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: Published: Aug 4, 2008. Publicly Released: Aug 4, 2008.

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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.

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.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In 2012, DOL implemented this recommendation and provided GAO with DOL's strategy to obtain and analyze employment-related data for the CNMI in order to inform its decision-making. DOL plans to analyze data from the U.S. Census Bureau, including County Business Patterns data and Census 2012 data. It also plans to analyze CNMI W-2 tax record data, including data on citizenship and industry sector.

    Recommendation: Because current data gaps limit federal agencies' ability to make key implementation decisions to best meet the goals of the legislation, the Secretary of Homeland Security and the Secretary of Labor should 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.

    Agency Affected: Department of Labor

  2. Status: Closed - Implemented

    Comments: No further action is needed, because federal agencies have completed decisions related to CNMI foreign investors under the Consolidated Natural Resources Act of 2008. In 2010, DHS issued a final rule allowing a large proportion of investors holding CNMI long-term foreign investor permits to obtain U.S. CNMI-only non-immigrant treaty investor status during the 5-year transition period that began in 2009.

    Recommendation: Because current data gaps limit federal agencies' ability to make key implementation decisions to best meet the goals of the legislation, the Secretary of Homeland Security and the Secretary of Labor should 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 Affected: Department of Homeland Security

  3. Status: Closed - Not Implemented

    Comments: DHS did not take the recommended action. DHS has identified a single data source that it plans to use in making its key implementation decision, but this source does not distinguish between U.S. and foreign workers. DHS has reported that it will review data that the U.S. Department of Labor is collecting and analyzing that distinguishes between U.S. and foreign workers and that DHS may, at some future date, use the Department of Labor data.

    Recommendation: Because current data gaps limit federal agencies' ability to make key implementation decisions to best meet the goals of the legislation, the Secretary of Homeland Security and the Secretary of Labor should 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.

    Agency Affected: Department of Homeland Security

  4. Status: Closed - Implemented

    Comments: The Department of Homeland Security (DHS) agreed with the recommendation. On March 25, 2011, DHS, and the departments of the Interior, Justice, Labor, and State finalized a memorandum of agreement that set forth the parameters of the working relationships and responsibilities for implementation of CNRA in the CNMI. (See GAO-11-805T)

    Recommendation: Because of the importance of key implementation decisions by different federal agencies and the interaction of those decisions, the Secretary of Homeland Security should 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.

    Agency Affected: Department of Homeland Security

  5. Status: Closed - Implemented

    Comments: The agency indicated in its agency comments or 60-day letter that it concurred with the recommendation and planned to take action to implement it. GAO is monitoring or reviewing agency actions to implement the recommendation. GAO has ongoing work in this area.

    Recommendation: Because current data gaps limit federal agencies' ability to make key implementation decisions to best meet the goals of the legislation, the Secretary of Homeland Security and the Secretary of Labor should 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 Affected: Department of Labor

 

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