Fifty years ago, 60 percent of Cuba’s food imports came from the United States. Trying to regain that market, in late February Minnesota Rep. Collin Peterson, along with 30-some co-sponsors, introduced the “Travel Restriction Reform and Export Enhancement Act (H.R. 4645),” a bill that would remove restrictions on U.S. agricultural sales and travel to Cuba.
Several weeks later, the House Agricultural Committee spent a March 11 hearing listening to testimony and debating the merits of altering the embargo.
For more on the bill, see Bill would loosen Cuba trade embargo.
While sides in the debate staked out positions, it became quickly apparent there was good news for growers: with caveats, the committee largely agreed that U.S. agriculture should be allowed to sell into Cuba without the current, onerous restrictions. Less popular — especially amongst the Republicans on the committee — was the notion that U.S. dollars could more easily flow into the communist nation’s coffers through free travel.
Shortly after the gavel banged, Republicans brought up several outstanding trade agreements the Obama administration is currently sitting on. The underlying sentiment: if the Cuba bill is enacted, the other agreements should be, as well.
“Exports are essential to the prosperity of American farmers and we should consistently seek greater opportunities for exports,” said Oklahoma Rep. Frank Lucas, ranking member on the committee. “We have several such opportunities ready and waiting. The three pending free-trade agreements the United States signed with Panama, Columbia and Korea are worth more than $2.6 billion in new market access for American agricultural exports. The Korean government alone is the most economically significant agreement negotiated in 16 years.”
The agreements are being “delayed unnecessarily” as the Obama administration has “passed up three key opportunities to lay out a clear path for expanding U.S. agricultural exports. Neither the president’s budget proposal, his export initiative, nor this year’s trade policy agenda places an emphasis on finally implementing our pending trade agreements. Instead, the administration seems narrowly focused on trade enforcement and technical assistance to expand trade. These are important, but inadequate when it comes to opening new markets.”
Since 2000, on average, the United States has exported roughly $320 million in U.S. product to Cuba annually.
“We’ve exported a variety of products including corn, wheat, soybeans, rice, poultry, dairy products, pork, live cattle, dried beans and peas, fresh and dried fruits,” testified Bob Stallman, a Texas rice farmer and American Farm Bureau Federation (AFBF) president. “The International Trade Commission (ITC) has reported the value of agricultural imports by Cuba has more than tripled since 2000.”
For more on the AFBF and Cuba, see Farm Bureau supports Cuba trade bill.
But those sales values have fluctuated, claimed Stallman and other witnesses, largely because the United States is no longer viewed by Cuba as “a reliable supplier due to our sales restrictions and the ability of U.S. government to alter those restrictions on a whim.
“The United States should be the preferred supplier in Cuba given our competitive prices, high-quality products and lower delivery costs due to the proximity of our countries. Instead, we’ve opened the door to the European Union, Brazil, Canada and Vietnam while hindering ourselves.”
The United States’ competitive disadvantage “isn’t a result of partner-imposed trade reasons but, rather, our own government-imposed restrictions. What we’re asking Congress for is to give U.S. farmers the competitive advantage in Cuba that they should rightly have.”
Numerous witnesses said the “unreliable supplier” tag was affixed in 2005 when the U.S. Treasury Department’s Office of Foreign Assets Control — at the direction of the Bush administration — changed payment rules that had been in place since legislation passed in 2000.
The move “negated the original intent of Congress, created a special case that only applies to Cuba, thus increasing the cost of our products and negatively impacting our sales,” said Stallman. “The current definition does nothing to protect U.S. exporters, but was put in place to hinder U.S. exports.
“The additional dollars Cuba now has to spend to purchase U.S. products don’t go to the U.S. farmer but, rather, the foreign bank carrying out the transaction. Payment of cash in advance was the method of doing business with Cuba prior to the (2005) change.”
Urging passage of the bill, Roger Johnson, a North Dakota farmer and president of the National Farmers Union (NFU), said “we need to get beyond where we’re at, beyond the diplomatic slaps in the face that the 2005 policy change was intended to provide.”
The current cash-only sales policy with Cuba is “an inefficient system characterized by small sales, the absence of long-term contracts, unnecessarily high transaction costs and exchange rate losses — all of which hurt our competitiveness,” said Johnson. “If direct banking transfers were permitted between the United States and Cuba it would also add additional efficiencies.”
If sales restrictions are loosened, U.S. rice is among commodities expected to receive a large export boost from Cuban business.
“After almost 50 years, one thing is clear: our Cuba policy is ineffective, it punishes U.S. farmers and costs U.S. jobs,” testified Mike Wagner, a rice farmer from Sumner, Miss., speaking on behalf of the U.S. Rice Producers Association and the USA Rice Federation. “In the 1950s, Cuba was the largest export market for U.S. rice. In 1959, Cuba accounted for 51 percent of all U.S. rice exports.
