APPENDIX: III APPENDIX III Mr. Frank C. Canahan, Director many mid-level management officials did not know that the Northern Mariana Islands had entered into the Covenant and were totally unaware of the rights guaranteed under that agreement. Once they became aware, the problems were usually resolved quickly and to our mutual satisfaction. Other issues required action at the highest level. For example, President Carter issued a proclamation in order to allow local people to use fishing vessels given to our government by Japan. Other issues which generally involve applicability or inapplicability of federal laws have been the subject of extensive review and study by the Commission on Federal Laws. Unlike many other territories and insular possessions, our Covenant has built-in mechanisms for the resolution of disputes. For example, see Section 902 of Public Law 94-241, which requires that special representatives meet and consider issues affecting our relationship. Although your draft report does not specifically mention the Commonwealth's relationship with the United States Congress and the. committees which have oversight over the territories, we feel an obligation to inform you that we feel that we have been treated quite fairly. Since 1978, supplemental appropriations us, has been most responsive to our requests. It is true, as indicated in your draft report, that, until recently, the United States was primarily interested in the . Trust Territory of the Pacific islands for strategic purposes. However, in all fairness, the United States did honor its pledge guaranteeing self-government. The most serious problem affecting the Northern Mariana Islands is that, on several occasions, attempts to attract more businesses to our island have been thwarted because of positions taken by federal officials. Although the Department of the Treasury has indicated that the income tax (which is mirrored after that of the United States) is inappropriate to our needs, both as a revenue measure and as an inducement to do business, the Department of Interior has been most reticent to act as our advocate before the appropriate committees of Congress. Several tax task forces have addressed this problem and we are ready to transmit draft legislation which would adopt, ina modified form, the Internal Revenue Code (IRC). I note that the IRC does not apply in either American Samoa or Puerto Rico. More importantly, it is not the local income tax in either the 60 2000267 eGREA efiollt=nalgialie-ndemi CA c have been made to fund needed projects such as a new power plant, new hospital and improvements to our water system. Capital improvements funds guaranteed by the Covenant would . have been insufficient to fund projects of this magnitude and the United States Congress, which has plenary authority over