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Puerto Rico - Compact of Permanent Union, November 8-19, 1975
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Puerto Rico - Compact of Permanent Union, November 8-19, 1975
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White House Special Files Unit Files
Issue Decision Papers for the President
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The original documents are located in Box 7, folder "Puerto Rico - Compact of Permanent
Union, November 8-19, 1975" of the White House Special Files Unit Files at the Gerald R.
Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
ACTION MEMORANDUM
WASHINGTON
LOG NO.:
Date: October 28
Time:
due /10
500pm
5'30
FOR ACTION: Phil Buchen
OCCI (for information): Jim Connor
Robert Hartmann
Jack Marsh
Brent Stcowcroft
Alan Greenspan
Bill Seidman
Jim Lynn
FROM THE STAFF SECRETARY
DUE: Date:
November 10
Time: 530pm
SUBJECT:
Compact of Permanent Union between
Puerto Rico earid the U.S.
ACTION REQUESTED:
For Necessary Action
FFor Your Recommendations
Prepare Agenda carid Brief
IDraft Reply
X For Your Comments
Draft Remarks
REMARKS:
please neeturn tto judy johnstongground floor west wing
#
op 2
you
BUBASE SUTTACH TTHIS OCCPYTTON MATERIAL SERMITTED.
TEE your Hunve any your atitipipleten a
desire
im
submitting
equire
piplease
Julants Ms Cadifon
Polor the
telephone Scooebtay
ssident.
Digitized from Box 7 of the White House Special Files Unit Files at the Gerald R. Ford Presidential Library
5
2.
Appoint a special in-house task force to develop
an alternative proposal to be submitted to the
Congress next January, together with a report out-
lining your objections to the instant proposal.
3.
Inform Governor Hernandez-Colon of Puerto Rico that
you have serious problems with the proposed Compact
in its current form and suggest that, together, we
might profitably use the additional time to jointly
develop a more appropriate proposal for submission
to the Congress upon its return.
4. Direct OMB, in consultation with the Domestic Council
and the National Security Council, to prepare a report
outlining your objections to the proposed Compact and
suggesting to the Congress that the real issue for
debate and resolution is whether Puerto Rico should
be made a State of the Union or given its independence.
RECOMMENDATIONS
DECISION
Option 1
gm
Option 2
Option 3
Option 4
ACTION MEMORANDUM
WASHINGTON
LOG NO.:
Date:
Time:
October 28
500pm
FOR ACTION: Phil Buchen
CC (for information): Jim Connor
Robert Hartmann
Jack Marsh
Brent Scowcroft
Alan Greenspan
Bill Seidman
Jim Lynn
FROM THE STAFF SECRETARY
DUE: Date:
November 10
Time: 530pm
SUBJECT:
Compact of Permanent Union between
Puerto Rico and the U.S.
ACTION REQUESTED:
For Necessary Action
For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X For Your Comments
Draft Remarks
REMARKS:
please return to judy johnston, ground floor west wing
Recommend the following:
That the President (1) inform the Governor of Puerto
Rico (either the outgoing Governor or the incoming Governor,
as appropriate) that he has serious problems with the
proposed compact in its current form; and (2) direct OMB,
in consultation with the Domestic Council and the National
Security Council, to prepare a report indicating the nature
of the Administration's objections for submission to the
95th Congress in January.
Do not recommend that we develop an alternative
proposal to be submitted to Congress or that the President
meet with the new Governor of Puerto Rico to work out an
alternative proposal
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
11/11/76
If you have any questions or if you anticipate a
delay in submitting the required material, please
Jame Mr. Cadlion
For
the
telephone the Staff Secretary immediately.
resident.
THE WHITE HOUSE
ACTION MEMORANDUM
WASHINGTON
LOG NO.:
Date: October 28
Time:
500pm
FOR ACTION: Phil Buchen
CC (for information): Jim Connor
Robert Hartmann
Jack Marsh
Brent Scowcooft
Alan Greenspan
Bill Seidman
Jim Lynn
NC
FROM THE STAFF SECRETARY
DUE: Date:
November 10
Time: 530pm
SUBJECT:
Compact of Permanent Union between
Puerto Rico and the U.S.
ACTION REQUESTED:
For Necessary Action
For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X For Your Comments
Draft Remarks
REMARKS:
please return to judy johnston, ground floor west wing
CARED
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material, please
K. R. COLE, JR.
telephone the Staff Secretary immediately.
For the President
ACTION MEMORANDUM
WASHINGTON
LOG NO.:
pm
Date:
Time:
October 28
500pm
FOR ACTION: Phil Buchen
cc (for information): Jim Connor
Robert Hartmann
Jack Marsh
Brent Scowcroft
Alan Greenspan
Bill Seidman
Jim Lynn
FROM THE STAFF SECRETARY
DUE: Date:
November 10
Time: 530pm
SUBJECT:
Compact of Permanent Union between
Puerto Rico and the U.S.
ACTION REQUESTED:
For Necessary Action
For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X For Your Comments
Draft Remarks
REMARKS:
please return to judy johnston, ground floor west wing
Mr. Hastmann should see
ap Option3 3 6 4
Both
RTA
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material, please
Justs Ms Cadlion
telephone the Staff Secretary immediately.
For the resident
ACTION MEMORANDUM
WASHINGTON
LOG NO.:
Date:
Time:
October 28
500pm
FOR ACTION: Phil Buchen
cc (for information): Jim Connor
Robert Hartmann
Jack Marsh
Brent Scowcroft
Alan Greenspan
Bill Seidman
Jim Lynn
FROM THE STAFF SECRETARY
DUE: Date:
November 10
Time: 530pm
SUBJECT:
Compact of Permanent Union between
Puerto Rico and the U.S.
