TRADE: US and Cuba

I asked: What does the US government think about US trade with Cuba?  

Tim Ashby replies: The Bush Administration seems determined to shut it down. The Treasury Department's Office of Foreign Assets Control (OFAC), which enforces trade sanctions, is preparing to require Cuba to prepay for goods prior to being exported. This is likely to choke off US exports to Cuba, which were over $400 million in 2004 and could reach $1 billion annually by 2006.  

A trade embargo with Cuba has existed since 1960.  However in 2000 Congress passed the Trade Sanctions Reform and Export Enhancement Act (TSREEA) which allowed agricultural and medical exports.  Since legal exports to Cuba began, Cuba has become our 21st largest agricultural market and we are Cubaâ•˙s primary source for imported food.  US exports to Cuba are growing at an annual rate of 115%.

A Texas A&M University study found that $400 million in agricultural exports to Cuba results in $919 million in additional economic output in the United States.  The study also estimates that 10,656 US jobs are created.  In the best-case scenario -elimination of the embargo - the projected $1.24 billion in exports to Cuba would stimulate $3.6 billion in US economic output.

The law prohibits US financing, requiring cash in advance for American exports to Cuba.  Ironically, Cuba is among the least risky markets for American exporters due to this requirement.  On rare occasions when Cuban payments have not been finalized in time, shippers ensured that legal title and possession of the goods were withheld until payment was received and thus effectively prevented credit sales.  OFAC now argues that any payment delay constitutes illegal extension of credit to Cuba.  While the new guidelines are ostensibly meant to remedy this, in reality they are an attempt by the Bush administration to intensify economic pressure on Fidel Castro ˆ at the expense of American farmers and businesses.

 The proposed export rules changes are irrational because food sales to Cuba do not prop up the Castro regime and they help alleviate the negative impact of US sanctions on ordinary Cubans.   Less than 5 percent of US products end up in state-owned stores where the markup of prices lines Castro's pockets.  The rest is distributed to the population through the rationing system. The proposed regulations are also probably illegal.  A recent report by Congressional Research Service (CRS) lawyers stated that it was difficult to find legal support for an interpretation of payment of cash in advance that requires payment to be received prior to shipment.  A letter sent to Treasury Secretary John Snow on November 23, 2004, by Senators Max Baucus (D-MT), Larry Craig (R-ID), and Byron Dorgan (D-ND) echoed the CRS report. The Senators expressed their outrage and profound disappointment about OFAC's actions, calling them an unacceptable interference by the US government into lawful commerce conducted by compliant US businesses, which must necessarily be interpreted as a conscious and intentional decision by OFAC to flout the will of Congress.   

Despite rancorous relations, Cuba prefers to import from the United States because of proximity to Havana and the high quality of US agricultural products.  Cuban officials have reluctantly declared that they will turn to other suppliers if forced to pay while goods remain in US ports. The proposed rules would hurt US exporters at a time when our trade deficit is over $600 billion and we need every foreign market.  If the goal of the US government is to end the Castro regime, an open US trade policy and interaction with US businesses can undermine Cuban communism better than an embargo.

Ronald Hilton 2004


last updated: February 2, 2005