Health Service Act, and the Micronesian Claims Act
applicable to the CNMI.
[21] Section 506 of the Covenant applies certain provisions of the INA
relating to citizenship and family-based permanent immigration to the
CNMI. Certain other nonimmigrant provisions of the INA (T and U) also
apply to CNMI. See 8 U.S.C. § 1101(a)(15)(T)-(U). In addition, the
Covenant provided U.S. citizenship to legally qualified CNMI residents.
[22] Northern Marianas College, Business Development Center, An
Economic Study for the Commonwealth of the Northern Mariana Islands,
with funding provided by the U.S. Department of the Interior, Office of
Insular Affairs (Saipan, Commonwealth of the Northern Mariana Islands,
October 1999).
[23] GAO, Commonwealth of the Northern Mariana Islands: Serious
Economic, Fiscal, and Accountability Challenges, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-07-436T] (Washington, D.C.: Feb.
8, 2007).
[24] Data are drawn from the 2000 U.S. Census and the 2005 CNMI HIES.
The 2005 CNMI HIES provides the latest household data available, but
some of the survey questions requested information from 2004.
[25] All household and per capita income values are in nominal dollars.
[26] GAO, Defense Infrastructure: Planning Efforts for the Proposed
Military Buildup on Guam Are in Their Initial Stages, with Many
Challenges Yet to Be Addressed, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-08-722T] (Washington, D.C.: May 1, 2008).
[27] Northern Marianas College, Business Development Center, An
Economic Study for the Commonwealth of the Northern Mariana Islands.
The study did not distinguish between U.S. citizens and U.S. lawful
permanent residents, referring to the combined group as permanent
residents.
[28] U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq
Accountability Appropriations Act, 2007 (Pub. L. No. 110-28, § 8103,
121 Stat. 188 (May 25, 2007)). This law also increased the U.S. minimum
wage to $7.25 per hour and applied the U.S. minimum wage to American
Samoa.
[29] The CNMI also offers a long-term tourist entry permit valid for up
to 60 additional days, but it is rarely used. In addition, Japanese,
Korean, and certain other tourists 55 years and older may enter for up
to 90 days under a comity entry permit, which is available to citizens
of countries that provide a comparable permit to CNMI residents.
[30] Additionally, the CNMI offers regular-term business entry permits,
valid for visits of up to 90 days within a 12-month period, which have
no investment requirements and may be used for shorter visits to the
CNMI.
[31] As a general rule, nonimmigrants temporarily admitted for an
employment-based purpose are authorized to work only in the authorized
position; lawful permanent residents and other immigrants may work for
any employer.
[32] Visitors from countries in the U.S. Visa Waiver Program must
possess a valid passport and a round-trip ticket, have been determined
by DHS not to be a threat to the United States, and execute the proper
immigration forms, among other requirements. The visitor also waives
his or her right to appeal an immigration officer's determination
regarding admissibility or to contest removal, other than on the basis
of an application for asylum.
[33] Under federal regulations for E-2 visas, spouses or children may
apply to join foreign investors under the E-2 visa, and spouses are
authorized to work under an E-2 visa.
[34] Generally, the lower the cost of the enterprise, the higher,
proportionately, the investment must be to be considered a substantial
amount of capital. In addition, for an E-2 visa, investment is defined
as the placing of capital at commercial risk with the objective of
generating a profit, and the investor must be in possession of and have
total control over the capital being invested. The capital must be
subject to loss if investment fortunes reverse, must be the investor's
unsecured personal business capital or capital secured by personal
assets, and must be irrevocably committed to the enterprise.
[35] Individuals seeking permanent immigrant visas must meet higher
thresholds than do E-2 visa holders, including the general requirement
to establish a business that creates at least 10 full-time jobs and an
investment of at least $1 million, or $500,000 in a rural or high-
unemployment area.
[36] The legislation does not identify the interagency process to be
used to coordinate implementation among relevant federal agencies and
the CNMI government. Executive Order 13299 established the Interagency
Group on Insular Affairs through which the Secretary of the Interior or
its designee shall convene meetings to provide advice on the
establishment or implementation of policies concerning the CNMI and
other insular areas, as of May 12, 2003.
[37] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-466].
[38] Other key provisions of the recent legislation establish the
position of a nonvoting CNMI delegate to the House of Representatives;
require several studies on the legislation's implementation; transfer
responsibility for refugee protection in the CNMI to the federal
government; and relate to lawful permanent resident status.
[39] Key rules and other aspects of the transition program require
further development through regulation. In addition, federal agencies
must determine how to implement and enforce the application of federal
immigration law in the CNMI, including establishing offices, hiring
staff, and implementing screening and enforcement systems.
[40] The agreements also may allocate funding among the respective
agencies tasked with related responsibilities.
[41] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-466].
[42] During the transition period, existing CNMI-government-approved
foreign workers lacking U.S. immigration status can continue to live
and work in the CNMI for a limited time--2 years after the effective
date of the transition program or when the CNMI-issued permit expires,
whichever is earlier.
[43] The legislation provides the CNMI and Guam with exemptions from
the H visa caps only through the end of the initial transition period
in 2014. See GAO-08-466. The subsequent report of the Senate Committee
on Energy and Natural Resources on H.R. 3079 states that the Committee
intends that the H exemptions for the CNMI and Guam be extended along
with any extension of the 5-year transition period. See S. Rep. 110-
324, Northern Mariana Islands Covenant Implementation Act (Apr. 10,
2008). The CNMI government agrees with this interpretation, and DOI
said in its comments on a draft of this report that it would ask DHS
for clarification on the provision.