ACTION REQUESTED:
For Necessary Action
For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X For Your Comments
Draft Remarks
REMARKS:
please return to judy johnston, ground floor west wing
I
6.
no
pub
GERALD
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material, please
James Mc Codition
telephone the Staff Secretary immediately.
For the resident
MEMORANDUM
THE WHITE HOUSE
WASHINGTON
November 15, 1976
LIMITED OFFICIAL USE
MEMORANDUM FOR:
JIM CANNON
FROM:
BRENT SCOWCROFT
wafor
SUBJECT:
Compact of Permanent Union Between
Puerto Rico and the United States
I have the following comments regarding the proposed Compact:
1. Although I understand that the President is required to submit
comments on the proposed Compact, many of the issues raised may
now be moot as a result of the recent election in Puerto Rico. That
election, at least in a vague way, was a mandate for statehood as
opposed to some of the more-difficult-to-characterize thrusts of the
proposed Compact. It appears highly likely that the new government
in Puerto Rico would want to take a new look at this proposal.
2. In light of these developments, I prefer Option 1.
3. I agree that the proposed provisions on navigable waters are
objectionable. Serious questions of national security would be raised
by acceptance of these proposals.
4. Authorization for Puerto Rico to participate in international
organizations and enter into international agreements in its own right
likewise would raise serious problems. The problem is not so much
comparability with the states, but rather with the proposed infringement
on the power and responsibility of the President, with the advice and
consent of the Senate, to conduct the foreign policy of the United States.
Although commonwealth status is sui generis and would not necessarily
need to be parallel with or limited by the rights and responsibilities
of the states in all respects, it does seem that the proposed derogation
of the President's foreign policy power raises serious constitutional
questions as well as the obvious far-reaching practical ones.
LIMITED OFFICIAL USE
LIMITED OFFICIAL USE
2
5. Option 4, at least as presently stated, presents problems.
We are committed to grant independence to Puerto Rico should the
Puerto Ricans opt for it. They have not done so. Option 4 seems
to raise the possibility of cutting them adrift should we choose to do
so. Nor do I believe that independence vs. statehood is "the real
issue". The real issue is whether we can carry out the responsibilities
that we have assumed toward the people of Puerto Rico in a relationship
that does not fit within our present traditional framework but which is
tailored specifically to the facts of the case and which will und oubtedly
change over time.
All of these considerations strongly suggest Option 1 as the most
appropriate response at this time.
LIMITED OFFICIAL USE
MEMORANDUM
THE WHITE HOUSE
WASHINGTON
November 11, 1975
MEMORANDUM FOR:
JEANNE W. DAVIS
NSC
FROM:
JAMES F. CONNOR
SECRE TARY TO THE CABINET
On October 23rd the attachedmemorandum was sent to all the
Cabinet members, including Secretary Kissinger at State
Department. We have received responses from all Cabinet
departments except State Department. I checked with
Mr. Springsteen's office and they report that on October 30th
State Department sent a response via the NSC to the
attention of General Scowcroft. Could you please let me
know the status of this. Otherwise we will have to submit
the report to the President minus State Department's comments.
Thank you.
encl.
See am response attached
John
THE WHITE HOUS:
WASHINGTON
October 23, 1975
MEMORANDUM FOR
THE CABINET
SUBJECT:
Report of the Ad Hoc Advisory Group
on Puerto Rico
Attached is the report of the Ad Hoc Advisory Group on
Puerto Rico entitled "Compact of Permanent Union Between
Puerto Rico and the United States. 11 Prior to submitting
the report to the President, it would be appreciated if
we could have the comments and recommendations
of the Departments concerned.
It would be further appreciated if your comments could
be received by this office by close of business Thursday,
H
October 30, 1975.
JAMES E. CONNOR
SECRETARY TO THE CABINET
Attachment
MEMORANDUM
NATIONAL SECURITY COUNCIL
7095
November 1, 1975
MEMORANDUM FOR:
JIM CONNOR
FROM:
Jeanne W. Davi
ms
SUBJECT:
Report of Ad Hoc Advisory
Group on Puerto Rico
In response to your October 22 query, it is our understanding
that Jim Cannon has already acknowledged receipt of the report.
As you note, the formal Executive Branch response to the
report is being coordinated by Jim Falk and the NSC Staff.
7095 - add-on
MEMORANDUM
NATIONAL SECURITY COUNCIL
October 31, 1975
MEMORANDUM FOR: JIM CAVANAUGH
FROM:
JEANNE W. DAVIS
SUBJECT:
Report of the Ad Hoc Advisory Group on
Puerto Rico
Attached are the Department of State's comments and recommendations
on the report of the Ad Hoc Advisory Group on Puerto Rico,
responding to Jim Connor's request to the various Departments and
Agencies.
7095 - add-on
MEMORANDUM
NATIONAL SECURITY COUNCIL
October 31, 1975
MEMORANDUM FOR: JIM CAVANAUGH
FROM:
JEANNE W. DAVIS
ane
SUBJECT:
Report of the Ad Hoc Advisory Group on
Puerto Rico
Attached are the Department of State's comments and recommendations
on the report of the Ad Hoc Advisory Group on Puerto Rico,
responding to Jim Connor's request to the various Departments and
Agencies.
7095 add-on
7521399
DEPARTMENT OF STATE
Washington, D.C. 20520
UNCLASSIFIED
October 30, 1975
MEMORANDUM FOR LIEUTENANT GENERAL BRENT SCOWCROFT
THE WHITE HOUSE
Subject: Report of the Ad Hoc Advisory Group
on Puerto Rico
The Department was requested by memo of
October 23, 1975 from Mr. James E. Connor to
submit comments and recommendations on the
Report of the Ad Hoc Advisory Group on Puerto
Rico entitled "Compact of Permanent Union Between
Puerto Rico and the United States." Our comments
and recommendations are attached.
