Order Code RS22879
Updated May 22, 2008
Haiti: Legislative Responses to the Food
Crisis and Related Development Challenges
Clare Ribando Seelke and J. F. Hornbeck
Foreign Affairs, Defense, and Trade Division
Summary
Haiti faces several interrelated challenges, the most immediate being a deepening
food crisis that in April 2008 led to deadly protests and the ouster of Haiti’s prime
minister. Haiti also suffers from a legacy of poverty, unemployment, and under-
development that is compounding security problems for its new and fragile democracy.
The Bush Administration has responded by redirecting some development assistance to
help the Haitian government stabilize rice prices and to support job creation programs.
On May 16, 2008, the Administration announced that it would send $20 million worth
of emergency food to Haiti. The 110th Congress is also considering supplemental
appropriations for food aid and increasing debt relief for Haiti. Specifically, in April
2008, the House unanimously passed an amendment to the Jubilee Act (H.Amdt. 993
to H.R. 2634) that recommends immediate cancellation of Haiti’s outstanding
multilateral debts. In May 2008, the House and Senate also passed the Food,
Conservation, and Energy Act of 2008 (H.R. 2419), the Farm Bill. Title XV includes
the Haitian Hemispheric Opportunity through Partnership Encouragement (HOPE) Act
of 2008, which provides tariff preferences for U.S. imports of Haitian apparel. This
report, which will be updated, follows the current situation in Haiti and key legislative
initiatives designed to help address Haiti’s many challenges.
Background
Haiti has had a long, difficult history highlighted by prolonged poverty, political
instability, and underdevelopment resulting in a politically fragile state with the lowest
standard of living in the Western Hemisphere.1 With the assistance of the United Nations
Stabilization Mission in Haiti (MINUSTAH) and large amounts of international aid, Haiti
has been attempting to establish a foundation for longer-term economic development.
Security issues have presented the primary risk to stability, while restoring economic
growth, investment, employment, and access to basic social services have been the major
and equally formidable challenges to sustainable development.
1 For a summary of Haiti’s recent history, see CRS Report RL32294, Haiti: Developments and
U.S. Policy Since 1991 and Current Congressional Concerns.
CRS-2
Since assuming his second non-consecutive term of office in May 2006, President
René Préval has emphasized the importance of rebuilding democratic institutions and
establishing conditions for private investment to create jobs. The success of his
government will depend largely on its ability to improve security and socioeconomic
conditions in Haiti, a country in which 76% of the population lives on less than $2 a day.
During his first two years in office, security conditions have improved, but Haitians have
seen their already substandard living conditions deteriorate further with the rise in global
food prices. In a country where more than half of the working age population is
unemployed, even many of those who have jobs do not earn enough to provide their
families with more than one meal a day.
Steeply rising food prices and resulting riots in Haiti have been a catalyst for
Administration and congressional action. The 110th Congress is responding directly to
Haiti’s immediate food needs, but has also taken the opportunity to advance legislation
on other fronts it deems critical for Haiti’s longer term development. In April 2008, the
House unanimously passed an amendment to the Jubilee Act (H.Amdt. 993 to H.R. 2634)
that recommends immediate cancellation of Haiti’s outstanding multilateral debts. In
May 2008, the House and Senate passed the Food, Conservation, and Energy Act of 2008
(H.R. 2419), the Farm Bill. Title XV includes the Haitian Hemispheric Opportunity
through Partnership Encouragement (HOPE) Act of 2008, which gives tariff preferences
to U.S. imports of Haitian apparel. Some Members also have urged the Administration
to grant temporary protected status (TPS) for Haitian immigrants living in the United
States through legislation (H.R. 522) and letters to the President. Others would also like
to see more counternarcotics assistance in response to any initiatives that traffickers may
contemplate to take advantage of Haiti’s current instability. Collectively, these and other
possible assistance efforts form the basis for a multifaceted congressional response to
Haiti’s stability and development challenges.
