Conference Probes Potential for U.S.-Cuba Farm
Kimberly L. Waldner and Wayne S. Smith
October 25, 2000, the Center for International Policy held a conference
on the prospects of agricultural trade between the United States
and Cuba now that a limited exception for food and medicine has
been made in the U.S. embargo. Conference participants noted that
American farmers needed new markets. They could sell an estimated
$400 to $600 million to Cuba almost immediately if unrestricted
sales were allowed, and $1 billion in five years. Beyond
the market imperative, a number of participants also said that
the United States should long ago have removed food and medicine
from the embargo to be consistent with international law.
noted that it was fully expected that Congress would pass legislation
last year to allow the sale of food and medicine to Cuba, Libya,
the Sudan, Iran and North Korea. Polls indicated American public
opinion to favor it and there was clearly a bipartisan majority
in both houses for it. An amendment offered by Rep. George Nethercutt
(R-Wash.) to the agricultural-appropriations bill was the vehicle.
Unfortunately, as conference participants noted, the Republican
leadership in the House backed by the Cuban-American representatives
from Florida and New Jersey once again blocked the Cuban market
to U.S. farmers. Though not tampering with the amendment's provisions
to sell food to the other four countries, the leadership got restrictions
attached to Cuba sales prohibiting not only U.S. government trade
credits but even private U.S. bank credit. Even worse, they attached
a wholly-unrelated tightening of travel controls, making it less
likely that U.S. citizens will be able to travel freely to Cuba
in the near future.
there was consensus at the conference that the thus-modified Nethercutt
amendment was less than hoped for, those representing agricultural
interests tended to see it as a welcome step forward, noting that
it opened the way to sales to the other four countries--including
the important Iranian market--and did not rule out sales to Cuba,
provided they were financed by third-country banks.
representatives at the conference, however, said their government
viewed the restrictions as insulting and discriminatory and would
not enter into any commercial transactions under these terms.
Most American participants whose focus was U.S.-Cuban relations
rather than agriculture saw the codification of travel controls
as too high a price to pay for an elusive gain on trade.
reacting critically or positively to the Nethercutt amendment
as enacted, many American participants believed that an all-out
effort should be made in the next Congress to remove the restrictions
on U.S. bank credits and to reverse the codification of travel
controls or lift them altogether.
was also general consensus that trade worked best when it was
two-way and the United States should not only export but also
begin importing from Cuba.
Patterns of Trade
1959, Cuba and the United States were important trading partners.
William Messina, Jr. is executive coordinator of the International
Agricultural Trade and Development Center of the University of
Florida. He noted that Cuba had been the United States' sixth-largest
export market, with the United States supplying 70 percent of
Cuba's imports, some 25 percent of which were agricultural
commodities, including rice, beans, beef and dairy products. The
United States in turn was Cuba's principal market and more than
90 percent of Cuban exports to the United States were agricultural
commodities, led by sugar, tobacco, tropical fruits and winter
this trade was mutually beneficial was undisputed by conference
participants, and much of it could be restored along earlier lines.
It would still be advantageous to Cuba to buy rice, beans and
dairy products from the United States and Cuba would also be interested
in wheat and poultry products. The United States still wanted
to buy fine Cuban tobacco and some tropical fruits and possibly
winter vegetables. As the nature of the world sugar market had
changed, the United States would no longer need large quantities
of Cuban sugar but could buy lesser amounts for refining, and
there are now other products of possible interest, such as shellfish,
citrus, and alcohol.
short, what was once an important trading relationship could easily
become so again to the benefit of both countries.
DeLaugher, president of the U.S. Rice Producers' Association,
began the panel discussion with an analogy--when a piece of farming
equipment sits unused for a long time, a lot of grease is needed
to get it going again. He explained that while the recent action
in Congress to allow for the restricted sale of food and medicine
to Cuba was not as big a grease gun as U.S. farmers had hoped
for this year, they would use it nonetheless. According to DeLaugher,
the market for rice in Cuba matched the production of rice in
the state of Texas--it was a large market. For that reason, the
growers and producers that he represented would continue to fight
for a further opening in the Cuban market.
