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Reexamining U.S. Trade with Cuba


The United States has become a major food provider to Cuba and could export even more goods to the island if U.S.-imposed trade restrictions were eased. That is the message some American agriculture officials brought to the U.S. International Trade Commission, which recently held a hearing on the status of commerce between the estranged nations.

From the early 1960s through the 1990s, commercial ties between Washington and Havana were virtually non-existent. Then in 2000, the United States amended its long-standing trade embargo of Cuba to allow the sale of food and medicine to the island on a cash-only basis.

Since then, the United States has become Cuba's largest supplier of agricultural products and sixth-largest trading partner overall, with more than one-billion dollars worth of U.S. goods flowing to the island.

William Messina, a researcher at the University of Florida's Institute of Food and Agriculture Sciences, testified at the U.S. International Trade Commission hearing. "For the past three years, Cuba has been among the top 25 or 30 most important export markets for U.S. agriculture. Cuba's purchases represent a relatively small proportion of total U.S. agricultural exports -- only about a half of one percent," says Messina. "But I can assure you, if you talk to U.S. farmers who have sold to Cuba, they will be very quick to emphasize to you how important this new market is to them. Is there potential for further expanding U.S. agricultural sales to Cuba? Absolutely."

Difficulties of Trade

Some American food producers are chafing under U.S. trade restrictions, according to North Dakota Agriculture Commissioner Roger Johnson. "The current policy of cash-only sales might seem to be in our best interest. However, I can tell you that it is an inefficient system. It is characterized by small sales, by the absence of long-term contracts, by unnecessarily high transportation costs. All of this makes it a bit more difficult to do business with Cuba than with other countries," says Johnson.

Johnson and others also criticized the U.S. travel ban to Cuba, noting that it hinders the ability of American agricultural producers to negotiate trade deals with Cuban officials. The ban also stunts Cuba's tourism industry. And it is argued that with fewer visiting mouths to feed on the island, the demand for U.S. food products is reduced.

More Trade With Havana?

President Bush has said that food and medicine may be sold to Cuba on humanitarian grounds, but insisted that eliminating the U.S. trade embargo would serve to bolster Cuba's communist regime.

Johnson finds that argument unpersuasive. "We have normalized trade relationships with other communist countries, such as China and Vietnam. In these cases, it is believed that economic engagement rather than embargoes will foster more open and democratic forms of government and lead to improved human rights for their citizens," says Johnson. "Yet with Cuba, our government continues with the exact opposite approach, seemingly convinced that economic isolation and diplomatic slaps in the face will bring positive change. I could not disagree more."

But what would happen if the U.S. trade embargo were scrapped? Absent major changes in the way Cuba does business, U.S. commercial interests would tread perilous waters in Havana, according to John Kavulich, a senior policy advisor to the New York-based U.S.-Cuba Trade and Economic Council.

Who Would Pay?

With normalized trade relations, Kavulich says Cuba would insist on credit arrangements to pay for food and other goods, as it does with its other commercial partners. Unfortunately, Kavulich notes, Cuba's track record when it comes to paying what it owes is poor.

"The government of Cuba would almost certainly default, as it has continually with companies and governments throughout the world. Payment of cash in advance has served both U.S. companies and the government of Cuba quite well," says Kavulich.

And what about ending U.S. travel restrictions to Cuba as a means of spurring food demand on the island? Kavulich says Cuba is ill-equipped to handle the hundreds of thousands of Americans who might want to visit every year.

"If, for example, Cuba has a high-season [hotel] occupancy rate of 70-percent and if the city of Havana has, perhaps, two thousand hotel rooms that might - - and I stress might - - be suitable by U.S. standards, where, then, would these new arrivals stay? What about cruise ships?," asks Kavulich. "They are fully-provisioned with the goal of having their customers dine on-board. Thus, there is not a substantial quantity of food products that would be exported from the United States to Cuba to sustain the cruise industry."

Benefits of Trade

And yet, one only has to look at a map to see the advantages of trade between the United States and Cuba, according to University of Florida researcher William Messina.

"The U.S. and Cuba are so close that transportation costs for purchases from the U.S. are naturally lower than from any other supplier. Also, the lead-time required for orders is far shorter than, for example, shipments of rice coming from Vietnam or halfway around the world from China. Finally," says Messina, "the economic order quantities - - the volumes necessary to achieve economical shipping and transportation rates - - are far lower from purchases from the United States, and this helps minimize storage issues for Cuba."

The U.S. International Trade Commission is reviewing agricultural sales to Cuba at the request of the U.S. Senate Finance Committee. It has been tasked with providing an overview of Cuba's food purchases from the United States, analyzing the effects of U.S. restrictions on those purchases, and assessing the impact if those restrictions are lifted. The commission's findings are to be released in June.

This story was first broadcast on the English news program, VOA News Now. For other Focus reports click here.