[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
HEARING TO REVIEW U.S. AGRICULTURAL SALES TO CUBA
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HEARING
BEFORE THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
MARCH 11, 2010
__________
Serial No. 111-44
Printed for the use of the Committee on Agriculture
agriculture.house.gov
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COMMITTEE ON AGRICULTURE
COLLIN C. PETERSON, Minnesota, Chairman
TIM HOLDEN, Pennsylvania, FRANK D. LUCAS, Oklahoma, Ranking
Vice Chairman Minority Member
MIKE McINTYRE, North Carolina BOB GOODLATTE, Virginia
LEONARD L. BOSWELL, Iowa JERRY MORAN, Kansas
JOE BACA, California TIMOTHY V. JOHNSON, Illinois
DENNIS A. CARDOZA, California SAM GRAVES, Missouri
DAVID SCOTT, Georgia MIKE ROGERS, Alabama
JIM MARSHALL, Georgia STEVE KING, Iowa
STEPHANIE HERSETH SANDLIN, South RANDY NEUGEBAUER, Texas
Dakota K. MICHAEL CONAWAY, Texas
HENRY CUELLAR, Texas JEFF FORTENBERRY, Nebraska
JIM COSTA, California JEAN SCHMIDT, Ohio
BRAD ELLSWORTH, Indiana ADRIAN SMITH, Nebraska
TIMOTHY J. WALZ, Minnesota ROBERT E. LATTA, Ohio
STEVE KAGEN, Wisconsin DAVID P. ROE, Tennessee
KURT SCHRADER, Oregon BLAINE LUETKEMEYER, Missouri
DEBORAH L. HALVORSON, Illinois GLENN THOMPSON, Pennsylvania
KATHLEEN A. DAHLKEMPER, BILL CASSIDY, Louisiana
Pennsylvania CYNTHIA M. LUMMIS, Wyoming
BOBBY BRIGHT, Alabama
BETSY MARKEY, Colorado
FRANK KRATOVIL, Jr., Maryland
MARK H. SCHAUER, Michigan
LARRY KISSELL, North Carolina
JOHN A. BOCCIERI, Ohio
SCOTT MURPHY, New York
EARL POMEROY, North Dakota
TRAVIS W. CHILDERS, Mississippi
WALT MINNICK, Idaho
______
Professional Staff
Robert L. Larew, Chief of Staff
Andrew W. Baker, Chief Counsel
April Slayton, Communications Director
Nicole Scott, Minority Staff Director
(ii)
C O N T E N T S
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Page
Cuellar, Hon. Henry, a Representative in Congress from Texas,
prepared statement............................................. 5
Lucas, Hon. Frank D., a Representative in Congress from Oklahoma,
opening statement.............................................. 3
Prepared statement........................................... 4
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, opening statement................................... 1
Prepared statement........................................... 2
Submitted letters on behalf of:
Hubbard, Rev. Howard J, Bishop of Albany; Chairman,
Committee on International Justice and Peace, United
States Conference of Catholic Bishops.................. 71
Vivanco, Jose Miguel, Executive Director, Americas
Division, Human Rights Watch........................... 71
Witnesses
Stallman, Bob, President, American Farm Bureau Federation; Rice
and Cattle Producer, Columbus, TX.............................. 5
Prepared statement........................................... 7
Johnson, Roger, President, National Farmers Union, Washington,
D.C............................................................ 10
Prepared statement........................................... 11
Wagner, Mike, Owner/Operator, Two Brooks Farm; Member, Board of
Directors, U.S. Rice Producers Association, Sumner, MS; on
behalf of USA Rice Federation.................................. 33
Prepared statement........................................... 34
Supplementary material....................................... 79
McReynolds, Jerry, President, National Association of Wheat
Growers; Wheat Producer, Woodston, KS.......................... 44
Prepared statement........................................... 45
Supplementary material....................................... 81
Wilson, John J., Senior Vice President, Marketing and Industry
Affairs, Dairy Farmers of America; Member, Board of Directors,
National Milk Producers Federation, Kansas City, MO............ 49
Prepared statement........................................... 51
Schott, Barton, First Vice President, National Corn Growers
Association; Corn, Soybean, and Wheat Producer, Kulm, ND....... 54
Prepared statement........................................... 55
Fritz, Scott E., Owner/Operator (President/Treasurer), Fritz
Black Sand Farm, Inc.; Member, Board of Directors, American
Soybean Association, Winamac, IN............................... 58
Prepared statement........................................... 59
Submitted Material
AgriLIFE Research, Texas A&M University, submitted reports....... 72
HEARING TO REVIEW U.S. AGRICULTURAL SALES TO CUBA
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THURSDAY, MARCH 11, 2010
House of Representatives,
Committee on Agriculture,
Washington, D.C.