Machin of the Cuban Interests Section agreed with his American
counterparts that Cuba was a natural market for United States
agricultural products, because of proximity, past trading relations
and interest in one another's products. He said that after the
fall of the Soviet Union in 1991, the Cuban government was forced
to diversify its pool of trading partners and suppliers. Today,
the most important Cuban trading partners were Europe, Canada,
and Latin America. The Cuban government currently imported $1.4
billion in foodstuffs annually, a number that was constantly increasing
as the economy grew and more food was needed for citizens and
any government, Machin said, Cuba's was always looking for better
trade conditions, lower prices and the highest-quality product
for its money. Currently the Cuban government got the majority
of its rice from Vietnam, China and Thailand. Due to the long
distances involved, the Cuba spent 30 percent more in freight
costs and deliveries took more than fifty days. By contrast, a
ship from New Orleans could cover the 599 nautical miles' distance
to Havana in four days. Shipping time and costs were important
factors for the Cubans.
said, however, that despite the advantage of proximity and even
recognizing the efforts expended by allies in Congress on the
legislation, the restrictions were humiliating and impossible
for the Cuban government to accept and there would be no commercial
Stern is former chairwoman of the International Trade Commission
and now head of the of the Stern Group, Inc. She said that the
impact on the U.S. economy from trade with Cuba would be small
but beneficial. She noted the steady increase in Cuban imports
from the West since the fall of the Soviet Union and explained
that even a partial lifting of the embargo on food and medicine
could allow for more than $400 million in U.S. exports after a
period of five years, and nearly six thousand associated jobs.
Stern's projections matched those of the U.S. Department of Agriculture
in August 2000. The USDA estimated that food and agricultural
entities in the United States could expect $300 to $500 million
in annual sales to Cuba. Stern's figures under partial lifting
were predicated on access to U.S. financing and agricultural credits.
She noted that under the final legislation with its restrictions
on U.S. financing, the anticipated $400 million in exports would
be reduced significantly. Finally, she said, with the Cubans unwilling
to negotiate deals under the recently passed legislation, the
amount of U.S. agricultural exports to Cuba dropped to zero.
from these economic calculations, Stern noted, political considerations
ruled. Political factors on both sides, the United States and
Cuba, would dictate the speed and extent of economic benefits.
These political factors were two: 1) the extent of U.S. official
action liberalizing the embargo and 2) the degree of domestic
liberalization and reform in Cuba's planned economy permitted
by the Cuban government.
saw a number of additional impediments to U.S.-Cuba trade. For
example, Cuban authorities might try to avoid the risk of relying
on any one supplier for the majority of their imports--in particular,
food--after having been burned twice in the past, first by the
original U.S. embargo and second by the devastating withdrawal
of the Soviet Union.
to Stern, the prospect of partial U.S. trade liberalization with
Cuba marked an important political step as well as an economic
opportunity. However, she cautioned that this opportunity for
American farmers and business was also a threat to the Cuban status
quo and the Cuban government's control.
Drazek was formerly assistant secretary of agriculture for international
affairs and is currently a trade consultant to DTB Associates.
He noted that even if the United States completely lifted the
embargo, trade would not be completely free as both countries
would likely impose tariffs. There would then be a need for a
free-trade agreement which would be more difficult to reach.
noted that in May 1998, Cuba celebrated its fiftieth anniversary
as a founding member of GATT and a member of the World Trade Organization.
He noted that at a recent U.N. meeting in New York Fidel Castro
received a standing ovation. This underlined the lack of support
for the embargo. It was seen that Castro had stood up to the United
States and not that the United States stood up to him.
conference noted that the United States could learn from the creative
financing options the Europeans have used to channel Cuban business
to their farmers. In some cases the Cubans have paid in cash,
but regardless of the method of payment, Cuba was allowed to negotiate
terms. For example, the French government helped its producers
underwrite trading costs with Cuba. Cuba was treated with respect
and allowed to make its share of the decisions, and both trading
partners gained confidence in one another. Even though the Cubans
paid more in freight, they were comfortable doing business on
these terms with partners who had proved reliable.
asked what steps the rice industry might take to get Congress
to pass more meaningful legislation in 2001, DeLaugher explained
that his organization was assembling a test financing package
to show how trade was still hampered under the new legislation.
He explained that the best way to persuade Congress was to show
legislators that nothing would get done under the current law.
overwhelming conclusion of the panel on Congress was that strong
bipartisan support existed in both houses for lifting all sanctions
on the sales of food and medicine. Panelists agreed that the measures
achieved in the agricultural-appropriations bill were only a foot
in the door--a jumping-off point for a more thorough and meaningful
change in policy in 2001.