George S. Springsteen
Executive Secretary
Attachment:
As Stated
UNCLASSIFIED
COMMENTS AND RECOMMENDATIONS OF THE DEPARTMENT
OF STATE ON THE REPORT OF THE AD HOC ADVISORY GROUP
ON PUERTO RICO ENTITLED "COMPACT OF PERMANENT UNION
BETWEEN PUERTO RICO AND THE UNITED STATES"
Sections 2 (d), 9 (d), (e) and (f), and 10 of the
proposed Compact are of particular interest to the
Department of State. With certain differences these
sections were included within the April 12 draft of
the Puerto Rican delegation to the Ad Hoc Advisory
Group, and the comments transmitted to Mr. Cook by the
Legal Adviser on May 2, 1975 remain applicable.
Section 2 (d) permits the participation of the
Free Associated State of Puerto Rico in international
organizations, as well as in certain types of agree-
ments with other countries. It is noted that the pro-
vision requires for participation in international
organizations a determination on a case-by-case basis
by the President of the United States. The Department
believes that such a requirement adequately protects
the responsibility of the Federal Government for the
conduct of Puerto Rico's foreign relations in this
area. We also note that past experience has demon-
strated the advisability of obtaining Congressional
concurrence for Puerto Rican membership in certain
international organizations; nothing in Section 2 (d)
would prevent seeking such concurrence in the future.
As a general rule, the Department believes that agree-
ments with other countries should be concluded by the
United States on behalf of, and with appropriate con-
sideration of the interests of Puerto Rico or by
Puerto Rico with the prior concurrence of the Department,
and the Congress where appropriate, and recommends
that the text of the Compact so indicate. U.S. dele-
gations concerned with negotiating such agreements
would, of course, include appropriate Puerto Rican
representation.
Section 9 deals with Common Market and Trade
Compact. Section 9 (d) of the Compact authorizes the
Free Associated State to levy, increase, reduce or
eliminate U.S. tariffs and quotas on imports from
foreign countries, in a manner consistent with the
international obligations of the United States, and
subject to certain specified provisos. This provision
would nullify the commonality of tariff treatment cur-
rently enjoyed by the United States and Puerto Rico,
- 2 -
which has heretofore been a cornerstone of the Common
Market concept. It would also permit actions contrary
to the U.S. national interest as reflected in current
U.S. quota or other import restraint programs (e.g.,
textiles). We assume that other interested agencies
(i.e., Commerce, Treasury, STR, Agriculture and Labor)
will be commenting on these problems as well.
We, therefore, recommend that the language in
Section 9 (d) regarding "mutually agreeable procedures"
be made sufficiently specific to avoid the problems
cited above.
Section 9 (e) would permit Puerto Rico to import
from other countries materials and articles duty-free
for subsequent shipment and sale to other parts of
the U.S. Customs territory (again without paying U.S.
duties) provided that the F.A.S. shipping price contains
at least 35% value added in Puerto Rico. This pro-
vision would authorize treatment similar to that
accorded developing countries in the U.S. Generalized
System of Preferences, but would not be subject to
any of that program's controls or limitations. Thus,
products excluded by law from our GSP would be eligible
for duty-free entry from Puerto Rico. A number of
agencies (e.g., Commerce, Labor, STR, Agriculture,
Treasury, Customs) will undoubtedly oppose this idea,
and State also has reservations.
Section 9 (f) includes, inter alia, three pro-
visions relating to the conduct of the Foreign Policy:
1) It obligates the U.S., in international
trade negotiations, to take into account Puerto Rico's
state of economic development and to promote its interests
by seeking the most favorable conditions for Puerto
Rico's exports;
2) It accords observer status to Puerto Rico
within U.S. negotiating delegations;
3) It obligates the U.S., upon request and after
consultation and agreement, to seek for Puerto Rico
acceptance as an associated developing state quali-
fying to participate in benefits from systems of pre-
ferences for developing countries.
- 3 -
The Department of State has no objection in
principle to the provisions of this Subsection. How-
ever, we would prefer to limit the scope of the langu-
age concerning Puerto Rican participation in so-called
"negotiating delegations." Many such delegations are
very small and deal with technical aspects of trade.
In practice, it would be difficult to assure in every
case that representation of the Free Associated State
could be included. It is consequently recommended
that the wording of this provision be changed to:
"The U.S. shall accord the Free Associated
State opportunity to participate, as part of
U.S. delegations, in general trade negotiations,
and in those specific trade negotiations where
the interests of the Free Associated State are
substantial. Representatives of the Free
Associated State in such delegations shall be
kept fully informed and shall be consulted con-
cerning negotiating positions and decisions of
interest to them.'
In reference to the final point (seeking to ob-
tain acceptance of Puerto Rico as an associated devel-
oping State), while the Department accepts in principle
such a commitment, we must note for the record our
opinion that other developed nations are unlikely to
grant generalized trade preferences to Puerto Rico
unless they can be assured that goods from the United
States are not diverted through and exported as pro-
ducts of Puerto Rico.
Section 10 of the Compact authorizes the President
of the United States and the Governor of the Free
Associated State to make adjustments in the number of
aliens admitted to Puerto Rico. The Department has no
objection to the establishment of what is, in effect,
a separate immigration system for Puerto Rico. How-
ever, the establishment of such a system will require
careful planning and, we believe, legislative modi-
fication of the Immigration and Nationality Act, speci-
fically the definition of the United States in Section
101 (a) (38).
- 4 -
As a final point for the record, the Department
wishes to note that under existing arrangements the
U.S. passport issuance function is currently admin-
istered by the Governor of Puerto Rico. The Department
suggests that the practice should be examined with a
view toward conformity with preferable Federal pro-
cedures - such an examination could occur during the
legislative process attendant to the Compact, or at
a later time by and upon the establishment of the
Joint Commission as envisaged in Section 14 of the
Compact.