The Committee met, pursuant to call, at 1:45 p.m., in Room
1300, Longworth House Office Building, Hon. Collin C. Peterson
[Chairman of the Committee] presiding.
Members present: Representatives Peterson, Holden, Boswell,
Baca, Costa, Halvorson, Dahlkemper, Bright, Schauer, Boccieri,
Murphy, Pomeroy, Minnick, Lucas, Goodlatte, Moran, Johnson,
King, Neugebauer, Conaway, Smith, Roe, Luetkemeyer, Thompson,
and Cassidy.
Staff present: Aleta Botts, Tyler Jameson, John Konya,
Clark Ogilvie, April Slayton, Debbie Smith, James Ryder, Mike
Dunlap, Tamara Hinton, Kevin Kramp, Josh Mathis, Nicole Scott,
and Sangina Wright.
OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE
IN CONGRESS FROM MINNESOTA
The Chairman. Good afternoon and welcome to today's
hearing.
Right now, Cuba relies heavily on imported food to feed its
people; and the United States provides about 30 percent of the
food Cuba imports. Given our geographic location close to Cuba
and high-quality, well-priced commodities, the U.S.
International Trade Commission estimates that the United States
could provide as much as \1/2\ to \2/3\ of the food and
agricultural imports if current trade restrictions were lifted.
These restrictions are limiting a very promising market for
U.S. agriculture producers. To that end, I have introduced
legislation H.R. 4645, along with Congressman Moran and other
Republicans and Democratics, including Members of this
Committee, to expand U.S. agriculture exports to Cuba.
The bill we have introduced would eliminate the requirement
that our farmers have to go through a third country bank to do
business in Cuba, and would place agriculture exports to Cuba
on the same terms for cash payment as other countries,
requiring payment when the shipment changes hands, as opposed
to what it is now.
It will also make it easier for U.S. citizens to travel to
Cuba, allowing American agriculture producers to more easily
conduct business with Cuba and boosting demand for U.S.
products in Cuba at the same time.
However, it should be very clear that this bill will not
end the U.S. embargo on Cuba, and will not allow U.S. banks to
extend credit to Cuba. It will simply allow U.S. agriculture
exporters to offer their products for sale in Cuba in the same
way that they do for business with all of our other trading
partners.
American agriculture is eager to increase exports and grow
this important sector of the U.S. economy. That is why many
diverse agriculture groups have already voiced support for this
bill, including the American Farm Bureau, The National Farmers
Union, the National Milk Producers, the National Chicken
Council, the National Corn Growers, the National Wheat Growers,
USA Rice Federation, U.S. Rice Producers, American Soybean
Association, American Cotton Shippers, National Council of
Farmer Cooperatives, and U.S. Apple Association, and others.
Before we begin, I think it is important to clarify one
other thing right now. I do not think any of the Members here,
or any of the witnesses at this table today, are supporters of
the Castro regime. None of us support the Cuban Government's
detainment of political prisoners. However, these policies we
have in place today have done nothing to remove the regime or
to improve the situation for political prisoners.
I have here and am entering into the record without
objection letters from the Human Rights Watch and Conference of
Catholic Bishops that support this legislation that I have
introduced because they recognize the restrictions in place are
failing the Cuban people.
[The documents referred to are located on p. 71.]
The Chairman. America's current policies have failed to
achieve their stated goal; and, instead, they have hand-
delivered an export market in our own backyard to the
Brazilians, the Europeans, and other competitors around the
world. It is time we ask ourselves why we have in place
policies that simply do not work and only harm U.S. interests.
So, again, I want to thank all the witnesses for joining us
today, and thank the Members for their interest in this
important issue. I look forward to the witnesses' testimony
[The prepared statement of Mr. Peterson follows:]
Prepared Statement of Hon. Collin C. Peterson, a Representative in
Congress from Minnesota
Good morning and welcome to today's hearing of the House
Agriculture Committee. Right now, Cuba relies heavily on imported food
to feed its people, and the United States provides about 30 percent of
the food Cuba imports. However, given our geographic location close to
Cuba and high quality, well-priced commodities, the U.S. International
Trade Commission estimates that the United States could provide as much
as \1/2\ to \2/3\ of Cuba's food and agriculture imports if current
trade restrictions were lifted. These restrictions are limiting a very
promising market for U.S. agriculture producers.
