Not Enough Congressional Support For 956, U.S. Counters PR U.N. Summit Claims, Acevedo Reiterates Trade Agreement Power’s Goal, GOP May Seek Vieques Training
For Iraqi Attack

September 13, 2002
Copyright © 2002 THE PUERTO RICO HERALD. All Rights Reserved.


One of the most important and active supporters of Puerto Rico Governor Sila Calderon’s request that the federal government exempt from taxation profits that Puerto Rico subsidiaries transfer to parent manufacturing companies in the States said this week that "there is not enough support for the bill."

The statement was made by the longtime tax policy assistant to Representative Charles Rangel (D-NY) the top ranking Democrat on the House tax policy committee, the Ways and Means Committee, and one of two lead House sponsors of the Calderon proposal.

The assistant, Job Sheiner, has been extremely aggressive in trying to promote the proposal. For example, he tried to pressure staff of the Joint Committee on Taxation -- of which Rangel is a top leader -- to lower their estimate of the amount of revenue that the proposal would cost the federal government. The $32 billion over 10 years estimate was 25 times what Calderon had claimed and was a major blow to the proposal.

Although he has vigorously pursued support for the proposal, Sheiner has been quietly skeptical it from the beginning. He previously acknowledged that it "would primarily benefit" pharmaceutical companies, which are expanding in Puerto Rico without the amendment to Section 956 and that it would not really benefit the type of labor-intensive plants that have been moving away from Puerto Rico.

He also recognized that the proposal would stand little chance of passage if Ways and Means Committee members recognized that it was an effort to recreate repealed tax credits for pharmaceuticals and similar companies in Puerto Rico under Section 936 of the Internal Revenue Code.

Section 936’s tax credit was reduced in 1993, and, in 1996, limited to existing users and ended totally in 2005. It was reduced and ended because profitable companies were obtaining more benefit from the credit than Puerto Rico’s economy was and were shifting income from taxable operations in the States to their tax-free operations in Puerto Rico. Members of Congress also felt that the credit was unfair to other areas of the U.S., especially needy areas in States.

Sheiner’s negative assessment -- and the unwillingness of the chairmen of both of Congress’ tax policy committees to go along with the proposal in any form -- has not diminished the determination of Calderon’s Resident Commissioner in Washington, Anibal Acevedo Vila ("commonwealth party"/D) to work for it.

Acevedo this week reiterated that it is his top priority. He also expressed optimism about its prospects, claiming, "In the long run, I believe we can get it."


Claims by Puerto Rico State Department officials in connection with the recent United Nations Summit on Sustainable Development in Johannesburg, South Africa touched a raw nerve and touched off contrary efforts by the U.S. State Department.

First there was P.R. Secretary of State Ferdinand Mercado’s claim that "Puerto Rico will participate as any other country and will have a turn to address the General Assembly." It caused concern among U.S. foreign policy officials that the Puerto Rico administration would try to pass itself off as the representative of a nation . . . and suggest that the United States did not represent the U.S. territory. To counter this, U.S. representatives quietly acted to block the Puerto Rico delegation from addressing the Summit as representative of a nation.

In fact, the Puerto Rico delegation was not accorded national status in the report of the Summit’s Credentials Committee or in the agendas of the full Summit or its subject subconferences. Additionally, "local governments" as well as environmental, business, labor and other groups were permitted limited participation in the Summit.

As if Mercado’s claims were not enough, then Puerto Rico Under Secretary of State used much of the speaking opportunity that he was accorded to blast a key United States policy in the territory: Navy and Marine Corps training at the only range the U.S. military has on the eastern side of the U.S. for combat amphibious invasion training. His anti-U.S. harangue further underscored the reason that federal officials are concerned about the current Puerto Rico administration’s foreign affairs ventures. It also helped underscore why federal officials enforce the constitutional requirement that only the federal government speaks for local jurisdictions of the U.S. in foreign policy matters — a requirement from which the administration of Governor Calderon ("commonwealth" party/no national party) wants the Commonwealth excepted.