10/29/75
MEMORANDUM
NATIONAL SECURITY COUNCIL
7095
November 1, 1975
MEMORANDUM FOR:
JIM CONNOR
FROM:
Jeanne W. Davi
and
SUBJECT:
Report of Ad Hoc Advisory
Group on Puerto Rico
In response to your October 22 query, it is our understanding
that Jim Cannon has already acknowledged receipt of the report.
As you note, the formal Executive Branch response to the
report is being coordinated by Jim Falk and the NSC Staff.
*netso- Jand Fall will
send proposed Presidented
arknowledgment tomorrow
11/3/75
June would like to reces all
wellas 6 one orporate
comments prom Calumb as
into one repaiD to the Presided
Sen ONSED comments to Jam Falk 11/3
November 12, 1975
Jim Falk -
Attached are the comments received
from the Department of Labor on the
Puerto Rico Report.
Trudy Fry
cc: Steve Low
On 11/11/75 Jim Falk advised Eleanor Conn ors that copies of all comments
should go to both Steve Low & Jim Falk --- Jim Falk has given Steve the
earlier reports received.
U.S. DEPARTMENT OF LABOR
OFFICE OF THE SECRETARY
WASHINGTON
NOV 10 1975
Mr. James E. Connor
Secretary to the Cabinet
The White House
Washington, D.C. 20500
Dear Mr. Connor:
This is in reply to your request of October 23, 1975
for my comments and recommendations on the report of
the Ad Hoc Advisory Group on Puerto Rico entitled
"Compact of Permanent Union between Puerto Rico and
the U.S."
In April 1975, I had a request to comment on the draft
report, from Marlow W. Cook, Co-chairman of the Ad Hoc
Advisory Group on Puerto Rico. A copy of my response
of May 6 to Mr. Cook is enclosed. Except with respect
to Section 2 of the Compact, the comments I made at
that time were not incorporated into the final report
and several substantive concerns remain unanswered.
For these reasons I am unable to endorse the Compact
in its present form.
We regret the delay in providing this information to
you.
Sincerely,
Secretary of Labor
Enclosure
U.S. DEPARTMENT OF LABOR
OFFICE OF THE SECRETARY
WASHINGTON
NOV 10 1075
Mr. James E. Connor
Secretary to the Cabinet
The White House
Washington, D.C. 20500
Dear Mr. Connor:
This is in reply to your request of October 23, 1975
for my comments and recommendations on the report of
the Ad Hoc Advisory Group on Puerto Rico entitled
"Compact of Permanent Union between Puerto Rico and
the U.S."
In April 1975, I had a request to comment on the draft
report, from Marlow W. Cook, Co-chairman of the Ad Hoc
Advisory Group on Puerto Rico. A copy of my response
of May 6 to Mr. Cook is enclosed. Except with respect
to Section 2 of the Compact, the comments I made at
that time were not incorporated into the final report
and several substantive concerns remain unanswered.
For these reasons I am unable to endorse the Compact
in its present form.
We regret the delay in providing this information to
you.
Sincerely,
John T. Dunlon
Secretary of Labor
Enclosure
LL-3
pay
110-4
MAY 6 1975
Mr. Narlow W. Cook
Co-Chairman
Ad Red Advisory Group on
Puerto Rica,
1016 16th Street, N.W.
Washington, D.C. 20036
Dear Mr. Cook:
This is in reply to your request for my comments on the
proposed bill "To Establish the Compact of Permanent
Union Between Puerto Rico and the United States."
I am in general agreement with the underlying purpose of
the proposed compact which, if adopted, would establish
a permanent relationship between Puerto Rico and the United
States. However, I have serious reservations concerning
several of the provisions and their effect upon rights of
workers in Puerto Rico.
UNENPLOYMENT INSURANCE
Sections 4 (a) and 6 (b) of the proposed compact would have en
effect upon the Federal unemployment insurance system of
which Puerto Rico is a part. The Puerto Rican unemployment
insurance law is an approved law under the Federal Unemployment
Tax Act and meets the requirements of Title III of the Social
Security Act. Puerto Rico qualifies in the same manner as
a state for purposes of the Federal-State unemployment
insurance system. It pays Federal-State extended benefits
and is reimbursed 50 parcent of the cost of such benafits
by the Federal Government. In addition, Puerto Rico is
eligible for Federal supplemental benefits payable under
the Emergency Unemployment Compensation Act of 1974 and
advance payment of benefits under Title III of the Social
Security Act. Puerto Rico has, in fact, applied for an
advance of $10 million to pay benefits in April 1975.
It is not clear whether the proposed compact would prevent
the continuation of Puerto Rican participation in the
FILE COPY FILE
Office of the Security
initials
2
Federal-State unemployment insurance system. The UI
program is supported by a Federal tax payable by employers
under the Federal Unemployment Tax Act. Section 4 (a) of
the proposed compact which makes internal revanues laws
of the United States inapplicable to Puerto Rico is
qualified by section 6 (b). Section 6 (b) would preserve
the application of grant and loan programs ** a * to the
citizens of the United States residing in the Free
Associated State of Puerto Rico." The Federal Unemploy-
ment Tax Act, the keystone of state participation in the
UI system, is not limited to a state or its citizens. It
applies broadly to employers and employees in the United
States, irrespective of whether they are citizens. Further,
section 3304 (a) (9) (A) of the Act specifically precludes a
state from denying unemployment benefits to an otherwise
eligible individual solely because he is residing in or
filing his claim in another state or Canada. Accordingly,
Puerto Rico might fail to qualify for Federal benefits.