2000 the Senate Agriculture Committee voted overwhelmingly to
end the restrictions and in late June the House voted 301-116
to prevent the use of Treasury funds to enforce the existing food-and-medicine
sanctions. Brian Moran, senior legislative assistant to Sen. Byron
L. Dorgan (D-N.D.), explained what happened next.
there were enough votes to ease the sanctions. But action would
follow no textbook pattern but would be influenced by election-year
politics. Everyone running for reelection needed to be able to
show victories on important issues. Thus both supporters and opponents
of sanctions were under great pressure to accept a compromise
lifting sanctions on other countries but effectively leaving them
election-year politics explained how an amendment originally benefitting
both Cuba and U.S. farmers ended up benefitting no one except
House leaders and three Cuban-American members. When Representative
Nethercutt came forward with an amendment that was sure to benefit
his constituents and other agricultural interests, the Republican
leadership cut a deal with him making him look like a hero in
his district while preventing a true opening to Cuba, indeed tightening
the current embargo by codifying the existing travel restrictions.
changing the original financing provisions in Nethercutt's amendment
and by tightening the travel restrictions, the Republican leadership
effectively redefined the issue. No longer was it whether to lift
all food and medicine sanctions, which clear majorities in both
Houses supported. Now it was whether to tighten travel while lifting
sanctions on everyone except Cuba. This tactic split the agricultural
community away from humanitarian and public-interest groups which
opposed sanctions on Cuba.
legislative assistant Rob Neal noted that the debate was about
more than Cuba. He reported that his boss and others were confronted
early on with the question of whether to keep Cuba in the legislation
at all. They could have excluded Cuba altogether and seen their
bill move quickly through both houses. However, they kept Cuba
in and as a result, beginning on February 28, 2001 sales of food
and medicine to Cuba would be legal.
to the legislation's inadequacies, Neal stated simply, "Don't
move the goalposts." Fifteen months ago no one would have guessed
how far this issue could come in an election year. After last
year's maneuvers by the leadership it was clear that any attempt
to move the issue forward would require a better effort in lining
up members. To spearhead this effort, in November 1999, 220 House
Republicans and Democrats signed a letter to Speaker J. Dennis
Hastert (R-Ill.) calling for meaningful change in U.S. sanctions
policy in the year 2000.
necessary steps were taken, such as scaling back the proposal
put forward by Sen. John Ashcroft and creating a congressional
force strong enough to ensure that the leadership would have to
accept some combination of the previous year's proposal. According
to Neal, they were successful - after all, they succeeded in not
allowing the Nethercutt amendment to be wiped out all together,
which looked like a real possibility in early summer of 2000.
was significant was that Cuba was kept in the bill. While the
current legislation might not change much on the ground, in looking
ahead to next year Neal could say, "Now we at least have a foot
in the door."
the opinion of Pete Kasperowicz, founder and editor of Cuba
Trader, Nethercutt's compromise with the Republican leadership
was excessive. With no government or private financing allowed
and travel restrictions increased, this was no opening at all.
Under these restrictions one must forget about selling to a Cuban
government entity altogether and find a private person with a
lot of cash.
was claimed by some that the new legislation waived the Helms-Burton
Act restriction that prevents U.S. ships that have called on Cuban
ports from reentering the United States for 180 days. In fact
it did not, Kasperowicz noted. This issue was, however, dealt
with in the Cuban Democracy Act, which said that exceptions to
this law might be made in the case of special licenses. And the
Office of Foreign Assets Control had indicated that it would waive
this restriction for U.S. companies exporting food and medicine
to Cuba under the new legislation.
noted that both Senator Ashcroft and Representative Nethercutt
were motivated by electoral considerations. The ironic part, he
said, was that in reading the bill that emerged one struggled
to find any real champions on the issue. Not much would come of
it at all.
noted during the panel discussion the Cuban-American representatives
from Florida and New Jersey were hyper-active during the entire
negotiating period. The Republican party was divided. The farmers
and free traders did not agree with the Cold War tactics of the
leadership and Cuban-American members.
Muse, in one final comment, criticized Nethercutt and his staff
for having gone behind closed doors with the leadership to appease
three House members, in the process negotiating away one of the
most fundamental human rights, that of travel. This he found to
be a pathetic tradeoff for a piece of legislation that would do
nothing to help Cubans or U.S. farmers.
Business and Morally Right"
speaker Jack Laurie, vice-president of the American Farm Bureau
Federation, recalled that he had visited Cuba in 1999 as part
of an agricultural fact-finding delegation led by the Center for
International Policy and had seen a country with many problems
and with policies that many Americans would find objectionable.
But he had also seen a country striving to revamp its economy
and in need of agricultural products the United States could supply.
It was an important potential market for American farm products.