Haiti’s Food Crisis
Rising food prices are having economic and political effects around the world, but
especially among poor people in low-income developing countries like Haiti.2 Prices for
basic food commodities in Haiti, the vast majority of which are imported, have risen by
an average of 30-40% over the last year. In early April 2008, weeks of protests against
rising food prices turned violent, with at least six people killed, including one U.N.
peacekeeper. Haitians were reportedly frustrated by the Préval government’s lack of
action and protests continued until the President announced a plan to partially subsidize
the cost of rice. On April 12, Haiti’s Prime Minister resigned after the Haitian Parliament
accused him of mishandling the government’s response to the food crisis. Préval
nominated Ericq Pierre, a Haitian economist with the Inter-American Development Bank
(IDB), as Prime Minister, but he was rejected by the Parliament. Préval may have a
difficult time finding another nominee for the post and lingering unrest could easily ignite
again and further destabilize the Préval government. Some have warned that, should
conditions not improve, supporters of ousted President Jean Bertrand Aristide may push
2 For more information on the effects of rising food prices, see CRS Report RL34478, Rising
Food Prices and Global Food Needs: the U.S. Response, by Charles E. Hanrahan.
CRS-3
for his return.3 Aristide’s last government (2001-2004) was marred by tension and
violence, and his departure from office led to the introduction of U.N. forces to stabilize
the country’s security situation.
To overcome the current crisis, observers maintain that President Préval will have
to solidify his governing coalition, a formidable task, and secure significant support from
the international community. Emergency assistance from the international community,
though increasing, reportedly is still insufficient. The World Bank is providing $10
million in grant funding, the IDB $12.5 million, and several donor countries have made
additional pledges. However, as of late April, the World Food Program (WFP), the food
agency of the United Nations, had reportedly received only 24% of the support estimated
to be needed over the next two years to support the Haitian government’s efforts to
strengthen social safety nets and create food price stabilization programs.4
Administration Response. The Bush Administration initially responded to the
food crisis in Haiti by redirecting $6.5 million in development assistance funds to support
President Préval’s plan to subsidize the cost of rice ($1 million) and to create short-term
employment programs ($5.5 million). Haiti has already been allocated a regular
appropriation of approximately $234 million in U.S. assistance in FY2008, including
some $34 million in P.L. 480 Title II food aid.5 The FY2009 regular request for Haiti
was for roughly $246 million, including $35.5 million in P.L. 480 food assistance. On
April 14, 2008, President Bush directed the Secretary of Agriculture to draw down the
Bill Emerson Humanitarian Trust by $200 million to help meet global emergency food
needs.6 USAID has indicated that it will use that $200 million worth of commodities plus
an additional $40 million in emergency P.L. 480 Title II food aid to assist ten countries
in FY2008, including Haiti. The food aid will be distributed by the WFP and private
voluntary organizations. On May 16, 2008, USAID announced that it would provide
another $20 million worth of emergency food aid to Haiti. Some 38,000 tons of food will
be shipped to Haiti, estimated to be enough to feed approximately 760,000 people for
three months.7
Congressional Emergency Food Aid Response. Congress is currently
considering the Administration’s request for a $350 million FY2008 supplemental
appropriation and a $770 million FY2009 supplemental appropriation for food aid. The
May 15, 2008, House-amended version of the FY2008 Supplemental Appropriations Act,
H.R. 2642, would make $1.86 billion in P.L. 489 food aid available in FY2008 and
FY2009. Members from both the House and Senate have asked the Administration to
3 “Haiti Politics, On a Knife’s Edge,†Economist Intelligence Unit, April 15, 2008; “Hungry for
Change in Haiti,†Christian Science Monitor, April 22, 2008.
4 World Food Program, “Haiti Financial Resource Status,†April 29, 2008.
5 P.L. 480 Title II authorizes the U.S. Agency for International Development (USAID) to
distribute U.S. agricultural commodities for emergency relief and for use in development
programs.
6 The Bill Emerson Humanitarian Trust is a reserve of commodities and cash authorized under
P.L. 105-385 that can be used to meet unanticipated humanitarian food aids in developing
countries or when U.S. domestic supplies run short.
7 USAID To Ship $20 million in Food Aid to Haiti, Miami Herald, May 16, 2008.
CRS-4
provide Haiti with no less than $60 million in emergency supplemental food assistance.
The additional food aid could be used to support the Préval government’s effort to
subsidize the cost of rice and WFP programs in Haiti, including communal kitchens and
school feeding programs. Haiti, however, will have to compete for food aid allocations
with other larger countries that also have pressing needs, such as Afghanistan and Sudan.
While responding to Haiti’s emergency food needs is the immediate priority, some
experts and advocates have urged Congress to consider funding programs to promote
agricultural development in Haiti as a long-term solution to the country’s food insecurity.