The remainder of section 6 (b) and section 6 (c) and (d)
are unclear as to whether the Free Associated State would
assume full responsibility for collecting revenues to
support programs such as unemployment insurance. No
decision has been made at this time as to what system of
contributory payments will be initiated and when it will
be initiated. It seems clear, however, that Puerto Rico
is unable at the present time to support an unemployment
insurance program without Federal assistance. It would
be a tragic mistake to discontinue the flow of benefits
to workers in Puerto Rico because of the failure of
Puerto Rico to qualify under the Act.
WORKER ADJUSTMENT ASSISTANCE
Section 9 of the proposed compact would continue the
free flow of goods to and from the United States and
Puerto Rico. Section (c), however, would require customs
duties and other similar taxes to be paid into the Treasury
of Puerto Rico. While we would defer to the Treasury
Department with respect to substantive comments on this
section, we note that this would provide Puerto Rico with
preferential treatment with regard to such tax collections
not available to the states at large. of importance to
the Department of Labor is section (d) which might preclude
workers in Puerto Rico from receiving worker adjustment
assistance under the Trade Act of 1974.
3
Section 9 (d) would authorize Puerto Rico to impose,
increase, reduce or eliminate tariffs on finished
products, semi-finished, agricultural or raw materials
imported directly from foreign countries or transhipped
through the United States. The Trade Act of 1974
specifies that in order for a group of workers to be
eligible for adjustment assistance, the increase of
imports must contribute importantly to the required
adverse effect of the workers and their employers.
While this section of the Trade Act does not refer
specifically to tariff changes, the legislative history
of the Act indicates that such assistance was deemed
necessary to offset the adverse effects on workers that
might result from the exercise of the trade negotiating
authority provided in the Act. If Puerto Rico is
empowered to raise or lower tariffs unilaterally, the
rights of adversely affected employees under the Trade
Act would be nullified.
ENTRY OF ALIENS INTO PUERTO RICO
Section 10 (a) of the proposed compact would enable the
Government of Puerto Rico to limit the number of aliens
or to increase the quota of resident aliens who may be
admitted to Puerto Rico with the concurrence of the
President and the Government. I assume that since this
is a separate section in the compact, any program affecting
aliens such as the Department of Labor's alien certification
responsibility would be considered under the immigration
and naturalization laws rather than the general labor
statutes. With this understanding, I defer to the Bureau
of Immigration and Naturalization for substantive comments
on this section. I would hope, however, that this
section would not be used to import lower paid workers
into Puerto Rico so as to deprive citizens of employment.
THE FAIR LABOR STANDARDS ACT AND RELATED ACTS
Section 17 (a) of the proposed compact would effectively
revise the application of the Fair Labor Standards Act
to Puerto Rico. It provides that the minimum wage in
Puerto Rico should be equivalent to the minimum wage in
4
the United States as soon as economically possible,
but reserves to Puerto Rico the authority to set the
minimum wage and hours of work standards except for
shipping and aviation and certain other enterprises.
In the most recent amendments to the Fair Labor
Standards Act, the Congress set a schedule for the
eventual achievement of parity of minimum wage rates
in Puerto Rico with those in the states. The amendments
also extended the applicable mainland rates for employees
of restaurants and hotels, food service employees of
retail or service establishments and employees of the
Federal Government to such employees in Puerto Rico. As
a result of industry committee actions since the enactment
of the 1974 amendments, a large number of workers in
industries in Puerto Rico are reaping the benefit of minimum
wages close to those for state-side workers. While we
recognize the unique economic and employment situation
existing in many industries in Puerto Rico, we would none-
theless, be opposed to provisions which would adversely effect
workers in the Commonwealth.
It is not clear as to the meaning of those "enterprises
whose products or services are sold or rendered substantially
in the United States" which would be subject to the Fair Labor
Standards Act. If this category is intended to cover the
so-called "run-away shop," then it should be made clear that
this will include industries which, in one or more of their
operations, compete substantially with their counterparts in
the states. For example, the clothing industry sells over
50 percent of its output in Puerto Rico, but at the same time,
because of wage and tax advantages, has virtually cornered
the market in military hats and caps.
The proposed language dealing with minimum wages and
maximum hours does not specifically refer to child labor,
age discrimination and equal pay and thus may not relieve
Puerto Rico employers from compliance with these requirements.
In fact, giving Puerto Rico "exclusive jurisdiction over
all matters pertaining to labor-management relations"
may not be broad enough to exclude Puerto Rico from the
provisions of Title VII, ADEA and equal pay. However,
if this provision was interpreted to exclude these
categories from FLSA or other coverage, then there would
be no protection for persons affected by the various acts at
present unless and until Puerto Rico enacted comparable laws.
This also should not preclude the application of existing Federal
5
laws. The Department of Labor has fought for these
GERALD
issues for many years and, particularly in the case of
child labor, would be opposed to any provisions which
would abrogats these rights.
SERVICE CONTRACT, PUBLIC CONTRACTS, CONTRACT WORK HOURS
AND RELATED ACTS
The Service Contract Act, Walsh-Healey and the Contract
Work Hours and Safety Standards Act do not apply to
contracts issued by the Government of Puerto Rico or its
agencies. However, contracts issued by the United States
to be performed in Puerto Rico for work on service contracts
would be affected by section 17(a) of the compact. To
eliminate this protection while not preserving the FLSA
minimum otherwise specified in SCA could result in a
disastrous lowering of wages for some workers. Similarly,
wage determinations under Walsh-Healey are not applicable
to Puerto Rico, but are governed by FLSA or by a minimum
established by industry committees. This protection
for workers will be lost with the adoption of the compact
as now written.
Although the Davis-Bacon Act is not applicable to Puerto
Rico, many of its related statutes, such as the National
Housing Act, 12 U.S.C. 1715(c) contain labor standards
that apply directly to Puerto Rico. The labor standards
in these related acts are aimed primarily at preventing
economic disruption of the economy of a locality by
insuring that local contracting firms are not subjected
to unfair competition from outside the locality and pay
wages which are substandard for the locality in which the
Federal public works are to be constructed. The very
difficulties that Congress sought to remedy in 1931 with
its enactment of the Davis-Bacon Act could occur in
Puerto Rico.