To that end, I have introduced legislation, H.R. 4645, along with
Congressman Moran and other Republicans and Democratics, including many
Members of this Committee, to expand U.S. agricultural exports to Cuba.
The bill we have introduced would eliminate the requirement that
our farmers have to go through a third country bank to do business in
Cuba, and would place agricultural exports to Cuba on the same terms
for cash payment as other countries, requiring payment when the
shipment changes hands. It would also make it easier for U.S. citizens
to travel to Cuba, allowing American agricultural producers to more
easily conduct business with Cuba and boosting demand for U.S. products
in Cuba. However, it should be very clear that this bill will NOT end
the U.S. embargo on Cuba and will not allow U.S. banks to extend credit
to Cuba. It will simply allow U.S. agriculture exporters to offer their
products for sale to Cuba in the same way they do business with all of
our other trading partners.
American agriculture is eager to increase exports and grow this
important sector of the U.S. economy. That is why many diverse
agriculture groups have already voiced support for H.R. 4645, including
the American Farm Bureau Federation, National Farmers Union, National
Milk Producers Federation, National Chicken Council, National Corn
Growers Association, National Association of Wheat Growers, USA Rice
Federation, U.S. Rice Producers Association, American Soybean
Association, American Cotton Shippers Association, National Council of
Farmer Cooperatives, and U.S. Apple Association, among others.
Before we begin, I think it's important to clarify one other thing
right now. I do not think any of the Members here or any of the
witnesses at that table today are supporters of the Castro regime. None
of us support the Cuban Government's detainment of political prisoners.
However, the policies we have in place today have done nothing to
remove the regime or improve the situation for political prisoners. I
have here, and am entering into the record, letters from Human Rights
Watch and the Conference of Catholic Bishops that support the
legislation I have introduced, because they recognize that the
restrictions currently in place are failing the Cuban people. America's
current policies have failed to achieve their stated goal and instead
they have hand-delivered an export market in our own backyard to the
Brazilians, the Europeans, and our other competitors around the world.
It's time we ask ourselves why we have in place policies that simply do
not work and that only harm U.S. interests.
I thank our witnesses for joining us today to talk about this
important issue, and I look forward to their testimony.
The Chairman. I will now recognize the gentleman from
Oklahoma, the Ranking Member, for a statement.
OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN
CONGRESS FROM OKLAHOMA
Mr. Lucas. Thank you, Mr. Chairman.
I am glad we had an opportunity today to discuss the
important role that exports play in the success of our farmers
and ranchers. I look forward to hearing from a full set of
witnesses who represent producers with agricultural export
interests, several of whom are producers themselves.
Exports are essential to the prosperity of American
farmers, and we should consistently seek greater opportunities
for exports. We have several such opportunities ready and
waiting. The three pending free trade agreements the U.S.
signed with Panama, Colombia, and Korea are worth more than
$2.6 billion in new market access for American agricultural
exports. The Korean agreement alone is the most economically
significant agreement negotiated in 16 years.
Unfortunately, these agreements are being delayed
unnecessarily.
The Obama Administration has in recent weeks passed up
three key opportunities to lay out a clear path for expanding
U.S. agricultural exports. Neither the President's budget
proposal, his export initiative, nor this year's trade policy
agenda places an emphasis on finally implementing our pending
trade agreements. Instead, the Administration seems narrowly
focused on trade enforcement and technical assistance to expand
trade. These are important activities, but they are inadequate
when it comes to opening new markets.
Today, we are here to talk about trade with Cuba. U.S.
farmers are well positioned to supply food and agricultural
products, which are exempt from the embargo on humanitarian
grounds. Since 2001, U.S. agricultural exporters have used
licenses to send products to Cuba. Over the past decade, the
U.S. share of the Cuban food market has risen dramatically.
In 2005, some additional changes were made to regulations
governing exports to Cuba; and this Committee is interested in
hearing how those changes have been implemented. Of particular
concern is the issue of specific and general licenses for
exports and travel, and how these licenses have been
administered.
I hope that our witnesses can help us understand how these
issues fit into our overall picture of expanding U.S. exports.