They have recommended U.S. support for new initiatives aimed at diversifying food
production and supporting agricultural, conservation, and infrastructure projects.8 Many
analysts also point to the large Haitian diaspora as a possible avenue to promote rural
development projects, possibly through short-term consultancies with the Haitian
government.
The HOPE Act: Trade Preferences for Export Promotion
To assist Haiti with rebuilding its economy by encouraging investment and job
creation in the once vibrant apparel sector, the 109th Congress passed the Haitian
Hemispheric Opportunity through Partnership Encouragement (HOPE) Act in December
2006 (P.L. 109-432). The act provides duty-free treatment for select apparel imports from
Haiti that are made in part from less expensive third country (e.g. Asian) yarns and
fabrics, provided Haiti meets eligibility criteria related to labor, human rights, and anti-
terrorism policies. To enhance the effectiveness of these provisions, the 110th Congress
expanded them in May 2008, when it passed the Food, Conservation, and Energy Act of
2008 (H.R. 2419) – the Farm Bill, Title XV of which includes the Haitian Hemispheric
Opportunity through Partnership Encouragement (HOPE) Act of 2008 (HOPE II Act).
The HOPE II Act builds on HOPE I, recognizing that apparel assembly is Haiti’s
core export sector and essential for its economic well-being because it generates 75%-
80% of the country’s foreign exchange used to finance Haiti’s large food import bill,
among other needs. In 2007, apparel constituted over 80% of Haiti’s total exports and
93% of exports to the United States (81% knit, 12% woven articles), so the sector
provides one potential avenue for employment growth. The rationale for emphasizing
tariff preferences among other policy options is based on the importance attached to
rejuvenating the apparel sector, and the dominant role of the U.S. market for Haiti’s
apparel exports. The HOPE II Act also supports textile and apparel firms in the
Dominican Republic, which have an extensive co-production arrangement with Haiti.
The HOPE II Act differs from other trade arrangements with the Caribbean that
emphasize apparel benefits. Unlike apparel provisions in the Caribbean Basin Trade
Partnership Act (CBTPA), of which Haiti is a beneficiary country, and the Dominican
Republic-Central America-United States Free Trade Agreement (CAFTA-DR), which
does not include Haiti, those in the HOPE II Act permit duty-free treatment for apparel
imports in limited quantities (known as tariff preference levels – TPLs) assembled or knit-
to-shape in Haiti with inputs from third-party countries, or those outside the region that
8 “Deforestation and Failing Agricultural Production in Haiti,†Interview with Dr. Robert
Maguire, Chicago Public Radio, April 28, 2008.
CRS-5
are not in a trade arrangement or agreement with the United States. The competitive
advantage to Haitian firms derives from their ability to use less expensive Asian inputs
and still receive duty-free treatment. To the extent that this advantage is in place for an
extended period of time, it is intended to encourage increased investment in the apparel
assembly business in Haiti, contributing to growth in output, employment, and exports.
Congress passed both HOPE Acts with broad support, but domestic textile producers
objected to the TPLs, contending that because the HOPE Acts permit use of third-party
fabrics and other inputs, the policy amounts to displacing jobs in the United States and
the Caribbean by those in Asia. As an alternative, the industry suggested allowing TPLs
only for goods no longer produced in the Western Hemisphere. U.S. textile producers
also found the rules of origin to be vague and difficult to enforce, and raised concern that
the tariff preferences could divert apparel production to Haiti from countries that are
partners to U.S. reciprocal trade agreements, such as CAFTA-DR and NAFTA.
Proponents of the HOPE tariff preferences responded that they apply to a very small
portion of U.S. apparel imports and are in place for only a limited period of time,
presenting little threat to larger U.S. and regional textile producers. They further argued
that rules of origin and other implementation issues can be clarified. Support for
enhancements in the HOPE II Act rested on arguments that these benefits outweighed
potential costs and therefore should be approved as part of an ongoing multifaceted
response to Haiti’s need for food aid, financial development assistance, and other
international aid.