[44] The joint Guam-CNMI visa waiver program grants visa-free travel
privileges to Guam or the CNMI only, not other parts of the United
States.
[45] The recent legislation places the CNMI immigration system under
federal control, which includes eliminating the CNMI regular-term
business entry permit.
[46] See [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-466] for
more information about the legislation's requirements related to
foreign workers in the CNMI.
[47] The legislation states that DHS shall set the conditions for
admission under the CNMI-only work permit program and the Secretary of
State shall authorize the issuance of nonimmigrant visas under the
program.
[48] U.S. Department of Labor, Office of the Assistant Secretary for
Policy, Impact of Increased Minimum Wages on the Economies of American
Samoa and the Commonwealth of the Northern Mariana Islands (Washington,
D.C.: 2008). The Office of Insular Affairs of DOI has provided
technical assistance to the CNMI to help with data collection,
including funding for the 2005 HIES and past surveys of the CNMI.
However, this assistance has not generated the scope of data collected
by federal sources for the United States more generally.
[49] We obtained data from the CNMI government on foreign workers
holding the CNMI's nonresident worker entry permit (706K) as of
December 31, 2007, from the CNMI LIIDS database. LIIDS is an
administrative data system used to enforce CNMI labor laws that
contains information on the individuals that have entered the CNMI for
employment and other purposes. References in this report to LIIDS data
on foreign workers exclude foreign workers employed by the CNMI
government under the CNMI employee entry permit (706B), those with
temporary work authorization (706P), religious missionaries (706M), and
certain other categories. We did not receive from the CNMI government
requested data on worker permit categories other than 706K; however,
BMS data on entries to the CNMI show that 706K permit holders represent
the large majority of CNMI foreign workers.
[50] Such approaches have been used, for example, in federal efforts to
reduce pollution levels, such as the cap and trade program for sulfur
dioxide under the Clean Air Act. See GAO, Vehicle Fuel Economy:
Reforming Fuel Economy Could Help Reduce Consumption by Cars and Light
Trucks, and Other Options Could Complement These Standards, GAO-07-921
(Washington, D.C.: Aug. 2, 2007).
[51] Under the federal immigration system, no percentage requirement
exists for the hiring of local residents, but some visas require
employers to demonstrate that they have been unable to hire U.S.
workers. For example, federal immigration law requires that employers
seeking to fill jobs with applicants for H-2B visas must demonstrate
that they have been unable to identify a qualified U.S. worker for the
position. Similarly, employers of H-2A applicants must certify through
DOL that sufficient U.S. workers cannot be found to perform the labor
and that the employment of the foreign worker will not adversely affect
the wages and working conditions of similarly employed U.S. workers. A
recent proposed federal rule would increase the penalties for employers
who could not demonstrate that they attempted to find a U.S. citizen
for the position. However, without regulations implementing the federal
legislation, it is unknown whether the CNMI-only work permit program
will include requirements related to U.S. workers. According to DOL
officials, such labor tests could help determine the need for foreign
workers.
[52] The legislation authorizes DHS to charge fees to recover the full
cost of providing adjudication and naturalization services, including
any administrative costs. While DHS has full authority to set fees for
the CNMI-only permit program, the report of the Senate Committee on
Energy and Natural Resources and the House Committee on Natural
Resources on H.R. 3079 state that the Committees encourage DHS and
other relevant federal agencies to keep the costs associated with the
transition program period on employers and foreign workers at the same
level as is currently assessed by the CNMI government under local law.
See S. Rep. 110-324, Northern Mariana Islands Covenant Implementation
Act (Apr. 10, 2008) and H. Rep. 110-469, Amending the Joint Resolution
Approving the Covenant to Establish a Commonwealth of the Northern
Mariana Islands, and for Other Purposes (Dec. 4, 2007).
[53] In addition to the annual fee of $250 paid by employers, foreign
workers in the CNMI are responsible for paying an annual alien
registration fee of $25.
[54] The determination of what constitutes a legitimate business, and
the extent to which such a business requires foreign workers to
supplement its workforce, is at the sole discretion of DHS.
[55] The report of the Senate Committee on Energy and Natural Resources
on H.R. 3079 states that it is highly unlikely that the CNMI will be
able to meet its labor needs and forgo the CNMI-only permit program in
5 years. The Committee expects there will be at least one, and probably
more than one, 5-year extension. See S. Rep. 110-324, Northern Mariana
Islands Covenant Implementation Act (Apr. 10, 2008).
[56] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-466]. Also
see appendix V of this report.
[57] In addition, we previously found that collaborative efforts
require agency staff to agree on roles and responsibilities and to
define and articulate a common outcome or purpose, among other key
practices. See GAO, Results-Oriented Government: Practices That Can
Help Enhance and Sustain Collaboration among Federal Agencies, GAO-06-
15 (Washington, D.C.: Oct. 21, 2005).
[58] However, DOI recently convened a meeting with officials of federal
agencies including DHS, DOL, and the Department of State to discuss
future coordination on legislation implementation.
[59] The quantity of labor, or number of workers, is a key factor in
determining the quantity of goods and services that an economy can
produce. For the U.S. economy, under certain assumptions, a 10 percent
reduction in the number of all workers might be expected to cause a 7
percent decline in production, measured as gross domestic product. See
Andrew B. Abel and Ben S. Bernanke, Macroeconomics, 5th ed. (New York:
Addison-Wesley Publishing Co., 2005).