“After Congress provided agricultural trade with Cuba in 2000, Cuba rapidly became the fastest-growing market for U.S. rice. In 2004, the Cubans bought $64 million worth of U.S. rice providing 1,400 U.S. jobs.”
Cuba became the fourth-largest milled rice customer for the United States. Then, the 2005 rules changes were implemented and “U.S. rice sales plummeted from $64 million in 2004 to zero in 2009 and 2010.” Wagner lamented that “U.S. agriculture has been relegated to a residual supplier of rice and other farm goods to Cuba.”
Asked to elaborate on the hoops Cuba must jump through to buy U.S. products, Johnson — who led eight trade missions to Cuba in his former job as North Dakota Agriculture Commissioner — called the process “extraordinarily cumbersome. It used to be that the goods would dock at the port, usually in Havana. Before they could be offloaded, the money had to be received.
“But that’s just a piece of it. The money would normally be wired across the ocean, converted into a foreign currency, then converted into dollars. So, you’d have two conversions — both of which would lose some money in transaction costs.
“Because of time differences, a day later the (funds) would be transferred to a U.S. bank. That would pay the (U.S.) company selling the products to Cuba. That would have to be confirmed by the federal government before word was sent back to Cuba — ‘Yes, we got the money. It’s in the bank. Now, offload the ship.’ It’s very inefficient.”
Johnson offered specifics about lost sales due to the current set-up. On three trips he was on, “the Cubans were interested in potatoes (both table-stock and seed) coming out of the Red River Valley. Twice, we specifically negotiated deals to sell. None of those sales have occurred because of the complexities of getting all the travel arrangements to allow Cuban inspectors to come up and get our sanitary and phytosanitary standards reconciled. Since USDA can’t talk to Cuba — only state governments can — the (agriculture departments in North Dakota, Minnesota and Maine) were left trying to negotiate requirements with Cubans. Then, we had to go back to the U.S. State Department and USDA and we never got it all done. The sales have never happened, as a result.”
While U.S. agricultural interests must deal with spools of red tape, Stallman pointed out U.S. telecommunications companies are authorized to receive payments directly from their Cuban counterparts. “U.S. agriculture is singled out for this expensive, unnecessary and discriminatory requirement.
“The opposition has tried to argue against this bill based on Cuba’s credit worthiness and the risk to U.S. suppliers,” continued Stallman. “This bill doesn’t allow credit, nor are we asking for credit. This bill would still require Cuba to pay for U.S. purchases in cash. The issue of credit and Cuba’s ability to pay doesn’t apply to what’s proposed. … U.S. agriculture is not requesting the embargo be lifted, but rather for Congress to take the small step of lifting key restrictions that will increase U.S. agriculture’s competitiveness in the market.”
While unhappy at the prospect of doing business with Cuba’s communist government, several on the committee seemed resigned to at least agricultural sales. Even so, “when we do business with the Cuban government, we facilitate their ability to not only meet the needs of their constituencies, but also to continue to exist,” said Lucas. “It’s one of the few examples of Soviet-style communism that still exists in the world. That means not a market-driven economy, but a government-dominated economy.”
How does Lucas square his distaste for U.S. sales to Cuba with sales to other communist nations?
“Even in places like mainland China, where the communists still attempt to maintain absolute political control, a more market-oriented process has been adopted. Consequently, they’ve seen dramatic economic growth in the last 10 to 20 years. …Would we be continuing the problems (Cuba has) by directly, or indirectly, helping the system survive?”
Left untouched: how China’s political and economic landscape would look today if President Nixon hadn’t moved to open trade in the 1970s.
Stallman, using a talking point others would echo in the hearing, said the closer the interaction between Americans and Cubans, “the greater the opportunity there is for them to see the truth about Americans versus the web of propaganda and lies they’re given by the government.” Such interaction, “ultimately enhances the opportunity to move towards democratic reforms. … The government has maintained itself over the years by putting all their problems by trying (to blame) the United States because of our policies. But if the truth is known by Cubans about Americans, our form of government and capitalistic system, I think it would provide a great opportunity.”
Johnson agreed “fully” and advocated opening the island to travel. “The influx of American tourists — and the exchange of views that would occur — would be healthy for both (countries). The policy we put in place 50 years ago was designed to get rid of a system of government. Ten U.S. presidents have come and gone and all we’ve done is move from one Castro to a younger brother. The policies we’ve used to try and make changes … have simply not worked.”
