10-05-2002

TRADE: Cows Chip Away at the Cuban Trade Embargo

HAVANA-In October 2000, when Congress passed a law allowing cash sales of
U.S. farm products to Cuba, no one could have imagined that two years
later, Cuban President Fidel Castro would be climbing into a pen with a
shorthorn bull calf from Minnesota to show his interest in the bounty of
American farmers.


But that was among the spectacles here last week at the U.S. Food &
Agribusiness Exhibition, a big trade fair in which American food producers
showed their wares to the Cuban government. Indeed, the Trade Sanctions
Reform and Export Enhancement Act of 2000, which allowed the sales of U.S.
food products to Cuba on a cash-only basis, has turned into one of the
most measurably successful trade laws of recent times. And it has given
Castro a major weapon in his campaign to end the 40-year U.S. policy that
bans general trade with Cuba and makes it illegal for Americans to travel
here, except for educational and humanitarian purposes.


The U.S.-Cuba Trade and Economic Council, a New York City-based group
financed by agribusiness giant Archer Daniels Midland and other companies
that want to trade with Havana, says Cuba's food imports from the United
States rose from zero in 2000 to $4.5 million in 2001, and had reached
$120 million this year even before the exhibition. Cuba's rank among the
228 countries that import food from the United States has risen from last
to 51st. With the purchases made at the exhibition, its rank should rise
to 42nd, placing it ahead of Denmark, South Africa, Chile, and
Vietnam.


Behind the success of the 2000 act is a tale of extraordinary political
maneuvering by U.S. farmers and agribusinesses and the Cuban government.
Before the 1959 Cuban revolution, which resulted in a Communist government
and the U.S. embargo, Cuba bought most of its food imports from the United
States. In the 1990s, U.S. farm leaders began arguing that keeping Cuba
out of a market only 90 miles off the coast of Florida made no
sense-especially when France and Canada and other competitors were selling
food to Havana. But anti-Castro Cubans in the United States and their
representatives in Congress persisted in their four-decade argument that
any trade with Cuba helps keep the Castro regime in power.


The act originated in the appropriations process for the Agriculture
Department for fiscal 2001. Rep. George Nethercutt, R-Wash., proposed an
amendment to allow trade with Cuba and other so-called "rogue
states," such as Iran, Sudan, and North Korea. Sen. Byron Dorgan,
D-N.D., proposed a similar amendment in the Senate. Anti-Castro
Cuban-Americans vigorously opposed the legislation. But after it became
clear that the bill had enough support to pass in the House and the
Senate, Rep. Lincoln Diaz-Balart, R-Fla., a Cuban-American himself,
persuaded House and Senate leaders to allow the measure to become law only
if it prohibited sales on credit and put restrictions on American travel
to Cuba into permanent law.


When President Clinton signed the act into law, Dorgan said it amounted to
"empty promises" to America's farmers because the cash-only
requirement would force them to make difficult arrangements with foreign
banks to get paid. Castro said the measure was so insulting he would not
spend a single cent on American food, and he staged a huge street
demonstration in Havana to protest its passage. Diaz-Balart said he was
convinced that the new law helped to put U.S. relations with Cuba under
tigher control.


But a year later, after Hurricane Michelle devastated Cuba, Castro
suddenly announced he would use some of his country's precious hard
currency to buy food from the United States to save on the cost of
transportation from more-distant sources such as Europe and Vietnam.
Archer Daniels Midland jumped at the opportunity not only to ship corn to
Cuba, but also to use the shipments as a way to build additional political
support in the United States for liberalizing U.S.-Cuban trade. ADM
collected corn from nine states and planned to ship it through the Port of
New Orleans, which had been the No. 1 U.S. port for trade with Cuba in the
pre-revolutionary days and had lost 5,000 jobs when the trade with Cuba
was stopped in the early 1960s.


The Treasury Department's Office of Foreign Assets Control, which enforces
the trade act, quickly gave approval for the food to leave the United
States. But anti-Castro activists inside and outside the Bush
administration pressured the office not to issue a separate shipping
license and managed to slow up the process. Advocates of U.S.-Cuba trade
say ADM's New Orleans strategy won the day, however, because Sens. John
Breaux and Mary L. Landrieu, both Louisiana Democrats, and Rep. William J.
Jefferson, D-La., added their own pressure on the Treasury office to issue
the license.