[60] Although we could have attempted to estimate other aspects of the
effect of the reduction of foreign workers on the CNMI economy, such as
the average earnings of CNMI residents, we selected total GDP in order
to measure the effect of reductions in foreign workers on the overall
economy--and the basis of CNMI government tax revenue--rather than on
any particular group. The simulations treat all foreign workers as
being employed in full-time positions. Additionally, each simulation
varied the assumptions regarding the similarity, or substitutability,
of foreign workers and CNMI resident workers. See appendix VI for more
details. Because of the nature of the mathematical models we used, we
could not consider the case in which the number of foreign workers
equals to zero.
[61] Because foreign workers comprise 60 percent of the CNMI labor
market, the decline in these workers shown in scenario 1 would reduce
total CNMI employment by almost 60 percent.
[62] In 2005, the International Programs Center (IPC) of the U.S.
Census Bureau, under contract to the U.S. Department of Interior,
estimated that CNMI GDP was between $753 million and $977 million in
2002. See Marc Rubin and Selma Sawaya, Final Trip Report on Benchmark
Estimates of 2002 Gross Domestic Product in the Commonwealth of the
Northern Mariana Islands (Washington, D.C.: U.S. Bureau of the Census,
2005).
[63] According to economic reasoning, the presence of a minimum wage
makes it less likely that reduced demand for foreign workers will
result in lower wages rather than in decreases in the number employed.
[64] The impact that reductions in employment in one sector can have on
another in the CNMI is supported by the results of a CNMI-specific
input-output model. Specifically, the authors estimated that in 1995
every garment worker supported .5 other jobs, while every tourism
worker supported .8 other jobs. See Northern Marianas College, Business
Development Center, An Economic Study for the Commonwealth of the
Northern Mariana Islands. This report was cited in GAO, Northern
Mariana Islands: Garment and Tourist Industries Play a Dominant Role in
the Commonwealth's Economy, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO/RCED/GGD-00-79] (Washington, D.C.: Feb. 14, 2000).
[65] Based on the 2005 HIES, there were approximately 16,000
households, with over 900 private household workers--one domestic
worker per every 17 households--in the CNMI.
[66] Because LIIDS data is based on approved applications, and because
of processing time, it may not be fully reflective of current wage
rates.
[67] References to foreign workers derived from the 2005 HIES data are
based on respondents who identified their status as "not a U.S.
citizen, temporary resident." This category includes individuals not
included in the LIIDS data referenced in this report, which is limited
to 706K visa holders, and not other categories, such as government or
religious workers.
[68] Economic reasoning suggests that while the minimum wage increases
the wages of workers because the number of workers demanded by
employers falls with the wage, it also reduces the number of workers
demanded. However, particularly since the early 1990s, economists have
debated the overall effects of a minimum wage increase on low-wage
employment. According to a recent review of this literature, although
there may be consensus that the overall effect is negative, there is no
consensus on the size of the effect. For discussion of the economic
literature on the effect of the minimum wage, see David Neumark and
William Wascher, "Minimum Wages and Employment," Foundations and Trends
in Microeconomics, vol. 3, no. 1-2 (2007): 1-182.
[69] Our report did not assess the overall impact of the minimum wage
increases on the CNMI economy, including the impact on the living
standards in the CNMI. Our scope was limited to the possible effects of
the minimum wage increases on the demand for foreign workers.
[70] "Jobs Study Committee Recommendations," memo from Charles Cepeda,
Alex Sablan, and Josephine Mesta to Michael S. Sablan (CNMI Public
Auditor), May 30, 2007.
[71] According to the recent legislation, in providing the technical
assistance, the federal government should consult with the CNMI
government, local businesses, regional banks, and other CNMI economy
experts. The CNMI must contribute a nonfederal matching requirement of
10 percent for the provision of technical assistance.
[72] Commenting on a draft of this report, the CNMI government stated
that the number of 706K permits as of June 30, 2008, was 18,942.
[73] As previously noted, the Current Population Survey, the standard
source for computing unemployment rates within the United States, does
not include the CNMI. However, according to the CNMI 2005 HIES, the
CNMI labor force included approximately 10,300 U.S. citizens, or about
60 percent of the population of U.S. citizens of working age. Of this
number, approximately 2,100--about 20 percent--were unemployed.
Additionally, there are approximately 500 unemployed permanent
residents. The unemployed included respondents who were looking for
work during the previous 4 weeks and were available to accept a job but
did not include those who had been discouraged from looking for work
and had left the labor force. As a result, it may undercount those who
might accept an offered job. However, CNMI government officials said
they believed the HIES unemployment rate was an overcount. For
comparison, in April 2008, the labor force participation rate in the
United States was 66 percent.
[74] See appendix VIII for the countries currently included in the
U.S., CNMI, and Guam waiver programs. Under U.S. visa waivers, visitors
may enter for up to 90 days. Under CNMI entry permit waivers, the
length of admission is also up to 90 days. Under Guam visa waivers,
visitors may enter for up to 15 days, while citizens from countries
eligible for the U.S. Visa Waiver Program may enter for 90 days. See
GAO-08-466 for more information about the legislation's requirements
related to tourists in the CNMI.
[75] DHS must identify the countries within 180 days of enactment of
the legislation, by November 4, 2008.