Laurie had no magic solution to Cuba's dilemma, but saw only good
for both sides in reforming the forty-year-old U.S. trade embargo.
the door to trade relations with our neighbor is not just good
business, it is morally and ethically right," he said. "Trade
involves far more than moving goods and services. The flow of
ideas and values also occurs. Cooperation and respect should dictate
our actions, not misguided government decrees."
continuation of sanctions on food and medicine hurts only defenseless
people, not their governments. When food is used as a weapon the
ones most hurt are the U.S. farmers and the consumers in those
countries targeted by our sanctions . . .Worst of all, America
gains the reputation of being a bully, keeping food and medicine
away from hungry and sick children; this is totally inconsistent
with our country's tradition of compassion for others."
called the recent congressional action an important first step,
but stressed the need for more. If markets were to be opened for
American farm products, U.S. government export assistance should
be allowed for all countries, Cuba included.
called on all to redouble their efforts to bring about the unfettered
sale of U.S. agricultural products to Cuba. In the year since
the American Farm Bureau Federation began its campaign to open
the Cuban market, "We've seen a sea change in U.S. policy toward
Cuba and achieved an opening to North Korea, Libya, the Sudan
and Iran. This puts us closer to our ultimate goal of total sanctions
calling on Americans to press ahead to lift all sanctions and
permit U.S. financing, both government and private, of sales to
Cuba, Laurie also called on Cuba to take a more positive view
of what was accomplished and perhaps even to test the legislation
by attempting a few purchases.
made a good beginning, " he concluded, "but much remains to be
Gutierrez Madrigal, president of Cubazucar, Havana, saw sugar
as an integral part of Cuban history, still the island's principal
export. After some difficult years following the collapse of the
Soviet Union, the Cuban sugar industry was beginning to recover.
Pesticides, fertilizers and many other inputs for a high-yield
crop remained in short supply, but Cuba was maximizing what it
had. Its aim was not to vastly increase production, rather to
produce a high-grade product on a cost-effective basis. It was
also concentrating on deriving maximum benefits from sugar by-products.
was not yet possible, Gutierrez said, for Cuba to revive in even
small quantities its historic sugar trade with the United States.
Many barriers remained on the U.S. side and the recent action
of the Republican leadership bode ill for the early elimination
of these barriers. Still, inevitably, the embargo would be lifted
and two-way trade resumed, with sugar a part of it.
Tom Earley is executive vice-president of Promar International
and former staff economist on the president's Council of Economic
Advisers. Despite its problems, he noted, Cuba was exporting some
$300 million in agricultural products besides sugar each year,
principally tobacco, rum, seafood, fruits and winter vegetables.
He saw no reason why Cuba could not dramatically expand these
exports, but to increase production it needed more fertilizers,
insecticides and other inputs requiring capital investment. Furthermore,
Cuba needed to upgrade support facilities such as cold storage
and packaging, which would also require capital. Joint ventures
had already begun with considerable foreign investment from many
countries, excluding the United States. When the time came, Americans
would doubtless be interested as well.
Muse, an attorney with Muse and Associates, stressed that so long
as the Helms-Burton Act was on the books, it would be difficult
to import any products from Cuba, agricultural or otherwise, as
those U.S. citizens and companies who lost properties in Cuba
could argue that the product was produced on land that previously
belonged to them and thus take the importer to U.S. federal court
on charges of trafficking in their lost property. Muse pointed
out that a dozen other reasons existed why two-way trade would
be nearly impossible until the Helms-Burton Act was rescinded.
toward the day when it was and normal trade resumed, it was important
that the property-claims issue be resolved, Muse noted. The only
claims the U.S. government had some legal responsibility for were
those of U.S. citizens whose properties were nationalized and
who were citizens at the time. Under international law, the U.S.
government had no responsibility for the claims of those who were
not then U.S. citizens--for example, the Cuban-American claims.
Smith added that Cuba had from the beginning recognized its obligation
to compensate American owners for their nationalized properties.
It had offered a formula for compensation at the time the properties
were taken, but the United States, rightly he believed, had rejected
it as insufficient. The matter was raised again in 1977 when the
United States and Cuba opened interests sections in each other's
capitals and resumed direct communication. Cuba reached compensation
agreements with every other state with claims against it. In 1977,
and periodically after that, it indicated its willingness to work
out an agreement with the United States. The United States was
unwilling to enter into such negotiations, however, because it
was fearful that this would be interpreted as a long step toward
normalization, a step it was unwilling to take.
willingness to negotiate then confronted the Helms-Burton Act's
lumping of Cuban-American claims together with the original American
claims. This mixing was in violation of international law. No
Cuban government would ever negotiate under those terms. Thus,
if the issue of compensation was ever to be addressed, Helms-Burton
must be rescinded and the Cuban-American claims thrown out. The
U.S. and Cuban governments could then sit down to settle the matter
of nationalized U.S. properties or each claimant could negotiate
his or her own deal with the Cubans
said that despite the restrictions imposed in the Nethercutt amendment,
the president retained the right to license the sale of food and
medicine to Cuba if he so chose. The Helms-Burton Act codified
the embargo in its entirety, but that meant that it also put in
law the president's authority to issue such licenses.
credits: Nestor Hernandez, BlackPearl Photography
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