UNCLAS SECTION 01 OF 03 PORT AU PRINCE 002674

SIPDIS

USTR FOR RUSSELL SMITH
WHA/CAR
EB/TPP
WHA/EPSC
INR/IAA/MAC
STATE PASS TO AID FOR LAC/CAR
TREASURY FOR MAUREEN WAFER
USDOC FOR 4322/ITA/MAN/WH/OLAC/ (SMITH, S.)

E.O. 12958: N/A
TAGS: ECON ETRD HA
SUBJECT: Haiti: Information on Caribbean Basin Recovery
Act

REF: SECSTATE 188288


1. Per reftel, following is information for USTR to use in
preparing its biannual report on the operation of the
Caribbean Basin Economic Recovery Act. Responses are in
narrative form and are keyed to the specific questions in
paragraphs six and seven of reftel.


2. Responses to Questions from paragraph six:

(1) Haiti has a relatively open trade regime and has
committed to undertake and fulfill its obligations under
the WTO on or ahead of schedule. Due to resource
constraints, the Government of Haiti only participates on a
limited basis in international negotiations. The Interim
Government of Haiti (IGOH) has indicated informally that it
would like to participate in a free trade agreement with
the United States, but also that it is not ready to begin
negotiations at this time.

(2) Haiti's major laws governing intellectual property
protection date from the early- to mid-twentieth century
and have not been updated to reflect the provisions of the
Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS). Limited manufacturing capacity, lack of
disposable income, and paucity of tourist traffic mean that
commercial piracy is limited. Weak judicial institutions
result in poor enforcement and erode the protection offered
by current statutes.

(3) The Constitution and the Labor Code provide the right
of free association to both public and private sector
workers. The economy's informal nature makes estimations
of workforce participation and unionization difficult, but
the number is probably relatively low. Persistent high
unemployment and the lack of a large manufacturing sector
have also limited union organizing activities. Employers
usually set wages unilaterally, though wages in the formal
sector are usually higher than the legal minimum wage. The
Labor Code prohibits forced or bonded labor for adults and
minors. Though Haitian law provides a framework for
internationally recognized worker rights, such rights are
often violated or circumscribed, particularly in the
informal or underground economy.

Workers in export processing zones enjoy the same rights as
workers elsewhere in the country, and their working
conditions are usually better than those in the economy at
large. Due to concerns from U.S. customers, and because
Haitian companies using CBI benefits are aware of the
eligibility criteria, it is likely that these beneficiary
companies are more sensitive to labor standards.

The minimum employment age is 15, and minors are prohibited
from working in dangerous conditions and working at night
in industrial enterprises. Legislation passed in 2003
removed exceptions in the labor law that had previously
allowed children to work as domestic servants beginning at
age 12. Fierce adult competition for the few available
jobs in the industrial sector means that child labor is not
a factor in the formal economy, but there are reports of
compulsory and child labor in the rural and informal
sectors. Internal trafficking of children for domestic
labor remained a widespread problem; see description of the
problem in the following sections.

Haiti has signed but not ratified ILO Convention 182. The
country has signed a Memorandum of Understanding with the
ILO International Program for the Elimination of Child
Labor and is working with the ILO on various programs aimed
at phasing out exploitative child labor.

(4) Haiti was categorized as a Tier 2 Watch List country
for failure to show evidence of increasing efforts to
combat trafficking in persons over the past year. The
majority of trafficking in Haiti involves the internal
movement of children for forced domestic labor, referred to
as "restaveks." The restavek tradition is widespread in
Haiti, and fraught with abuse. Poor rural families
sometimes give custody of their children to urban, more
affluent families or other family members, in the hope that
they will receive an education and economic opportunities.
However, the reality is often mistreatment, abuse, and long
hours of uncompensated labor. The IGOH estimates there are
90,000-120,000 children in coercive labor conditions as
restaveks, but UNICEF estimates the number is much higher,
between 250,000 and 300,000. Since the political crisis in
Haiti, the interim government has attempted to address
trafficking in the country. However, there is much more
that needs to be done and the newly elected government,
which is scheduled to take office in February 2006, should
be committed to addressing these issues, including the
large-scale exploitation of restavek children.
(5) Haiti meets U.S. counter-narcotics certification
criteria under the Foreign Assistance Act of 1961.

(6) Haiti became a party to the Inter-American Convention
Against Corruption (IACAC) when its ratification was
published in July 2002. However, the country is still
widely viewed as one of the most corrupt countries in the
world. There has been some limited progress under the
interim government. Under recent IMF agreements, the IGOH
has drastically cut back on the use of "current accounts"
which are often used by corrupt officials to fund personal
or political expenditures. In addition, the IGOH has begun
to conduct audits of several state-owned enterprises in
order to eliminate ghost employees. The IGOH's Financial
Intelligence Unit, with assistance from the U.S.
government, is actively investigating corruption by the
previous regime. Despite these steps, corruption still
remains endemic in the country.

(7) Government procurement is still characterized by
procedures that are inadequately transparent and corruption
is common.


3. Responses to questions in paragraph seven:

There are no active cases of the government nationalizing
or expropriating the property of a U.S. citizen, although
there are several dormant cases where no action has been
taken by either party for a number of years. Post has seen
no evidence of the country failing to act in good faith in
recognizing arbitral awards in favor of U.S. citizens.
Post is not aware of any preferential treatment to products
of a developed country that has an adverse effect on U.S.
commerce. Government entities do not, as a matter of
policy or general practice, broadcast copyrighted material
belonging to U.S. copyright-holders without their express
consent. The U.S. has an extradition treaty with Haiti
(Extradition Treaty between Haiti and the United States of
1904). Under this treaty, however, Haitians do not
extradite their citizens, but will extradite U.S. citizens
under a Mutual Legal Assistance Treaty (MLAT).

In February 2004, President Aristide resigned and left the
country following an outbreak of political violence
directed at overthrowing his regime. An interim government
took over and governs Haiti until new elections take place,
currently set for December 2005 and January 2006. A new,
democratically elected government is scheduled to be
inaugurated in February 2006.

Haiti is one of the poorest countries in the world; it is
the poorest country in the western hemisphere. Average
income is estimated at between USD 300 and 400. Growth in
FY 2005 was 1.5 percent, following a 3.8 percent drop in FY

2004. Much of the FY 2004 drop was due to political
violence and natural disasters. The economy has been in a
long-term decline, averaging negative growth over the past
25 years. The economy consists of retail trade, small-
scale agriculture, light manufacturing and some services.
Most of the economy exists in the informal sector and is
unregulated. Haiti runs a large trade deficit; its largest
trading partner is the United States, which accounts for
over half of its exports and imports. Haiti's major export
is apparel, such as tee shirts. A major component of the
economy is remittances, estimated at more than USD 1
billion per year and foreign aid, at approximately USD 500
million last year. Without that assistance, particularly
remittances that go directly to the pockets of Haitians,
the economic situation in Haiti would be much worse.

Haiti has a relatively open trading regime and utilizes
few, if any, export subsidies or trade distorting export
performance or local content requirements. Because Haiti's
economy is so small and it trades little with its Caribbean
neighbors, the country's trade policies contribute only
marginally to the revitalization of the region as a whole,
although its trade policies certainly do not impact the
region negatively. The country is doing what it can to
promote its own economic development, given limitations
caused by the paucity of resources and the recent history
of violence and natural disasters. Haiti generally
cooperates closely with the United States on economic
issues.