[76] The regulations must also include any bonding requirements for
nationals of some or all of the countries who may present an increased
risk of overstays or other potential problems, if those requirements
are different from those generally applicable to nonimmigrants under
the INA. DHS is required to monitor the admission of nonimmigrant
visitors to the CNMI and Guam and has the authority to suspend a
particular country from the visa waiver program if DHS determines that
an unacceptable number of visitors from that country are remaining
unlawfully in either the CNMI or Guam, unlawfully obtaining entry into
other parts of the United States, seeking asylum, or contesting
removal. In addition, DHS may suspend a country from the program if it
determines that the country poses a risk to the law enforcement or
security interests of the United States, the CNMI, or Guam. DHS can
also suspend the visa waiver program on a country-by-country basis for
other good cause. See [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-
08-466].
[77] The report of the Senate Committee on Energy and Natural Resources
on H.R. 3079 and the House Committee on Natural Resources on H.R. 3079
state that in drafting regulations, the Committees encourage DHS to
consult with the CNMI tourism industry to determine which tourist
markets have contributed to the benefit of the CNMI economy and that
such benefit can be measured in terms of hotel occupancy, length of
stay, and expenditures. S. Rep. 110-324, Northern Mariana Islands
Covenant Implementation Act (Apr. 10, 2008), and H. Rep. 110-469,
Amending the Joint Resolution Approving the Covenant to Establish a
Commonwealth of the Northern Mariana Islands, and for Other Purposes
(Dec. 4, 2007). In addition, the Governors of the CNMI and Guam may
petition DHS and DOI to have countries added to the visa waiver program
list.
[78] The Secretary of Homeland Security, in consultation with the
Secretary of State, is required by law (Pub.L. No. 110-53, 121 Stat.
344 (Aug. 3, 2007)) to develop and implement a fully automated
electronic travel authorization system to collect biographical and
other information. The information is to be collected in advance of
travel, so that DHS can determine the eligibility of, and identify any
law enforcement or security risk in permitting, the visitor to travel
to the United States. The final interim regulation was published in
June 2008, which provides information on how the system will be
implemented.
[79] In July 2006, we reported that DHS and the Department of State
were consulting with 13 countries, including South Korea, seeking
admission into the U.S. Visa Waiver Program. The other countries were
Bulgaria, Cyprus, Czech Republic, Estonia, Greece, Hungary, Latvia,
Lithuania, Malta, Poland, Romania, and Slovakia. In August 2007,
Congress passed legislation that provides DHS with the authority to
admit countries with refusal rates for business and tourism visas
between 3 and 10 percent under the Visa Waiver Program if the countries
meet certain conditions and if DHS implements certain security
measures. South Korea's refusal rate in fiscal year 2007 was 4.4
percent. See GAO, Process for Admitting Additional Countries into the
Visa Waiver Program, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-
06-835R] (Washington, D.C.: July 28, 2006) and GAO, Visa Waiver
Program: Limitations with the Department of Homeland Security's Plan to
Verify Departure of Foreign Nationals, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-08-458T] (Washington, D.C.: Feb.
28, 2008).
[80] For South Korean tourists 55 years or older who currently come to
the CNMI, the impact is likely to be minimal because they can enter the
CNMI with the comity entry permits and are not required to obtain
regular visitor entry permits.
[81] In its comments on a draft of this report, the CNMI government
said the average Russian stay was 13.5 rather than 9 days, but it did
not provide additional data. MVA and the Hotel Association of the
Northern Mariana Islands track and provided us with data on CNMI
tourism, including hotel occupancy rates, the number of visitors for
business and pleasure from each country, length of stay, and cost of
various tour packages from different countries. We did not identify any
data on the number of visitors for pleasure only. In July 2008, a
report by the CNMI and Guam tourism industry and government officials
presented some data on tourists' expenditures by countries of
citizenship.
[82] Tour packages from China typically cost around $700 to $850 per
person. According to MVA, tour packages normally include air fare,
hotel accommodation, and transportation from airport to hotel. MVA data
also indicate that the typical length of stay for Chinese tourists is
approximately 3 nights.
[83] In addition, because a U.S. visitor visa, unlike the current CNMI
system, does not require sponsors or bonding, CNMI tourist sector
representatives expressed concerns about potential increases in
overstays.
[84] According to Guam Visitor Bureau statistics, Guam had 7,728
visitors from China in 2007, of which 1,504 were from mainland China,
and 6,224 were from Hong Kong.
[85] The United States and China signed the U.S.-People's Republic of
China Tourism Agreement in December 2007. The agreement facilitates
Chinese group leisure travel to the United States. Chinese regulations
restrict companies from organizing and marketing package tours for
leisure purposes to countries that do not have agreements in place,
often referred to as Approved Destination Status agreements. The U.S.-
China agreement fulfills this purpose without changing existing laws or
policies of the United States, including the issuance of visas.
[86] The recent legislation authorizes DHS to provide CNMI-only
nonimmigrant E-2 treaty investor status to foreign investors admitted
to the CNMI in long-term investor status under CNMI immigration laws
before the start of the transition program. These "grandfathered"
foreign investors attaining CNMI-only nonimmigrant status during the
transition period will not have to meet the federal treaty requirements
for E-2 nonimmigrant foreign investor status. To be grandfathered, the
investor must have continuously maintained residence in the CNMI under
long-term investor status, must be otherwise admissible, and must
maintain the investment that formed the basis for such long-term
investor status. Because the retiree foreign investor entry permit does
not require investment in a CNMI business, we assume that investors
holding this permit will not be grandfathered.