The HOPE I Act provided three major tariff preferences for limited amounts of
articles imported directly from Haiti: 1) quotas for the duty-free treatment of apparel
articles that meet the regional value-added content rule (50% rising to 60%), effectively
allowing the remaining portion of inputs to be sourced from outside the region; 2) tariff
preference levels for woven articles, or additional quotas for duty-free treatment of a
limited amount of woven apparel that cannot meet the 50%-60% value-added rule
(allowing all inputs for these articles to be sourced from anywhere in the world); and, 3)
a single transformation rule of origin that allows for duty-free treatment of brassieres
made from components sourced anywhere in the world, provided the garments are cut and
sewn or otherwise assembled completely in Haiti, the United States, or both.
The HOPE I Act, however, did not result in dramatic growth in U.S. textile imports
from Haiti, inhibited by the limited time frame and complicated rules of origin. The
HOPE II Act enhances the tariff preferences by extending them for 10 years through
September 30, 2018, making the rules more flexible and simpler, expanding existing
benefits, and adding new ones. The major features of HOPE II would provide greater
duty-free treatment than HOPE I for certain U.S. apparel imports wholly assembled or
knit-to-shape in Haiti.
In brief, HOPE II: (1) maintains the value-added rule in HOPE I, freezing the cap
on total apparel imports and keeping the original five-year sunset provision because the
rule was little used and is highly complicated; (2) increases the cap for select woven
apparel imports; (3) provides a new cap for select imports of knit apparel, with significant
exclusions; (4) adds a new uncapped “3 for 1†earned import allowance (EIA) that allows
duty-free treatment of imports made from qualifying inputs (e.g. fabrics made from U.S.
or countries a party to U.S. trade agreements) and articles made from non-qualifying
CRS-6
inputs (e.g. from Asian fabrics) in a 3 for 1 ratio; (5) includes a new uncapped benefit for
apparel using non-U.S. fabrics deemed to be in “short supply,†(6) expands the single
transformation rule from brassieres to apparel articles covered under CAFTA-DR,
headgear, and select sleepwear, luggage, and handbags; and, (7) allows for direct
shipment of apparel articles sent from Haiti to the Dominican Republic for finishing,
reducing transportation costs and lead times incurred under the HOPE I requirement that
articles be returned to Haiti for direct shipment to the United States. HOPE II would also
require that Haiti create a new apparel sector monitoring program (Labor Ombudsman)
to ensure compliance with core labor standards.
Debt Relief
Some Members of Congress also pushed to provide immediate debt relief to Haiti
to help the Préval government free up limited fiscal resources to address the food crisis.
According to the Haitian Central Bank, Haiti’s foreign public debt totals roughly $1.7
billion, a large portion of which is owed to multilateral institutions such as the World
Bank, IDB, and International Monetary Fund (IMF). A March 2008 IMF report projects
that the Haitian government will make debt service payments of roughly $71.7 million in
2008.9 On April 16, 2008, the House unanimously passed an amendment to the Jubilee
Act (H.Amdt. 993 to H.R. 2634) that recommends immediate cancellation of Haiti’s
outstanding debts to the international financial institutions. A companion bill (S. 2166)
has been introduced in the Senate. Hearings were held, but the bill is still in committee.
The Jubilee Act seeks to change multilateral lending practices and cancel debt for many
low-income countries.
Critics charge that providing immediate cancellation of Haiti’s debt is probably
unnecessary because Haiti is already advancing through the Heavily Indebted Poor
Countries (HIPC) debt relief process. They assert that Haiti, similar to other heavily
indebted countries, should be encouraged to adopt sound reforms and policy changes that
will (hopefully) help it avoid future excessive indebtedness. Providing Haiti with
unconditional debt relief, they argue, would encourage the Haitian government to increase
borrowing. In November 2007, the Haitian government published a Poverty Reduction
Strategy in line with IMF and World Bank recommendations. Many observers had
predicted that Haiti would be able to meet the so-called “completion point†required for
debt relief by late 2008 or early 2009, but the current crisis could delay this outcome.
Proponents counter that given Haiti’s immediate food crisis, the Secretary of the
Treasury should urge the multilateral donors to cancel Haiti’s foreign debt immediately
because Haitian public finances could be better used to subsidize food purchases that are
desperately needed right away. Immediate assistance would also accelerate debt relief
anticipated under the HIPC program, but which may not be forthcoming soon because
Haiti is unlikely to meet the remaining conditions for debt relief in the near future.
9 International Monetary Fund, “Haiti: Country Report No.08/117,â€March 2008.