I hope we can shed light on some of a few questions, such as
regulations administered in an equitable and timely manner, are
they? What changes can the Administration make to respond to
your concerns? And what other avenues of exports do you see are
a necessary component to our U.S. trade policy?
As we discuss these topics today, it is important to
understand that our priorities should be finding a way to
increase agricultural exports to help meet the food needs of
the Cuban people without supporting Cuba's current oppressive
government.
I thank the Chairman for this hearing, and I yield back.
[The prepared statement of Mr. Lucas follows:]
Prepared Statement of Hon. Frank D. Lucas, a Representative in Congress
from Oklahoma
Thank you, Mr. Chairman.
I am glad we have an opportunity today to discuss the important
role that exports play in the success of our farmers and ranchers. I
look forward to hearing from a full set of witnesses who represent
producers with agricultural export interests, several of whom are
producers themselves.
Exports are essential to the prosperity of American farmers, and we
should consistently seek greater opportunities for exports. We have
several such opportunities ready and waiting. The three pending free
trade agreements the U.S. signed with Panama, Colombia, and Korea are
worth more than $2.6 billion in new market access for American
agricultural exports. The Korean agreement alone is the most
economically significant agreement negotiated in 16 years.
Unfortunately these agreements are being delayed unnecessarily.
The Obama Administration has in recent weeks passed up three key
opportunities to lay out a clear path for expanding U.S. agricultural
exports. Neither the President's budget proposal, his export
initiative, nor this year's trade policy agenda places an emphasis on
finally implementing our pending trade agreements. Instead, the
Administration seems narrowly focused on trade enforcement and
technical assistance to expand trade. These are important activities,
but they're inadequate when it comes to opening new markets.
Today, we are here to talk about trade with Cuba. U.S. farmers are
well positioned to supply food and agricultural products, which are
exempt from the embargo on humanitarian grounds. Since 2001, U.S.
agricultural exporters have used licenses to send products to Cuba.
Over the past decade, the U.S. share of the Cuban food market has risen
dramatically.
In 2005, some additional changes were made to regulations governing
exports to Cuba, and this Committee is interested in hearing how those
changes have been implemented. Of particular concern is the issue of
specific or general licenses for exports and travel, and how those
licenses have been administered.
I hope that our witnesses can help us understand how these issues
fit into their overall picture of expanding U.S. exports. I hope they
can shed some light on a few questions, such as are regulations
administered in an equitable and timely manner? What changes can the
Administration make to respond to your concerns? What other avenues for
exports do you see are a necessary component to our trade policy?
As we discuss these topics today, it's important to understand that
our priority should be finding a way to increase agriculture exports to
help meet the food needs of the Cuban people without supporting Cuba's
oppressive government.
The Chairman. I thank the gentleman.
All the Members will be able to put a statement into the
record if they so wish.
[The prepared statement of Mr. Cuellar follows:]
Prepared Statement of Hon. Henry Cuellar, a Representative in Congress
from Texas
Thank you Chairman Peterson and Ranking Member Lucas for holding
today's hearing of the House Committee on Agriculture to review United
States agricultural sales to Cuba. I look forward to our hearings on
this issue, as I believe there are both strong positives and negatives
to changes to our current policy.
When reviewing changes to our current relationship with Cuba, I
must first and foremost represent my Congressional District and
constituents. I understand the strong views that Cuba policy elicits,
and I hope our hearings will serve to answer many questions about the
short and long term implications this may lead to.
American agricultural producers are the best in the world. They
have every ability to compete and succeed in any marketplace, and I do
believe that expanding markets for them during some of the toughest
economic times in our lifetimes will help lessen the impact of our
current recession. That is why I have supported in the past increased
access and trade globally. In fact, this Congress I created the Pro-
Trade caucus. Let there be no doubt--trade creates jobs for American
workers.
However, let us not be blind to the negatives of this legislation.
Cuba is a communist country with a Dictator. There is no debating that.
The United States has made a near 50 year commitment to ending the
communist rule that lives only 90 miles off our border. We must
carefully consider if now is the time--or if changing the policy now
puts our last 50 years to waste.
Finally, we must try to ensure that by expanding trade into Cuba,
we don't only generate revenue for the Cuban Government, but also
improve the quality of life for 11 million Cuban citizens.
I have approached this issue with an open mind, and I will continue
to learn of the impact this legislation will have in its current form.
I look forward to a substantive and productive debate with my
colleagues on the Committee on Agriculture, as I know many of them
share my concerns.
