Wednesday, May 16, 2007

Forbes Reports on Congress and Cuba

Congress Looks At Cuba
Brian Wingfield, 05.02.07, 6:00 AM ET

The frenzy over what U.S.-Cuba trade relations will look like once history claims Fidel Castro is festering once again.

The ailing dictator failed to show for the annual May Day parade in Havana Tuesday, fueling speculation that his days are numbered. But wind is already gathering in the sails of lawmakers here who are pushing for a return to normal relations with Cuba.

At the request of Sen. Finance Committee Chairman Max Baucus, D-Mont., the U.S. International Trade Commission (ITC) is currently investigating the effects on American producers of U.S. travel and agricultural export restrictions with Cuba. Several bills have already been introduced in the House to ease the U.S. embargo, which has been in place since 1962, and Ways and Means Committee Chairman Charles Rangel, D-N.Y., is pushing a measure that would lift the trade embargo altogether.

No one is expecting a normalization of relations, at least while President Bush is in the White House, but the stage appears to be getting set for his successor. Castro has already outlasted nine U.S. presidents. If he does make it through 2008, he will almost certainly not outlast a 10th. Whatever the outcome, U.S. businesses are eager to invest in a new Cuba.

The ITC has not given any indication what it will say in its final report to the Senate Finance Committee later this summer (the commission does not comment on ongoing investigations), but a growing body of evidence suggests that keeping the current restrictions in place limits the profit potential of U.S. businesses.

Under U.S. law, trade relations with Havana are limited to certain food exports and medical supplies, and at least regarding agricultural products, all payments must be made in cash.

According to the ITC, the U.S. exported $337 million in agricultural, fish and forest products to Cuba in 2006. Much of this is rice, wheat, chicken, corn and soybeans supplied by companies such as Archer Daniels Midland, Cargill and Tyson Foods.

But some experts say this figure could nearly double if the current restrictions were relaxed.

"Forty years ago, the U.S. provided 60% of Cuba's food imports," said North Dakota Agriculture Commissioner Roger Johnson in his testimony before the ITC. "Our goal should be to regain and exceed that market share."

North Dakota has already exported more than $32 million in dry beans, peas, wheat and other products since 2002. Johnson, like many officials in agricultural states, has called for all sanctions against Cuba to be lifted.

Before the embargo was put in place, Cuba was the leading market for U.S. rice suppliers. It has since fallen to eighth place, according to the USA Rice Federation. The federation estimates that up to 600,000 metric tons of rice--about the same amount that Cuba imported from the U.S. between 2001 and 2005--would be imported annually if restrictions were removed.

And according to the American Society of Travel Agents, if the U.S. were to lift its travel restrictions to Cuba in 2008, nearly 1.8 million Americans would visit the country by 2010. This could impact U.S. gross domestic product by as much as $1.6 billion, the society says.

But much of this potential will depend upon Cuba itself. For one thing, the nation only contains 11 million people, meaning that there is a ceiling on the amount of agricultural imports it can handle.

And according to John Kavulich, senior policy adviser to the U.S.-Cuba Trade and Economic Council, the data provided by the Cuban government regarding U.S. imports are unreliable and unverifiable because they are provided by a centrally planned government with a poor track record of transparency.

"The true impediments to the expansion of agricultural, fish and forestry products from the U.S. to Cuba are in Havana, not in Washington, D.C.," he says. He adds that it is also questionable just how much Cuba is would be able to handle an onslaught of American tourists. "They've let their tourism infrastructure crumble."

An additional unknown is what course of action the U.S. will take once Castro dies. Initially, it appeared that U.S. businesses were willing to leap into to Havana to bring capitalism back to the Caribbean island. But after Castro first became ill last summer, it became apparent that a new government under Fidel's brother, Raul, will probably continue the communist policies of the last four decades.

Nonetheless, it appears that U.S. policymakers are setting the stage for an easing of the economic sanctions. Bush will undoubtedly veto any free standing bill that might relax the embargo. But the pressure is building to open more U.S. markets to Cuba. And with Bush in retirement and Castro likely no longer around after 2008, the lid just might come off.

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