laying further negotiations, but, at the same time carrying out the commitments that we had made last year to this committee. In addition, he felt a need to get his own feet on the ground, do his own homework, and so on.

In effect, Dr. Williams will replace me as the chief of the negotiating team, and the makeup negotiating team will be his selection, and I at this point do not have much idea, if any, as to whom Dr. Williams will wish to have. The machinery of the interagency group, under the Under Secretaries Committee, will remain in being to address policy aspects of this question, from the point of view of the executive branch.

Senator Salii came back to Washington for other business a couple of weeks ago. A week ago, last Thursday, I went to San Francisco and met there with Dr. Williams, Senator Salii, and Representative Silk who had traveled there for the purpose to try to informally arrange where to go from here, in general.

We didn't discuss the substantive issues before the respective delegations, but we did discuss the how, when, and the where of the next round. Let me say first that the Micronesians themselves, speaking in terms of weeks, are in no hurry for the next round of talks, because they have the special session of the Congress of Micronesia coming up the 3d of May, and they don't want to meet until after that is over and after the U.N. Trusteeship Council meetings are over; these latter meetings begin, I believe, on the 25th of May.

In addition, Dr. Williams must wind up his commitments in San Francisco this month and next, and he plans to spend the month of June in the trust territory, going from district to district, not discussing status, but a fact-finding and viewing trip. I think he plans to spend a number of days in each one of the six districts.

Before he goes, he plans to attend the trusteeship council session in the U.N. The arrangement he made with Senator Salii and Representative Silk is that after he comes back, we will get together for the next round of talks, not before the middle of July and possibly as late as August.

Now this presupposes that the congressional consultation to which we are committed with this committee and other Members of the Congress of the United States and, in fact, other committees, with whom the other departments are concerned, must take place during the month of May and the month of June. This we are planning to do.

Mrs. Mink, I'm making a long speech in answer to your question, but there is very little of substance that has occurred since the August session of the Congress of Micronesia.

Mrs. MINK. As I understand it, your responsibilities as chairman of the Interagency Committee was to serve as the chief negotiator with the Congress of Micronesia's political status commission?

Mr. LOESCH. That is the way it worked out; yes. This was kind of an ad hoc arrangement, I must say, in the executive branch; but that is the

Mr. BURTON. Mr. Loesch, if I may offer the suggestion; when you are asked a question, if it is a yes, some of the surplus might be eliminated so some of the other members can have questions. Mrs.

Mink can have an opportunity to pursue her point and it won't be obscured with all the words.

Mr. LOESCH. I beg your pardon.

Mrs. MINK. If this is an accurate description of your role as chairman of the Interagency Committee, then the White House's appointment of Mr. Williams in essence substitutes your role as chief negotiator and places him in this position, does it not?

Mr. LOESCH. Yes.

Mrs. MINK. And so, since May of 1970 to the present time, nothing having transpired to indicate further progress in the negotiations, are we being told today that very likely not until August will there be likely to occur any further meetings with the Micronesian commission to begin active pursuit of some possible compromise?

Mr. LOESCH. Yes. It could be as early as the middle of July, but my guess is August.

Mrs. MINK. Is it possible for you to tell us whether the Interagency Committee was consulted by the White House prior to the appointment of Mr. Williams, and was it at the recommendation of the Interagency Committee, because of the stalemate

Mr. LOESCH. I really don't know how to answer that question, Mrs. Mink.

Certainly, we had discussions with White House staff through the Under Secretaries Committee which oversaw the operations of the interagency group. But we, in the interagency group, made no rec ommendation as to the appointment of the personal representative of the President. That wasn't up to us.

Mrs. MINK. Thank you very much, Mr. Chairman.

Mr. BURTON. Congressman Ruppe.

Mr. RUPPE. Thank you, Mr. Chairman.

Mr. Loesch, could you summarize what might be the present position of that delegation regarding their future status?