[87] These categories include U.S. immigrant investor (EB-5) status.
CNMI foreign investors pursuing immigrant investor status will face
higher investment requirements than under CNMI law but will gain an
option to apply for U.S. permanent immigration status that is not
currently available under CNMI law. The opportunity to obtain permanent
status may help attract investors; however, the more stringent
investment requirements will make it more difficult to obtain immigrant
investor status. We previously found that a small fraction of the
available immigrant investor visas had been granted annually. See GAO,
Immigrant Investors: Small Number of Participants Attributed to Pending
Regulations and Other Factors, GAO-05-256 (Washington, D.C.: Apr. 1,
2005). See GAO-08-466 for more information about the legislation's
requirements related to foreign investment in the CNMI.
[88] In this report, all references to CNMI foreign investor permits
refer to entry permits.
[89] While the U.S. Department of Commerce's Bureau of Economic
Analysis collects information on foreign direct investments in states
and other territories, data for the CNMI are combined with data for
other territories such as Guam, American Samoa, and the Virgin Islands.
In addition, although the 2002 Economic Census of the Northern Mariana
Islands includes information on CNMI businesses by owner citizenship
status, we are not able to use the data in this report because some
establishments did not report citizenship status, resulting in
incomplete data.
[90] The minimum investment amounts required by CNMI law include
$250,000 by an individual in a single investment or $100,000 per person
in an aggregate investment exceeding $2 million for perpetual foreign
investors, $150,000 in a public organization or at least $250,000 in a
private investment for long-term business permits, and $100,000 (or
$75,000 on the islands of Tinian or Rota) for retiree investors.
[91] CNMI's regular-term business entry permit, which has no investment
requirement, allows visits of up to 90 days within a 12-month period.
[92] We requested from the CNMI government, but did not receive,
information on foreign investor entry permits from the LIIDS database.
This information would have included the current numbers of foreign
investors holding each type of entry permit and would have allowed us
to compare numbers of entry permit holders with CNMI Department of
Commerce data. Without LIIDS data on foreign investors, we were unable
to verify whether the holders of foreign investor entry permits issued
were currently present in the CNMI. However, in its comments on a draft
of this report, the CNMI government provided the number of active and
valid long-term business and perpetual foreign investor entry permits
as of July 8, 2008, based on the CNMI Department of Commerce's manual
review of its files.
[93] According to the CNMI government, more than one permit holder can
be associated with a single business venture.
[94] For example, 2005 HIES data show that 75 percent of CNMI hotel
workers are foreign workers. Additionally, based on the LIIDS data,
workers in the hotel industry fill positions such as cooks, waiters and
waitresses, and cleaners.
[95] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-466].
[96] S. Rep. 110-324, Northern Mariana Islands Covenant Implementation
Act (Apr. 10, 2008).
[97] GAO, Commonwealth of the Northern Mariana Islands: Pending
Legislation Would Apply U.S. Immigration Law to the CNMI with a
Transition Period, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-
466] (Washington, D.C.: Mar. 28, 2008).
[98] Consolidated Natural Resources Act of 2008, Pub. L. No. 110-229,
Title VII, 122 Stat. 754, 853 (May 8, 2008).
[99] 8 U.S.C. §1101 et. seq.
[100] Covenant to Establish a Commonwealth of the Northern Mariana
Islands in Political Union with the United States of America (Pub. L.
No. 94-241, § 1, 90 Stat. 263 (Mar. 24, 1976) and 48 U.S.C. § 1801).
[101] U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq
Accountability Appropriations Act, 2007 (Pub. L. No. 110-28, §8103, 121
Stat. 188 (May 25, 2007).
[102] H.R. Rep. 110-469, Amending the Joint Resolution Approving the
Covenant to Establish a Commonwealth of the Northern Mariana Islands,
and for Other Purposes (Dec. 4, 2007).
[103] S. Rep. 110-324, Northern Mariana Islands Covenant Implementation
Act (Apr. 10, 2008).
[104] LIIDS is an administrative data system used to enforce CNMI labor
laws that contains information on the individuals that have entered the
CNMI for employment and other purposes.
[105] HIES was conducted by the Central Statistics Division of the CNMI
Department of Commerce, with funding from DOI's Office of Insular
Affairs and assistance from consultants including a former U.S. Census
Bureau employee, to provide a demographic profile of the CNMI. The
scope of the survey was the three most populated islands in the CNMI--
Saipan, Tinian, and Rota.
[106] The BMS database contains information on persons' entries to and
exits from the CNMI for the purpose of supporting border security. Data
are collected primarily through automated passport readers.
[107] The 2005 HIES survey data includes 24,925 respondents who defined
their status as temporary, non-U.S. citizens. Although the HIES
includes non-706K permit holders, the HIES figure was broadly
consistent with the 19,823 706K permit holders shown in the LIIDS data
because the number of foreign workers has fallen since 2005.
[108] The foreign worker permit functions were defined as FWFt = FWF0 -
(t+1)B* FWF0/(months)B, where t is the number of periods since the
beginning of the reduction (beginning with zero), FWF is the number of
CNMI-only permits at the beginning of the period, and months is the
number of months in the period until permits should be equal to zero.