OCCUPATIONAL SAFETY AND HEALTH ACT
Section 17(c) of the compact would reserve to Puerto
Rico exclusive jurisdiction over matters related to
occupational safety and health. For Puerto Rico to ex-
clude itself from coverage under the Occupational Safety
and Health Act of 1970 without having an equally effective
program in its place would constitute a grave disservice
6
to its workers. Section 18 of the Act provides a viable
means under which Puerto Rico could administer its own
program and obtain financial assistance from the Federal
Government. Section 18 provides that a state would have
jurisdiction under its own law for any occupational and
safety issue in which no standard is in effect under
section 6 of the Act. A state can assume responsibility
for the development and enforcement of occupational safety
and health standards where a Federal standard has been
premulgated under section 6. Grants are made to thesstates
under section 23 (g) for the purpose of assisting it in
administering and enforcing programs for occupational
safety and health contained in state plans approved by
the Secretary of Labor pursuant to section 18. Thus, if
the Act applied to Puerto Rico, it would have the benefit
of the Federal expertise developed by OSHA and NIOSH and,
in addition, could receive 50 percent funding for the
implementation of its program from the United States.
INTERNATIONAL LABOR ORGANIZATIONS
Section 2 of the proposed compact recognizes the jurisdiction
and authority of the United States to conduct foreign
affairs. However, section 2 (e) proposes that Puerto Rico
shall belong to international organizations and make
unilateral non-political agreements with other countries.
The Department of State is charged with the conduct of
foreign affairs on behalf of the United States, including
participation in international organizations. By agreement
with the State Department, the Department of Labor partici-
pates in the formulation of policy with respect to the
International Labor Organization. The no is an international
organization which would be included in the proposal to
permit independent membership by Puerto Rico.
Puerto Rico's present inability to participate in inter-
national organizations relates to its status as neither an
independent nation nor a territory, (some international
organizations permit territories to be admitted to member-
ship). ILO, however, has not adopted a system of "associate"
membership for states which cannot be admitted to full
membership. In the past, some political entities achieved
full membership in ILO before achieving full sovereignty,
but one of the requirements is that the entity must have
7
autonomy in labor matters. At the present time, Puerto
Rico does not have such autonomy. Even under the compact
as it is proposed, Puerto Rico would not have autonomy
over all aspects of labor matters related to Puerto Rico
and thus would probably be excluded from membership in
ILO. While there are many areas in which international
organizations operate in which it would be mntually
advantageous to Puerto Rico and the United States for
Puerto Rico to participate, we would be opposed to such
participation without the approval of the Executive Branch
or the Congress.
CONCLUSION
There are many other aspects of the proposed compact to
which we would pose objections or request clarifications.
Some of our objections are in areas not directly related
to labor laws and I would defer to those agencies which
have a primary interest in the subject matter.
I am most concerned, however, with the impact on workers
in Puerto Rico if the Federal labor laws are abrogated.
I feel that the compact as it now stands is ambivalent as
to the position which Puerto Rico wishes to maintain in
this regard. It is my opinion that working men and women
will suffer irreparable harm should they be deprived of
the protection of Federal labor laws. Because of the many
deficiencies which I see in the compact in this respect,
I cannot endorse it in its present form.
Sincerely,
John T. Dunlop
/
Secretary of Labor
PERSONALLY
THE SECY OF LABOR
LLC: SPPetters:btr 4/28/75
N2428, x38065
Rewritten:SPPetters:btr 5/2/75
..
November 17, 1975
Jim Falk -
Attached are OMB's comments
on the Puerto Rico report. Missing
are comments from Justice and
DOT -- we are following on these.
Trudy Fry
cc: Steve Low
WTM
RESIDENT
OFFICE
&
EXECUTIVE OFFICE OF THE PRESIDENT
BECUTIVE
UNITED
OFFICE OF MANAGEMENT AND BUDGET
STATES
WASHINGTON, D.C. 20503
NOV 1 1 1975
MEMORANDUM TO MR. JAMES E. CONNOR
Secretary to the Cabinet
FROM:
Donald G. Ogilvie
SUBJECT:
OMB recommendations re Ad Hoc Group
Report on Puerto Rico
This is in response to your October 23 request for comments
and recommendations concerning the report of the Ad Hoc
Advisory Group on Puerto Rico entitled, "Compact of
Permanent Union between Puerto Rico and the U.S." We pre-
viously had notified you we would need some additional time
beyond your deadline of October 30 for comments and recommen-
dations. The following comments and recommendations are an
interim response to your request. They indicate a number of
major policy questions which should be answered before the
report of Ad Hoc Group is submitted to the President.
We would note, at the outset, that in contrast to the
extensive interagency review and coordination on questions
concerning possible changes in the political status of the
Trust Territory and Guam, OMB was not requested to provide
its views on this proposed compact at any previous time.
In fact, we question whether there has been any coordinated
Federal agency involvement in the preparation of the proposed
new compact. If there had been such involvement by OMB, many
of the questions outlined below could have been addressed and
resolved at a much earlier point of time.
We believe this proposed compact should be given very
deliberate consideration both because (1) it is proposed as
a substitute for the present Federal Relations Act which
defines the political, fiscal, national security and other
fundamental relations between the U.S. and Puerto Rico and
2
(2) if recommended by the Executive Branch it would set
numerous precedents which would have direct effects in
ongoing negotiations with the Trust Territory of the
Pacific Islands and the soon to be commenced discussions
with the U.S. Territory of Guam. Further, transmission
to the Congress of any recommendations for the revision
of the present relations between the Federal Government
and Puerto Rico inevitably will provoke comparisons with
the Administration's proposed compact to establish a
Commonwealth of the Northern Mariana Islands in the
Western Pacific.