Mr. LOESCH. You're speaking of the Micronesian delegation?

Mr. RUPPE. Yes. Could you summarize what might be their feeling as to the future of that trust territory?

Mr. LOESCH. I would be loathe to generalize, Congressman. There was considerable discussion last summer, in the session of the Congress of Micronesia and considerable talk about independence, et

cetera.

I think that the Micronesians themselves are now more anxious to address the practicalities of any relationship that might be arrived at-how it would work, how it would be funded, and so on. In other words, if I read the situation correctly. I think they're in a much more practical mood now than last summer. Now, as you are aware, there's quite a difference of opinion among the districts themselves as to what relationship should be developed

Mr. RUPPE. Would you summarize, perhaps by saying that the idea of independence is still of some interest, that they are exploring the possibility of improving the existing relationship with the United States, particularly as improving the financial offerings that might be forthcoming from this country?

Mr. LOESCH. Yes.

Certainly it is my opinion that they are willing to explore the practicalities of various kinds of relationships.

Mr. RUPPE. If they were to go the route of independence, would they do this in direct negotiation with the United States or could they appeal directly to the United Nations Security Council?

Mr. LOESCH. Well, I am not an international lawyer, but I can say that according to its terms, the trusteeship agreement cannot be terminated without the consent of the United States.

Mr. RUPPE. I notice in your statement you indicate, as regards American Samoa that you review the budgetary requirements of American Samoa for the appropriations process. Do we actually supply the budget of Samoa, do they raise the money on their own? Mr. LOESCH. Yes, they do. They raise a substantial amount of local revenue. I think it is in the order of $6 million at the present time. But, we supply the balance of the requirements.

Mr. RUPPE. I notice that Mrs. Farrington has indicated that a program for fiscal 1972 involves the expenditure on American Samoa of about $11.2 million.

Considering the population is about 27,000, can they actually absorb that much money in construction and the buildup of construction work?

Mr. LOESCH. Yes, they can. As a matter of fact, the Governor is pressing for a higher level than that. And I haven't any doubt that the money will be put to good use. There is a great deal to be done, Congressman, in American Samoa.

There are some villages that have never had access except by the roughest of trails, and highways and roads should be built.

Mr. RUPPE. Does the construction and the work there find its accomplishment by native peoples or do we bring in construction crews to do the work?

Mr. LOESCH. Some of each. However, American contractors are brought in only for the largest jobs. Native indigenous capability has been developed for the smaller

Mr. RUPPE. Well, then do you and your colleague indicate or suggest that the training skills of the population have been improved and that they are, to a continually greater degree taking over any work development, project development, etc., on the island?

Mr. LOESCH. I think so, but Mrs. Farrington has just returned last night from American Samoa, perhaps she can tell us.

Mr. RUPPE. She can give us the latest information.

Mrs. FARRINGTON. Well, I would say that the Samoan people live in a communal system in villages, so whenever they are called upon they are very responsive in small jobs and do their best, although they don't have many highly skilled workmen. They do, when it comes to a large contract, as Mr. Loesch says, have to bring in somebody. But, they are making every effort to train the local people, and just this year there has been the terrific impact, on me anyway, of the community college that's been started there to train them in vocational skills too.

And, it has gone beyond all expectations, the applications coming for next year, and they are doing everything as they can.

As far as the need is concerned, and this year, I've been there, you can't imagine what the need is. As Mr. Loesch pointed out there in village after village there's no road access to it, although there are the most mountainous, dangerous trails that people have to go through daily to get children to go to school. And they are in great need for sewage improvement and water supply.

Just everything that you call infrastructure is needed.

Mr. RUPPE. How would the Bulova Watch Co. find the talent or skills in the islands to actually get into production? Do they train the people, or does the United States train them?

Mrs. FARRINGTON. As far as I know, they train them. They are doing a great job. They started out in the Virgin Islands with the watch companies, and also in Guam, they have proved they can train the local people, and they are going into Samoa.