In the case of the first period (May 31, 2009, to December 31, 2014),
there were 67 months; in the case of the other periods, there were 60
months (5 years). Using this function, higher values of b cause the
decline to be larger at the end of the period. When b is equal to 1,
the function is linear. The "last month" function had an exponential
decline of .1 percent per month, with the remaining decline occurring
in the last month of the period.
[109] Northern Marianas College, Business Development Center, An
Economic Study for the Commonwealth of the Northern Mariana Islands,
with funding provided by the U.S. Department of the Interior, Office of
Insular Affairs (Saipan, Commonwealth of the Northern Mariana Islands,
October, 1999).
[110] According to the American Jobs Creation Act of 2004, in order to
qualify, residents must be present in the CNMI for at least 183 days
per year and must not have a "tax home" or "closer connection" to the
United States or any other territory. See Pub. L. No. 108-357, §908,
118 Stat. 1418, 1655 (Oct. 22, 2004).
[111] Until 2006, a possessions tax credit enabled corporations
organized in the United States that met certain conditions to reduce
the federal tax payable on income earned in and repatriated from the
CNMI and other insular areas. The credit had been designed to encourage
U.S.-based corporations to invest in these areas.
[112] For additional information, see GAO-08-466.
[113] As a general rule, nonimmigrants temporarily admitted for an
employment-based purpose are authorized to work only in the authorized
position; lawful permanent residents and other immigrants may work for
any employer.
[114] For purposes of the H-1B visa, "specialty occupation" is defined
as one that requires a theoretical and practical application of a body
of highly specialized knowledge and attainment of a bachelor's or
higher degree in that specific specialty as a minimum for entry into
the United States (8 U.S.C. § 1184(i)). Beneficiaries can qualify to
perform the specialty occupation by meeting one of the following
criteria: (1) hold a U.S. baccalaureate or higher degree required by
the specialty occupation from an accredited college or university; (2)
hold a foreign degree determined to be equivalent to a U.S.
baccalaureate or higher degree required by the specialty occupation
from an accredited college or university; (3) hold an unrestricted
state license, registration, or certification which authorizes him or
her to fully practice the specialty occupation and be immediately
engaged in that specialty in the state of intended employment; or (4)
have education, specialized training, and/or progressively responsible
experience that is equivalent to completion of a U.S. baccalaureate or
higher degree in the specialty occupation, and have recognition of
expertise in the specialty through progressively responsible positions
directly related to the specialty. Unlike other nonimmigrant
categories, H-1B and H-1C visa holders may lawfully seek to become a
permanent resident of the United States at the end of the authorized
nonimmigrant stay.
[115] There are exceptions to the H-1B cap for aliens employed by
certain nonprofit institutions and for up to 20,000 aliens who have
earned a master's degree or higher from a U.S. institution of higher
education. U.S. law provides an exemption from the H-2B visa caps for
returning workers through fiscal year 2007, stating that "an alien who
has already been counted toward the numerical limitation during fiscal
year 2004, 2005, or 2006 shall not again be counted toward such
limitation during fiscal year 2007. Such an alien shall be considered a
returning worker" (8 USC 1184(g)(9)(A)). However, this exemption
expired at the end of fiscal year 2007. As a result, fewer H-2B visas
are now available for first-time workers.
[116] Currently, the Guam government issues labor certification of
applications for H-2 nonimmigrant visas in Guam. It is unclear whether
the CNMI government would have similar responsibilities under the
legislation.
[117] GAO found that the legislation provides the CNMI and Guam with
exemptions from the H visa caps only through the end of the initial
transition period in 2014. See [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-08-466]. The subsequent report of the Senate Committee
on Energy and Natural Resources on H.R. 3079 states that the Committee
intends that the H exemptions for the CNMI and Guam be extended along
with any extension of the 5-year transition period. See S. Rep. 110-
324, Northern Mariana Islands Covenant Implementation Act (Apr. 10,
2008).
[118] Approximately 60 percent of foreign workers answered this
question on the survey. In addition, new businesses may be attracted to
the CNMI and Guam because of possible access to workers under the
uncapped H visas and may hire a different pool of workers. It is
unknown whether DHS would make H visas available to such new businesses
or only to existing businesses that are part of the current CNMI
economy.
[119] The December 2007 LIIDS data showed that 898 706K permits were
issued to workers with the following listed occupations: accountants,
architects, civil engineers, computer programmers, electrical
engineers, nurses, and physical therapists. LIIDS data do not include
information on the credentials, such as college degrees, or work
experience of these workers. A DOI official said he thought that
workers with these job titles would qualify for the H-1B visa. If all
of these workers qualified for H-1B visas, they would represent about 5
percent of the approximately 20,000 706K foreign workers in the CNMI,
according to December 2007 LIIDS data.
[120] The H-2B category applies to residents of foreign countries who
are coming to the United States temporarily to perform nonagricultural
temporary labor or service if unemployed persons capable of performing
such labor or service are unable to be found in the United States (8
U.S.C. § 1101(a)(15)(H)(ii)(B)).
[121] This figure includes lawful permanent residents.
[122] H-2A employers must comply with the federal labor certification
process, which determines whether the employment is agricultural in
nature, whether it is open to U.S. workers and if qualified U.S.
workers are available, the adverse impact of employment of a qualified
alien, and whether employment conditions (e.g., housing) meet
applicable requirements (8 C.F.R. § 214.2(h)(5)(ii)).