We have only had time to make a quick review of the report
without the benefit of the views of other agencies. However,
even this quick look indicates at least the following major
policy questions:
1. Why should the Administration agree to the proposal to
extend to the citizens of Puerto Rico the right to vote
for the President and the Vice President of the U.S.?
Under the present Federal law, citizens of Puerto Rico
generally are not required to pay Federal income or other
taxes. The same situation exists in Guam, the Virgin
Islands, American Samoa, and is proposed for the Common-
wealth of the Northern Mariana Islands.
The Ad Hoc Group proposes that this exemption from
Federal taxes be maintained but that the citizens of
Puerto Rico be granted the right to vote for the
President and Vice President. If this right were
to be extended to them, it would raise the issue of
extending that same right to U.S. citizens in the
other named areas.
2. Why should the Administration agree to the proposed
acceptance of a new, novel, term in American political
relations ("Free Associated State") to re-define Puerto
Rico's status?
If that term were accepted for Puerto Rico, could it
also be applied to Guam, the Virgin Islands, American
Samoa, or the Northern Mariana Islands?
3
3. Why should the Administration agree to the proposed
authority for the Free Associated State to participate
in International Organizations?
This is a proposal which has direct and immediate significance
for proposals now under active consideration in the Executive
Branch pertaining to requests by both Guam and the Trust
Territory of the Pacific Islands to participate in Inter-
national Organizations. The policy up until now for both
these latter areas has been to oppose such participation.
4. Why should the Administration agree to the proposal that
Puerto Rico
"
would levy, increase, reduce, or
eliminate tariffs and quotas on articles imported
directly from foreign countries or transshipped through
the United States " after prior consultation and coordination
with Federal authorities?
Once again, similar proposals are certain to be advanced by
the other named areas.
5. Why should the Administration agree to the proposal to provide
new authority under which Puerto Rico could import materials
and articles duty free for subsequent shipment or sale to
other parts of the United States customs territory provided
the F.A.S. (free at side) shipping price includes at least
33% value added in Puerto Rico?
Guam and the Virgin Islands (but not Puerto Rico) under
current law can make such duty-free imports provided F.A.S.
price includes at least 50% value added in those areas
(except for watches and watch movements for which recent
legislation reduced the valued added requirement to only
30%).
6. Why should the Administration agree to the proposal that
Puerto Rico be represented in the U.S. Congress by one
representative in the House of Representatives and one
representative in the Senate?
At present, Puerto Rico, Guam and the Virgin Islands
and the District of Columbia each has only one represenative
to the House.
FORD LIBRARY
4
7. Why should the Administration agree to the proposal
that Puerto Rico would have the privilege to submit
objections to the applicability to Puerto Rico of
proposed bills or Federal rules, regulations, or
orders before they are enacted or take final effect
and if such objections are raised to require specific
actions on them to determine whether the inclusion of
Puerto Rico is essential and also whether it would be
compatible with this proposed compact?
Once again, comparable proposals by the other areas are
likely to be requested if this proposal is accepted.
8. Why should the Administration agree to the proposal
that Puerto Rico would have exclusive jurisdiction over
all matters pertaining to minimum wages and working
hours, except for the shipping and aviation industries,
which would continue to be covered by appropriate Federal
laws?
Once again, we question whether this is a desirable
precedent.
We believe the following steps need to be taken in reviewing
the report and recommendations concerning Puerto Rico:
1. that the views provided to you by the Cabinet
R.
agencies be transmitted to OMB;
FORD
2. that OMB request the views on the report of other
GERALD
Federal agencies not represented in the Cabinet;
LIBRARY
3. that OMB obtain estimates from all agencies of the
potential impacts on the Federal budget of the
proposed compact;
4. that OMB work with the Office of Micronesian Status
Negotiations and the Department of the Interior to
develop a comparative analysis of the provisions of
(1) this proposed compact; (2) the proposed Commonwealth
of the Northern Mariana Islands; (3) the recommendations
previously approved by the President for proposed changes
in Guam's future political status; and (4) the present
negotiating instructions for Ambassador Williams with
regard to the five districts of the Trust Territory not
included in the Northern Mariana Islands Commonwealth
proposal.
5
Based on these views, facts and analyses we could identify
any other major policy questions as well as work to resolve
the policy questions identified above which the Ad Hoc
Advisory Group's recommendations raise. Realistically,
it will take several weeks to complete this kind of effort.
However, we believe such a review could be completed in time
to determine whether or not to transmit the Ad Hoc Group
recommendations to the Congress early in the next session.
We strongly recommend that the Report of the Ad Hoc Advisory
Group on Puerto Rico be given very deliberate consideration
before the President makes any decision about whether or not
to transmit it to the Congress because the proposed compact
which it contains would fundamentally re-write the existing
Federal Relations Act for Puerto Rico.
LIBRARY
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
NOV 14 1575
MEMORANDUM TO MR. JAMES E. CONNOR
FORD
Secretary to the Cabinet
FROM:
Donald G. Ogilvie
(Signed) Don
LIBRARY
SUBJECT:
OMB recommendations re Ad Hoc Group
Report on Puerto Rico
This is in response to your October 23 request for comments
and recommendations concerning the report of the Ad Hoc
Advisory Group on Puerto Rico entitled, "Compact of
Permanent Union between Puerto Rico and the U.S." We pre-
viously had notified you we would need some additional time
beyond your deadline of October 30 for comments and recommen-
dations. The following comments and recommendations are an
interim response to your request. They indicate a number of
major policy questions which should be answered before the
report of Ad Hoc Group is submitted to the President.
We would note, at the outset, that in contrast to the
extensive interagency review and coordination on questions
concerning possible changes in the political status of the
Trust Territory and Guam, OMB was not requested to provide
its views on this proposed compact at any previous time.