The anti-Castro activists noted that the Cuban purchase of U.S. corn came
only a week after the Senate Agriculture, Nutrition, and Forestry
Committee approved a provision in the 2002 farm bill that would have
allowed U.S. financial institutions to provide credit to Cuba. The Bush
administration insisted, successfully, that the Cuba credit provision be
taken out of the farm bill before President Bush would sign it, and some
farm leaders wondered whether the Cuban purchases would stop. But Cuba has
continued making purchases in cash.


The U.S.-Cuba Trade and Economic Council says Cuba has now bought
agricultural products from 30 states, represented by 60 senators and 313
House members. Council President John Kavulich said that the Cubans bought
products from California companies for the first time during the
exhibition last week and that more states may join the list when the
council compiles final information on sales from the trade fair.


The five-day agricultural exhibition brought to Cuba 288 U.S. companies
representing 3,000 products. The fair also brought 700 Americans,
including Minnesota Gov. Jesse Ventura and seven state agriculture
commissioners, to Cuba.


And its success evidently outraged Otto Reich, a Cuban native who
vigorously opposes trade with Castro and who is the assistant secretary of
State for Western Hemisphere affairs. Reich called in reporters from
Midwestern newspapers to hear him denounce the trade fair and warn
American farmers and agribusiness executives visiting Cuba to avoid
"sexual tourism" there. That remark led Ventura to demand
apologies from President Bush and Reich, and prompted exhibition
organizers to say that Reich had forfeited his ability to comment on the
exhibition.


Castro, meanwhile, wore a double-breasted business suit rather than his
customary army fatigues during his five visits to the exhibition, and he
signed contracts totaling $89 million, including transportation costs.
Castro also entertained several states' delegations personally at lunches
and dinners, giving the partygoers-many of them rural Republicans who had
never before been entertained by a head of state-boxes of expensive cigars
and bottles of rum as souvenirs. Members of the delegations returned to
the convention hall to tell reporters how impressed they were by Castro's
hospitality, intelligence, and understanding of agriculture and world
affairs. Castro also told the delegations that Cuba is getting out of the
money-losing export sugar business-a plan that could reduce the U.S. sugar
industry's fears that closer ties could bring renewed competition from
Cuban sugar.


Rep. Ileana Ros-Lehtinen, R-Fla., a Cuban-American born in Havana,
recently told a Washington conference that her fellow lawmakers seem deaf
to her arguments about human-rights abuses and the lack of free elections
in Cuba, so she and the anti-Castro groups have been arguing that the Cuba
agricultural gold rush may not be what it's cracked up to be. Cuba, for
example, is behind on paying what it owes to France, to Canada, and to
foreign companies, she pointed out. James Cason, the top U.S. diplomat in
Havana, said during the exhibition that Cuba is a "deadbeat"
country when it comes to credit and that the cash-only arrangement is best
because farmers are sure to get their money. Castro has pointed out
repeatedly that Cuba has paid all its debts to American companies. An
official from Alimport, the Cuban import agency, maintained that Cuba is
paying its debts to France, but Kavulich noted that those payments have
taken place only after Cuba renegotiated the debt.


Agribusiness executives now say the cash-only sales requirement that the
anti-Castro activists forced on them has turned out to be a blessing
because the business has gone so smoothly it has whetted everyone's
appetite for more. But they say the Cuban market will be limited until the
Cubans can get credit to buy some of the foods that they would serve to
foreign tourists here. The agribusiness executives say they will make
sales on credit only when they are sure they will be paid.


The diplomatic community here is awestruck by Castro's new American
shopping spree. Castro's decision to buy U.S. agricultural products proves
he is not a Communist ideologue, said Swedish Ambassador to Cuba Eivor
Halkjaer. Castro, she said, is a "moralist" and a
"nationalist" who wants to preserve the equality among people
that is the hallmark of his revolution, but he recognizes that after the
loss of Soviet aid, Cuba needs to bring back American tourists.


The diplomats in Havana wonder how much cash Castro can afford to spend
and how patiently he can wait for Congress to change the trade and travel
laws. Nevertheless, one diplomat here, who calls the dictator "very
skillful," is betting that Castro will use his new relationship with
American farmers and agribusiness executives to get the embargo
lifted-perhaps sooner rather than later.


Jerry Hagstrom

National Journal