[123] For our analysis, we converted the U.S. H visa range of fees to
an annual range. H-1B visas are typically valid for up to 3 years, and
petition fees range from $320 to $2,320, depending on whether fraud
prevention and other supplemental fees are required. H-1B visas may be
renewed for an additional 3 years, and the petition renewal fees are
generally the same as the initial petition fees; however, the $500
fraud prevention and detection fee is required only the first time a
petitioner files for a worker. H-2A visa fees are $320, in addition to
$100 plus $10 for each additional worker for labor certification by
DOL. H-2B visa fees are $470. We did not analyze the full cost of
obtaining a foreign worker in either the United States or the CNMI.
Costs other than petition and visa fees and bonds may include renewal
and status adjustment fees; biometric fees; fees for expedited service;
user fees, such as immigration inspection fees included in the cost of
airline tickets; legal costs; worker health examinations and care;
transportation; benefits; and other costs.
[124] See Office of Management and Budget Circular A-94, "Guidelines
and Discount Rates for Benefit-Cost Analysis of Federal Programs,"
which suggests that any assumptions be tested by using sensitivity
analysis.
[125] In 2005, the International Programs Center (IPC) of the U.S.
Census Bureau, under contract to DOI, estimated that CNMI GDP was
between $753 million and $977 million in 2002. See Marc Rubin and Selma
Sawaya, Final Trip Report on Benchmark Estimates of 2002 Gross Domestic
Product in the Commonwealth of the Northern Mariana Islands, a report
prepared by the U.S. Bureau of the Census, 2005.
[126] Functions that use the Constant Elasticity of Substitution
function to model different types of labor are often used in the
economic literature studying the effect of immigration. See George
Borjas, "The Labor Demand Curve is Downward Sloping: Reexamining the
impact of immigration on the labor market," The Quarterly Journal of
Economics, Vol. 118, No. 4 (November 2003); David Card "Immigrant
Inflows, Native Outflows, and the Local Market Impacts of Higher
Immigration," Journal of Labor Economics, Vol. 19, No. 1 (January
2001); Barry Chiswick, Carmel U. Chiswick, and Paul W. Miller "Are
Immigrants and Natives Perfect Substitutes in Production?,"
International Migration Review, Vol. 19, No. 4 (Winter 1985); and
George Borjas, Jeffrey Grogger, and Gordon Hanson, "Imperfect
Substitution between Immigrants and Natives: a Reappraisal," NBER
working paper 13887 (March 2008).
[127] For the purposes of this simulation, resident workers were
defined as all workers who are not temporary, non-U.S. citizens,
according to HIES definitions. These include U.S. citizens and
permanent residents. The 2005 HIES survey categorizes as permanent
residents approximately 80 percent of non-citizens in the CNMI from the
Freely Associated States (FAS) who were born in the FAS or Asia.
[128] The elasticity of substitution is equal to 1/(1+r). See Alpha
Chiang, Fundamental Methods of Mathematical Economics, 3rd Edition (New
York: McGraw Hill, 1984): 426.
[129] Alwyn Young, "The Tyranny of Numbers: Confronting the Statistical
Realities of the East Asian Growth Experience," The Quarterly Journal
of Economics, Vol. 110, No. 3 (August 1995).
[130] Louis Kuijs and Tao Wang, "China's Pattern of Growth: Moving to
Sustainability and Reducing Inequality," China and the World Economy,
Vol. 1, No. 14 (2006).
[131] Robert Hall, "Macroeconomic Fluctuations and the Allocation of
Time," The Journal of Labor Economics, Vol. 15., No. 1, Part 2: Essays
in Honor of Yoram Ben-Porath (January 1997).
[132] George Borjas, "The Economic Benefits of Immigration," The
Journal of Economic Perspectives, Vol. 9, No. 2 (Spring 1995).
[133] The survey asked about 2004 wages.
[134] This wage was calculated assuming 2080 hours were worked for both
resident and foreign workers.
[135] It can be derived from formula (1) that under equilibrium, ln(FW/
RW) = 1/(1+r) * ln (W(RW)/W(FW)). This implies that the 2005 conditions
(where the ration of FW to RW was 1.61 to 1) were 1/(1+r) = .72,
therefore r = .39. See Alpha Chiang, Fundamental Methods of
Mathematical Economics, 428.
[136] This translates into an elasticity of substitution between
foreign and resident workers of two-thirds to infinity.
[137] The 2005 HIES data include respondents who identified their
status as "not a U.S. citizen, temporary resident." In addition to
foreign workers, survey respondents who identified themselves as
temporary non-U.S. citizens may include other groups, such as holders
of CNMI foreign investor permits.
[138] We requested from the CNMI government but did not receive CNMI
Labor and Immigration Identification and Documentation System (LIIDS)
data on immediate relatives of CNMI entry permit holders.
[139] These numbers include individuals in the CNMI who are living in
group quarters.
[140] To calculate the lower bound of the number of U.S. citizen
children living in households headed by a temporary non-U.S. citizen,
we assume that all non-U.S. citizen children (includes permanent non-
U.S. citizens and temporary non-U.S. citizens) live in households
headed by a temporary non-U.S. citizen. The remaining number of
children living in households headed by a temporary non-U.S. citizen
must themselves be U.S. citizens. To calculate the upper bound of U.S.
citizen children living in a household headed by a temporary non-U.S.
citizen, we assume that all non-U.S. citizen children live in
households headed by someone other than a temporary non-U.S. citizen.
All of the remaining children in households headed by a temporary non-
U.S. citizen must themselves be U.S. citizens.