Lucas then claimed Cuba had spread a political “contagion … to other countries in Central and South America. I can see where the basic food needs of the Cuban people should be met — that’s a humanitarian issue. … I just don’t want to facilitate things that wind up enabling the regime to hold on and to spread its style of governance around by using access to things the average Cuban citizen never sees.”
Selling versus trading
Pointing out that H.R. 4645 would not actually allow “trade” with Cuba but only “sales” of U.S. goods, Kansas Rep. Jerry Moran was unmoved by Lucas’ worries.
“We deal with communist countries on an ongoing basis in a trading relationship in which we offer credit,” said Moran, a Republican. “Who is the United States’ biggest creditor? China! And yet we’re nervous about selling for cash, up front, agricultural commodities, food and medicine to a country 90 miles off our shore. What a double standard we’ve created in this country.
“In Kansas, today, we wouldn’t object to selling Boeing aircraft to China. Yet, we worry about whether or not to sell wheat to Cuba. I don’t understand how we got ourselves in this position.”
Iowa Rep. Leonard Boswell, full of praise for Moran’s stand, said the current set-up means “we’re just denying ourselves markets because (the Cubans) can go elsewhere. And they are.” The embargo “is not working. It’s silliness to keep this up.
“Dammit,” Boswell ended emphatically, “it’s time to do something.”
During the hearing, several committee members — including Texas Rep. Randy Neugebauer, Texas Rep. Mike Conaway and Missouri Rep. Blaine Luetkemeyer — expressed hope that legislation easing agricultural sales to Cuba would pass. However, they were decidedly unenthusiastic with the bill’s travel portion.
“I don’t think we need to get into an area that isn’t agricultural,” said Luetkemeyer. “To say we’ll improve the wherewithal of the people of Cuba through tourism so they can buy our agricultural products is a stretch beyond which I can’t go. I can tell you that isn’t the way it works.”
The legislator least happy with the bill was Iowa Rep. Steve King who offered several vignettes about a trip to Cuba in the 1990s. Prior to the trip, King said he had been for opening trade.
Afterwards, “two things stood out that I can’t get past. One is when Castro nationalized property — in 1963, I think — 25 percent of the deeds were in the hands of Americans. Americans are the only ones not to be compensated for that real estate. They hold the deeds today.”
If there were to be investments of Americans into Cuba, King “can’t imagine Castro doing anything except selling that property that belongs to Americans back to other Americans to pit them against each other.”
Second, it was a surprise to King that, “at that time, the exchange of the peso to the dollar was 21 to one. One would think Americans trading in Cuba, tourists going to Cuba, would give the Cubans an opportunity to make some money and maybe lift them up economically. But what really happens … is Cubans could earn dollars and hold them. But they couldn’t spend (the dollars) unless they went to a ‘dollar store’ where an American dollar was worth one peso, not 21.”
Like a loan shark, Castro “was picking up the 20 peso vigorish.”
The United States has “invested nearly half a century into waiting out the biological solution in Cuba,” said King. “I’m more patient than the witnesses before us. I’m willing to wait out this biological solution.”
Considering King’s stance, Peterson asked if the Iowan is “in favor of quitting selling Boeing aircraft to China and other things we’re doing to prop up that communist regime?”
King: “Let’s figure out how to work on that endeavor, as well. It lights up my attention.”
Tourism or liberty?
Moran had an answer for his fellow Republicans worried about propping up the Castro regime through U.S. tourist dollars.
“Somehow we got onto tourism,” he said. “This is not a bill that creates tourism. This bill authorizes travel by United States citizens. … What we’re really doing here is creating freedom and liberty for American citizens about what country they can visit. We don’t have such travel restrictions on any other country.”
King was unbowed and attempted to turn Moran’s “liberty” claims towards the Cubans. “The point I made earlier is about the liberty of the Cuban people. I think that’s something we should take into consideration. We’re the vanguard of liberty for the world, part of what remains of the Monroe Doctrine…
“I’m just not hearing in the dialogue how Castro would be able to use” such export food sales “as a tool.”
After reading an appalling list of rations allowed to Cubans, King said one his “very high goals and dreams in life is to swim ashore at the Bay of Pigs and walk on to a free Cuba. I hope we all live to see that day.”
King’s sweet daydream of swimming towards a palm-lined shore quickly evaporated under Peterson’s retort. The committee chairman wanted the last word.
“I take it from your comments that you must have supported the Russian grain embargo?
“The problem is (Cubans) will get this stuff some place. Our cutting them off is only hurting ourselves. Whether they buy it from us, from Vietnam or wherever isn’t going to do a damned thing about the problems we’re talking about.
“There are groups here that I don’t always agree with — Human Rights Watch and so forth that have the exact opposite position from you. They say this bill will help with the human rights problems.
“We’re cutting off our nose to spite our face, here. It’s crazy.”