Resident Commissioner Acevedo also this week reiterated the goal of the commonwealth obtaining foreign policy powers. He made his case for Puerto Rico being able to enter into trade agreements with sovereign nations to a reporter, although he also said the effort would be pursued as a part of Calderon’s campaign to gain national government powers for the Commonwealth while retaining most other benefits of Puerto Rico’s U.S. status.

Acevedo claimed that a trade agreement between Puerto Rico and the Dominican Republic could benefit the United States by improving the economies of both Caribbean areas and, thereby, decreasing economic-based migration of Puerto Ricans to the States and immigration of Dominicans into the U.S. Among other things, he did not explain that Puerto Rico is a part of the Customs territory of the U.S. and that establishing rules for Puerto Rico trade with foreign nations that are different for the rules that apply to other parts of the U.S. would necessitate the U.S. establishing trade barriers between itself and Puerto Rico. The barriers would be needed to prevent the foreign countries’ products from entering the U.S. through Puerto Rico on more favorable terms that they could if shipped directly. Preventing "pass through" shipping would mean significant economic changes for Puerto Rico and an end to one of the "pillars" of "commonwealth" long claimed by Acevedo and some other "commonwealth" party leaders: "Common market" with the U.S.

Acevedo also claimed that the federal government granting the powers is "a matter of political will" and not the U.S. Constitution or federal law. He did not acknowledge that there is a constitutional impediment to the power transfer according to the U.S. Departments of State and Justice and leaders on Puerto Rico issues in the U.S. Congress. He also suggested that there are no policy problems with transferring the power, ignoring, for example, the one explained in the preceding paragraph.


Key Republican members of Congress are planning to question the Bush Administration’s goal of ending Navy and Marine Corps training at the range on the eastern tip of the island of Vieques, Puerto Rico by May 1, 2003 when President Bush asks Congress to support a military attack to replace Iraq dictator Saddam Hussein.

Aides to the ranking Republican on the Senate Armed Services Readiness Subcommittee, James Inhofe (OK), and House Armed Services Committee Member James Hansen (UT) say their bosses may raise the question in hearings. Hansen is also thinking about sponsoring a resolution calling for training past May 1, 2003.

The May 1, 2003 goal was established in January 2000 by President Clinton in consultation with the Navy and Marine Corps and then Puerto Rico Governor Pedro Rossello (statehood party/D). Clinton issued an order requiring the replacement of the range by that time and won congressional approval of a law requiring it.

When President Bush was elected, Hansen and Inhofe, who had unsuccessfully fought the requirement, hoped they could convince the new President to support eliminating it. But Bush had effectively embraced the requirement as a candidate and did not change his policy during the initial months of his presidency.

He embraced the goal even more when Calderon lobbied him to end the training immediately and eliminate the requirement for a referendum on Vieques to end the training although he asked the Congress to eliminate the referendum requirement.

Hansen, Inhofe, and House Armed Services Committee Chairman Bob Stump (R-AZ), however, then persuaded the Bush Administration to accept legislation that end use of the range when the Secretary of the Navy determines, in consultation with the top officers of the Navy and Marine Corps, that the services have another way of training for combat amphibious invasions that is "equal or better" than the Vieques range. The Bush Administration accepted the new requirement although it continued to maintain the goal of replacing the range by May 1, 2003.

Calderon and Acevedo, who were elected largely on the strength of their commitment to get the training ended in a matter of months in 2001, now say that it ending by may 1, 2003 is adequate and Bush’s intent to have the training end by then is enough. While campaigning, they said that the law requiring the end of training in the future was not an adequate guarantee.

Acevedo this week stunned Democrats in Congress who he previously asked to support an immediate end to training by saying that Bush’s intent to end the training May 1, 2003 is adequate and by opposing requests that Bush be asked to order a May 1, 2003 end or otherwise commit to it in writing.

The "Washington Update" appears weekly.

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