Again, I thank the Chairman and the Ranking Member for holding
these hearings. I understand the emotions that any discussion of Cuba
can bring out. I look forward to the testimony today, and our continued
work on this Committee.
The Chairman. We welcome our first panel, the Presidents of
our two major general farm organizations, Mr. Bob Stallman, the
President of the American Farm Bureau, and Mr. Robert Johnson,
the President of the National Farmers Union.
So, gentlemen, we appreciate you being here with us today;
and I guess, Mr. Stallman, you are up first. Welcome to the
Committee.
STATEMENT OF BOB STALLMAN, PRESIDENT, AMERICAN FARM BUREAU
FEDERATION; RICE AND CATTLE PRODUCER, COLUMBUS, TX
Mr. Stallman. Thank you, Mr. Chairman and Ranking Member
Lucas, Members of the Committee.
I am Bob Stallman, President of the American Farm Bureau
Federation and a rice and cattle producer from Columbus, Texas;
and I certainly appreciate this invitation to share our views
on U.S. agricultural exports to Cuba.
The American Farm Bureau Federation supports H.R. 4645. We
appreciate the leadership of the Chairman and Representative
Moran for sponsoring this legislation, and the efforts of other
House Members who worked together to develop this bill.
H.R. 4645 will increase agricultural exports and supply
food to the Cuban people. U.S. agricultural exports to Cuba do
reach the Cuban people and are not solely placed in hard
currency supermarkets. Cuba's agricultural production is not
able to meet the food demands of the nation, so they must
import agricultural goods. If not, many Cuban citizens would go
hungry.
On the average, the United States has exported $320 million
in U.S. product per year since 2000. We have exported a variety
of products, including corn, wheat, soybeans, rice, poultry,
dairy products, pork, live cattle, dried beans and peas, and
fresh and dried fruits, including apples, grapes, and pears.
The International Trade Commission has reported that the
value of agricultural imports by Cuba has more than tripled
since 2000, but those sales values have fluctuated. Our
submitted statement includes U.S. commodity export numbers.
Given that my colleagues representing those commodity groups
will be testifying, I will focus my comments on the legislation
and its importance.
The major factor contributing to sales fluctuations is that
the U.S. is not viewed by Cuba as a reliable supplier due to
our sales restrictions, and the ability of the U.S. Government
to alter those restrictions on a whim. The United States should
be the preferred supplier in Cuba, given our competitive
prices, high-quality products and lower delivery costs due to
the proximity of our countries. Instead, we have opened the
door to countries like the European Union, Brazil, Canada,
Vietnam, while hindering ourselves. Our competitive
disadvantage in the market is not a result of partner-imposed
trade reasons, but, rather, our own government-imposed
restrictions.
What we are asking for from Congress is to give U.S.
farmers the competitive advantage in Cuba that they should
rightly have, and the opportunity to increase U.S. agricultural
exports. The provisions of H.R. 4645 include returning the so-
called payment of cash in advance rule to normal commercial
terms, as intended by Congress. The Office of Foreign Assets
Control rule change in 2005 negated the original intent of
Congress, created a special case that only applies to Cuba,
thus increasing the cost of purchasing our products and
negatively impacting our sales. The current definition does
nothing to protect U.S. exporters, but was put in place to
attempt to hinder U.S. exports.
The additional dollars that Cuba now has to spend to
purchase U.S. product does not go to the U.S. farmer, but,
rather, the foreign bank carrying out the transaction. Payment
of cash in advance was the method of doing business with Cuba
prior to the change, and those who used this method previously
are supportive of returning to what Congress originally
intended.
The legislation would also eliminate the requirement that
Cuba wire any payment for U.S. goods through a third country
bank. This process comes with a high fee, again increasing the
cost of purchasing agricultural goods from the United States.
While U.S. telecommunications companies are authorized to
receive payments directly from their Cuban counterparts, U.S.
agriculture is singled out for this expensive, unnecessary, and
discriminatory requirement.
The opposition has tried to argue against this bill based
on Cuba's creditworthiness and the risk to U.S. suppliers. This
bill does not allow credit or are we asking for credit. This
bill would still require Cuba to pay for U.S. purchases in
cash. The issue of credit and Cuba's ability to pay does not
apply to what is being proposed.
Finally, H.R. 4645 would lift the U.S. travel ban. Lifting
the travel restrictions on U.S. citizens will have a direct
impact on U.S. agricultural sales. Increased travel to Cuba by
U.S. citizens will boost food demand in the country, and
coupled with these other reforms U.S. industry would expect to
meet the increased food needs. Remember, Cuba does not have the
capacity to fully meet its own food needs.