In fact, we question whether there has been any coordinated
Federal agency involvement in the preparation of the proposed
new compact. If there had been such involvement by OMB, many
of the questions outlined below could have been addressed and
resolved at a much earlier point of time.
We believe this proposed compact should be given very
deliberate consideration both because (1) it is proposed as
a substitute for the present Federal Relations Act which
defines the political, fiscal, national security and other
fundamental relations between the U.S. and Puerto Rico and
2
(2) if recommended by the Executive Branch it would set
numerous precedents which would have direct effects in
ongoing negotiations with the Trust Territory of the
Pacific Islands and the soon to be commenced discussions
with the U.S. Territory of Guam. Further, transmission
to the Congress of any recommendations for the revision
of the present relations between the Federal Government
and Puerto Rico inevitably will provoke comparisons with
the Administration's proposed compact to establish a
Commonwealth of the Northern Mariana Islands in the
Western Pacific.
We have only had time to make a quick review of the report
without the benefit of the views of other agencies. However,
even this quick look indicates at least the following major
policy questions:
1. Why should the Administration agree to the proposal to
extend to the citizens of Puerto Rico the right to vote
for the President and the Vice President of the U.S.?
Under the present Federal law, citizens of Puerto Rico
generally are not required to pay Federal income or other
taxes. The same situation exists in Guam, the Virgin
Islands, American Samoa, and is proposed for the Common-
wealth of the Northern Mariana Islands.
The Ad Hoc Group proposes that this exemption from
Federal taxes be maintained but that the citizens of
Puerto Rico be granted the right to vote for the
President and Vice President. If this right were
to be extended to them, it would raise the issue of
extending that same right to U.S. citizens in the
other named areas.
2. Why should the Administration agree to the proposed
acceptance of a new, novel, term in American political
relations ("Free Associated State") to re-define Puerto
Rico's status?
If that term were accepted for Puerto Rico, could it
also be applied to Guam, the Virgin Islands, American
Samoa, or the Northern Mariana Islands?
FORD
LIBRARY
3
3.
Why should the Administration agree to the proposed
authority for the Free Associated State to participate
in International Organizations?
This is a proposal which has direct and immediate significance
for proposals now under active consideration in the Executive
Branch pertaining to requests by both Guam and the Trust
Territory of the Pacific Islands to participate in Inter-
national Organizations. The policy up until now for both
these latter areas has been to oppose such participation.
4. Why should the Administration agree to the proposal that
Puerto Rico "
would levy, increase, reduce, or
eliminate tariffs and quotas on articles imported
directly from foreign countries or transshipped through
the United States " after prior consultation and coordination
with Federal authorities?
Once again, similar proposals are certain to be advanced by
the other named areas.
5. Why should the Administration agree to the proposal to provide
new authority under which Puerto Rico could import materials
and articles duty free for subsequent shipment or sale to
other parts of the United States customs territory provided
the F.A.S. (free at side) shipping price includes at least
33% value added in Puerto Rico?
Guam and the Virgin Islands (but not Puerto Rico) under
current law can make such duty-free imports provided F.A.S.
price includes at least 50% value added in those areas
(except for watches and watch movements for which recent
legislation reduced the valued added requirement to only
FORD
30%).
6. Why should the Administration agree to the proposal that
LIBRARY
Puerto Rico be represented in the U.S. Congress by one
representative in the House of Representatives and one
representative in the Senate?
At present, Puerto Rico, Guam and the Virgin Islands
and the District of Columbia each has only one represenative
to the House.
4
7.
Why should the Administration agree to the proposal
that Puerto Rico would have the privilege to submit
objections to the applicability to Puerto Rico of
proposed bills or Federal rules, regulations, or
orders before they are enacted or take final effect
and if such objections are raised to require specific
actions on them to determine whether the inclusion of
Puerto Rico is essential and also whether it would be
compatible with this proposed compact?
Once again, comparable proposals by the other areas are
likely to be requested if this proposal is accepted.
8. Why should the Administration agree to the proposal
that Puerto Rico would have exclusive jurisdiction over
all matters pertaining to minimum wages and working
hours, except for the shipping and aviation industries,
which would continue to be covered by appropriate Federal
laws?
Once again, we question whether this is a desirable
precedent.
We believe the following steps need to be taken in reviewing
the report and recommendations concerning Puerto Rico:
1. that the views provided to you by the Cabinet
agencies be transmitted to oMB;
2. that OMB request the views on the report of other
Federal agencies not represented in the Cabinet;
3. that OMB obtain estimates from all agencies of the
potential impacts on the Federal budget of the
proposed compact;
4. that OMB work with the Office of Micronesian Status
Negotiations and the Department of the Interior to
develop a comparative analysis of the provisions of
(1) this proposed compact; (2) the proposed Commonwealth
of the Northern Mariana Islands; (3) the recommendations
previously approved by the President for proposed changes
in Guam's future political status; and (4) the present
negotiating instructions for Ambassador Williams with
regard to the five districts of the Trust Territory not
included in the Northern Mariana Islands Commonwealth
proposal.
5
Based on these views, facts and analyses we could identify
any other major policy questions as well as work to resolve
the policy questions identified above which the Ad Hoc
Advisory Group's recommendations raise. Realistically,
it will take several weeks to complete this kind of effort.
However, we believe such a review could be completed in time
to determine whether or not to transmit the Ad Hoc Group
recommendations to the Congress early in the next session.
We strongly recommend that the Report of the Ad Hoc Advisory
Group on Puerto Rico be given very deliberate consideration
before the President makes any decision about whether or not
to transmit it to the Congress because the proposed compact
which it contains would fundamentally re-write the existing
Federal Relations Act for Puerto Rico.
LIBRARY