Mr. RUPPE. How many are they employing now and what is their goal for 2 or 3 years from now?

Mrs. FARRINGTON. I'd have to ask Mr. Heller. Maybe he'd know. Mr. HELLER. They expect to employ 40 people. They have a quota of about 200,000 watches a year and that is fairly well fixed, so they can't go very much beyond that.

Mr. RUPPE. So they'd like to build up to about 40 individuals.
Mr. HELLER. That's right.

Mr. RUPPE. Changing the subject to Micronesia momentarily, the Micronesian Occupation Center apparently trains some 500 students. Is this a new occupational center?

Mrs. FARRINGTON. It is a new one that opened last year. I was there in January and visited it. They officially have about 286, I believe, students. And they have 500 coming the next year, and 1,000 coming the next year. And it is one of the greatest helps for Micronesia that I could imagine. I was very much impressed with it.

They had even a real service station there that was serving the community that they were training the students to operate. They were training them in hotel work and all manner of things in which they never had any training before.

Mr. RUPPE. This is essentially a vocational type program then? Mrs. FARRINGTON. Yes.

Mr. RUPPE. And finally, as far as the Virgin Island is concerned, you indicated the Federal Government does have an involvement as far as a Federal contribution to the matching fund is concerned, yet you indicate there's no direct appropriation of money for the Virgin Islands. And it seems-that seems to me something of an inconsistency.

Mrs. FARRINGTON. Well, Mr. Dunn can explain the details of that to you.

Mr. DUNN. The matching funds are developed mainly from the rum tax paid on rum imported from the Virgin Islands into the United States and its at the rate of $10.50 per gallon. Last year it amounted to $16 million.

It was called a matching fund originally, because when it was first

set up, the Virgin Islands had to raise a set amount of revenue to get the full amount put into the matching funds. They now raise many more dollars than are in the matching fund, so it's really not a matching fund, as such. Last year it amounted to $16 million. Mr. RUPPE. This is duty on rum sent from the Virgin Islands to New York?

Mr. DUNN. To the United States.

Mr. RUPPE. To the United States.

Mr. DUNN. Yes. That is put on matching funds.

Mr. RUPPE. And all of the additional revenues for the administration of the island are actually developed and derived from the Virgin Islands itself?

Mr. DUNN. Right. They have a tax structure whereby Virgin Islanders pay tax to the Virgin Islands government in lieu of Federal income tax.

Mr. RUPPE. How about the airport? Will this also be paid for by Virgin Island revenues?

Mr. DUNN. With possibly some contributions from the Department of Transportation.

Mr. RUPPE. So then there are other American revenue services available to them, but none on direct appropriation?

Mr. DUNN. Federal grant programs, just like States.

Mr. LOESCH. To clarify that maybe we should make it clear that the Virgin Islanders pay no Federal income tax in effect. They pay at the same rate we do, but the money goes direct to the Virgin Islands, which of course amounts to a subsidy to that extent.

Mr. BURTON. Will the gentleman yield?

Mr. RUPPE. Yes.

Mr. BURTON. Among other things, one of the problems that we've found in the Virgin Islands with regard to the Hess oil contract is that the U.S. Customs deducts 10 percent from the amount of duties it returns to Hess as the cost of collecting them. Until the U.S. Comptroller protested, this 10 percent was made up by the Virgin Islands' Government. It is not now doing so. Now, the Hess Oil Co. agreement, as I understand it, also provides for the payment of a minimum of $7,500 a day, representing 50 cents a barrel, to the Virgin Islands government.

Because 100 percent of the customs duties have not been returned, Hess has not made its payments to the Virgin Islands. As a matter of fact, when the Hess oil production increases, it is going to cost the Virgin Islands government money. They not only will not in effect have any income, they will have a cost.

Were you aware of that?

Mr. LOESCH. Yes.

(The material for the record follows:)