[141] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-466].
[142] S. Rep. 110-324, Northern Mariana Islands Covenant Implementation
Act (Apr. 10, 2008).
[143] GAO, "CNMI Scope and Methodology" (one-page undated document,
probably finalized in October or November 2007).
[144] These references are illustrative: Relevant data not collected by
CNMI or federal agencies (p.5); key federal sources of labor market
data do not cover the CNMI (p.6); critical data on foreign investment
in the CNMI are not available (p.7); critical data on the CNMI labor
market are not available (p.8); needed data are lacking on which DHS
and DOL could base their decisions (pp. 24-25); United States does not
collect data on the CNMI as it does for the U.S. generally (p.26 n46);
DOL will have difficulty obtaining data on unemployment (p30); data
lacking on tourist expenditures (p.49); lack of data on permit refusal
rates (p.51); lack of data on foreign investors (p.55); lack of data on
foreign investment (p36); lack of data on amount of investment
associated with permits (p.57); data unavailable on extent to which
foreign investment decisions are affected by availability of various
kinds of permits (p.58): lack critical data on CNMI labor market and
foreign investment (p.64); data gaps limit federal agency capabilities
to make key implementation decisions (p.65); data do not permit
distinctions between non-citizens who are permanent and temporary
residents (p.70); insufficient data on visa interview wait times
(p.71); overall data on foreign investment not collected by CNMI or
federal government (p.72).
[145] The GAO report might have made a useful contribution on this
subject by acknowledging that the existing data problems are not
subject to a quick fix. In fact, critical data of the kind necessary to
measure the impact of the recent wage increases, or of the
implementation of Public Law 110-229, will not be available until 2012,
when the results of the 2010 census are published.
[146] The introduction to the report summarizes the GAO's findings: (a)
"The impact on the CNMI's labor market of the recent legislation
applying U.S. immigration law will largely depend on decisions that the
Department of Homeland Security (DHS) and the Department of Labor (DOL)
make in implementing a permit system for CNMI workers as required by
the legislation- (b) "The impact of the recent legislation on the
CNMI's tourism sector will depend largely on federal regulations
specifying the countries to be included in a joint CNMI-Guam visa
waiver program required by the legislation." (c) "The recent
legislation's impact on CNMI foreign investment will depend in part on
DHS decisions regarding the application of U.S. nonimmigrant treaty
investor status - "grandfathering"-for investors with CNMI foreign
investor entry permits." This same point was made frequently in GAO's
earlier report. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-
466] (Introduction, pp. 4-6).
[147] Even this scenario does not accomplish the statutory objective,
leaving about 2000 foreign workers in the CNMI by the year 2021. The
other two scenarios shown on page 37 show a different rate of reduction
of permits by Homeland Security, but the same assumption regarding
Labor's grant of extensions. The report does not assess the impact of
using the two other identified assumptions with respect to the
extension of the transition period - the decision not to grant any
extension beyond 2014 or the decision to grant an extension after 4.5
years of each transition period has elapsed. It seems obvious that the
projected impact on the CNMI economy would be much greater (and sooner)
under either of these alternatives than the 50-60% reduction in GDP by
2021 shown by the only simulations analysis set forth in the draft
report.
[148] We acknowledge that a few of these projects are mentioned in
Appendix III and that the report also mentions the military buildup on
Guam and its possible impact on the CNMI. Our point basically is that
the report should not seek to avoid addressing the real impacts of the
law on the CNMI economy by emphasizing that the economy is likely to
decline substantially without regard to the new law.
[149] The report tends to belittle such efforts by suggesting that they
are of recent origin. The Commonwealth's efforts in this area have been
ongoing for some 20 years and have had some considerable success.
Nearly all of the foreign workers in the CNMI government have been
replaced. Many foreign workers in higher-level private sector positions
have also been replaced.
[150] Wilkes and Siemer, An Honorable decor& The Covenant between the
Northern Mariana Islands and the United Stares (Honolulu: University of
Hawaii Press, 2002), pp. 15, 107-108, 123-125, 180-181. The
Commission's economist anticipated more rapid development in the
visitor industry than occurred, but was essentially correct about the
reliance of foreign workers in that industry, whose growth exceeded his
expectations by the mid-1980s.
[151] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/RCED/GGD-00-
79], Northern Mariana Islands: Garment and Tourist Industries Play a
Dominant Role in the Commonwealth's Economy (February 2000).
[152] Id., 20.
[153] Ibid.
[154] Id., 9.
[155] Id., 24-25. The pertinent charts indicate that the wage
differences in two of the categories were less than 50%.
[156] For example, the Governor of the CNMI stated in a June 24, 2008,
press release that preliminary analyses from independent economists
retained by the CNMI government indicated that deportation of about
20,000 foreign workers, and their families, from the CNMI would reduce
its economic output by at least 50 percent. DOI's Office of Insular
Affairs provided funding to the CNMI government for a comprehensive
assessment of the CNMI economy.
[157] Supplemental Appropriations Act, 2008, Pub. L. No. 110-252, 122
Stat. 2323 (June 30, 2008).
[158] While the comment letter cited the Marianas Visitors Bureau, we
assume it refers to the Marianas Visitors Authority.
[159] Senate Committee on Energy and Natural Resources, Hearing on
Impact of Increased Minimum Wages on the Economies of American Samoa
and the Commonwealth of the Northern Mariana Islands (February 28,
2008).
[End of section]
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