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Environment, Energy and Transportation Program

Opening Trade with Cuba

December 2001 State Legislatures article.

By Cheryl Runyon and Doug Farquhar

Illinois, Iowa, Ohio and Oklahoma want to thaw the Cold War with Cuba, but need the support of the federal government. "It is clearly time for the United States government to pursue new policies with relation to Cuba," says former Ohio State Senator Chuck Horn, who lead a delegation of state officials to Cuba.

Illinois officials have visited the country as well, with Governor George Ryan joining a delegation of legislative leaders seeking new markets for its agricultural crops.

Legislators from Iowa and Oklahoma traveled to the Caribbean country in June 2001 to discuss opening trade. Trade with Havana could bring farmers up to $1 billion a year.

Congress, however, hasn't been helpful. And with good reason.

"Castro treats Cuba like a private farm with 11 million slave laborers, all working for him," says Florida Representative Mario Diaz-Balart, whose father, grandfather, and uncle served in the Cuban legislature before the revolution. "Why should the U.S. seek to end apartheid in South Africa and support totalitarianism in Cuba?"

Congress approved the lifting of trade sanctions on food and medicine in October 2000, but added language prohibiting any U.S. bank, or federal, state or local government from providing financial credit to Cuba to buy food or medicine. Sales to Cuba can only occur on a cash-in-advance basis or if a third country's bank finances the sale. Without credit, Cuba lacks hard cash to do business.

"Not only does Castro want us to sell him food, he wants the U.S. taxpayer to fund it," adds Balart.

Cuba, the land and exports

Cuba, the largest country in the Caribbean, sits only 90 miles from Key West, Florida. The land is lush and tropical, with rolling plains in the north flowing into rugged hills to the southeast. It produces sugar cane, tobacco, and citrus crops, and has become a tourist haven for sun-starved Europeans.

Its close proximity makes Cuba a natural trading partner with the U.S. In fact, prior to the revolution, American business heavily invested in cattle, citrus and tobacco production. Half the Cuban sugar exports went to the U.S. American interests controlled 25 percent of all the land in Cuba, before Castro's revolution turned all investments over to the state.

Eleven million people live on this island the size of Ohio, and almost 60 percent of the land is in agriculture, with sugar cane being its largest crop. Ten percent of the Cuban Gross Domestic Product comes from sugar production, making it more valuable than the tobacco grown for its famous cigars.

But this agriculturally-rich country is food-poor, with a majority of its population unable to adequately feed itself. Food consumption has fallen 36 percent since the end of Soviet support in 1989. People dependent on state rations eat half as much as they did in the 1980s. "Agriculture operates on ox and plow technology," notes Iowa Senator Steve King, who visited the island in June. "What we should send them is farm equipment."

The U.S. Department of Agriculture has estimated that-were the embargo completely lifted-Cuba could buy about $1 billion worth of agricultural products from the United States each year for the next five years. Any increase in market would be a great relief to economically-strapped farmers.

"Cuba plans to buy $1 billion agricultural products this year from all over the world" says Fernando Remirez, the highest ranking Cuban official in the US, during a speech to the Illinois legislature. But not from the U.S. Not without cash. And not with Helms/Burton.

Cuba's Economy and the Embargo

Being cash strapped is only part of the problem. The embargo, first imposed in 1962 at the height of the Cold War, was strengthened by the U.S. Congress during the 1990s. The Helms/Burton Act penalized other countries doing business with Cuba, preventing their ships from using U.S. ports and barring company officials from entering this country. It also allowed the president to impose sanctions on countries trading with Cuba and codified the embargo making it a federal law, instead of an executive order.

This forced Cuba to rely on European and Asian suppliers and markets. Since Helms/Burton prevents ships trading with Cuba from docking at U.S. ports, import costs have shot up because these vessels from across the Atlantic or from Asia only can haul Cuban products for the long trip home. With their economy weakened by the fall of the Soviet Union, Cubans have little product to export.

"The only way for Castro to survive is with American support," according to Balart.

Congress recently did vote to allow travel to Cuba, and the Department of Commerce amended the Trade Sanctions Reform and Export Enhancement Act (TSRA) in July 2001 to permit agricultural sales to Cuba as long as the sales "do not promote international terrorism."

One bright sector in the Cuban economy is tourism. "Cubans love to talk to American tourists," adds Chuck Horn. "They also love their cash," which is the only form of money allowed, since Cubans can't exchange credit cards, checks or travelers checks.

European, Russian and Canadian tourists pump $1.4 billion into the economy, a half billion dollars more than the largest export, sugar. Another bright spot is the North American Free Trade Agreement.

"Canada and Mexico trade with Cuba, and our farmers are in direct competition with our NAFTA partners," says Jim Rubingh, marketing director for the Colorado Department of Agriculture, who lead a delegation of agri-businesses and legislators in June. And Cuba joined the WTO in 1995, allowing it to trade with the rest of the world.

State Delegations

Although the federal government remains steadfast on the embargo, state legislatures are actively sending delegations to open trade. As the former chair of the Economic Development Committee of the Ohio Senate, Chuck Horn led a delegation of businesses to the island in March 2001. State Senator David Miller from Iowa joined Senator King during his visit in June. Legislators from Oklahoma also have visited the island exploring new markets for trade.

Illinois Governor George Ryan and a legislative delegation visited Cuba in October 1999.

"Although our country is opposed to the Cuba dictatorship and the suppression of human rights, that should not be reason enough to punish a nation of 11 million people," says Illinois State Senator Emil Jones, who participated on the trip. "It is time to reopen our doors and reopen the lines of communication."

The Illinois legislature passed a resolution (the first in this country) encouraging the U.S. to lift the embargo on food and medicine, followed by a second resolution this year seeking to repeal the entire embargo. Texas followed suit during the 2001 session by passing SCR 54, which urges Congress to remove the Cuban trade, financial, and travel restrictions.

Chuck Horn supports these efforts. "The U.S. embargo is not working. Much benefit could come from a positive relationship with Cuba," replies Horn.

Cubans agree as well. "The policy is outdated and out of touch with the global world we live today," says Fernando Remirez. "The vast majority of the international community is against the embargo, as are the Cuban people. We believe a vast majority of the American people are in favor of improved relations."

But not all who visit Cuba are against the embargo.

"Castro still controls the economy," says Senator King, who visited the island seeking to promote Iowa agricultural products. "Cuba has no distribution system, no cash, and the regime takes all the hard currency. Lifting the embargo would only benefit Castro."

Diaz-Balart agrees. "Its morally reprehensible that the U.S. would support a regime that prohibits labor unions, forbids a free press, and jails political opponents. Opening trade helps the Cuban people no more than trading with South Africa helped the blacks."

Federal Policy

For the timebeing, the embargo will remain, as will the Helms/Burton law. The Bush administration faces dual pressures from the agricultural and trade sector to allow free trade and investment in Cuba while embargo supporters continue to push for additional restrictions on trade and travel.

Secretary of State Colin Powell, in testimony before Congress, admitted that Castro has "done some good for the Cuban people," but the Bush administration's policy is to "try and get around him and his regime and touch the people, with travel and some funds going back and forth."

"The long view is not encouraging for opening trade with Cuba," says Dr. Terry McCoy with the Center for Latin American Studies at the University of Florida. "I see no move by the administration to loosen or liberalize trade with Cuba."

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