This need also brings with it the opportunity to sell Cuba
higher valued products, increasing the overall value of our
exports to the country. Given that Cuba would still be required
to purchase product from the U.S. with cash, those dollars
received from U.S. visitors would be spent to meet those
additional food needs.
Travel will also have a positive impact on the Cuban people
and their food consumption. U.S. citizens traveling to Cuba
will use dollars, and some of those dollars will flow back to
the Cuban people. This will increase the income of the Cuban
people, allowing them to purchase products they previously
could not.
U.S. agriculture's goal is to make the United States the
number one supplier in agricultural products to Cuba. In order
to achieve this goal, Cuba must view the United States as its
preferred supplier. Eliminating these restrictions will
decrease the advantage the United States has given our
competitors and restore the advantage to U.S. farmers.
U.S. agriculture is not requesting the embargo be lifted,
but rather for Congress to take the small step of lifting key
restrictions that will increase U.S. agriculture's
competitiveness in the market. We urge Members of this
Committee and this House to cosponsor and support H.R. 4645.
Thank you, and I look forward to the opportunity to answer
questions.
[The prepared statement of Mr. Stallman follows:]
Prepared Statement of Bob Stallman, President, American Farm Bureau
Federation; Rice and Cattle Producer, Columbus, TX
My name is Bob Stallman. I am President of the American Farm Bureau
Federation and a rice and cattle producer from Columbus, Texas. I
appreciate the invitation to share Farm Bureau's views on U.S.
agricultural exports to Cuba. Farm Bureau is the nation's largest
general farm organization, with more than six million member families,
representing producers of every commodity from every state as well as
Puerto Rico.
While the United States has only been exporting U.S. agricultural
products to Cuba for just over 10 years, we have seen the promise the
market holds. Unfortunately, because of restrictions on U.S. exports to
Cuba, U.S. farmers have not been able to benefit from the full
potential of the market.
Because of the market potential, the American Farm Bureau
Federation has been an advocate for easing restrictions on exports to
Cuba and is a supporter of H.R. 4645, The Travel Reform and Export
Enhancement Act. We appreciate the leadership of Chairman Collin
Peterson and Rep. Jerry Moran for drafting this legislation, and the
efforts of other House Members who worked together to develop this
bill. This legislation will eliminate costly obstacles for American
farmers interested in exporting to Cuba and will expand the potential
for increase food consumption providing an even greater opportunity to
export U.S. products to the market.
H.R. 4645 will increase agricultural exports and supply food to the
Cuban people. U.S. agricultural exports to Cuba do reach the Cuban
people and are not solely placed in hard-currency supermarkets. Cuba's
agricultural production does not meet the food demands of the nation so
they must import agricultural goods, if not many Cuban citizens would
go hungry.
The Cuban Market
U.S. agriculture has seen significant growth and experienced
significant setbacks since being allowed to trade with Cuba in 2000. We
have seen our sales increase and decline over the years, but on average
the United States has exported roughly $320 million in U.S. product per
year since 2000. The factors that have contributed to these
fluctuations can be attributed to U.S. regulation changes, cost of
doing business with the United States, commodity prices, transportation
cost, etc., but the major factor is that the United States is not
viewed by Cuba as a reliable supplier due to our sales restrictions and
the ability of the U.S. Government to alter those restrictions at a
whim.
The United States has exported a variety of commodities to Cuba. Of
those commodities grain and feed has consistently been the top export
group with sales of $369 million making up more than half of our total
exports in 2008. With an 81 percent increase from 2007 to 2008, corn
and wheat have been the largest beneficiaries of these sales. Rice on
the other hand had seen major growth until 2006 when exports reached a
high of $39 million; since then rice sales have been on a sharp decline
resulting in no rice sales in 2009.
Oilseeds are the second largest group of exports to Cuba. The
majority of what Cuba is importing from the United States in this group
consists mainly of soybeans and soybean products. Of these products the
United States exported $135 million in 2008 and has seen a growth of
119 percent since Cuba began purchasing these products in 2002.
Since 2001 Cuba has been an importer of U.S. meats and dairy
products. A majority of these sales have come from poultry purchases by
Cuba. U.S. poultry sales showed nearly 80 percent growth in 2008 from
2007, with sales reaching a high of $139 million. U.S. dairy sales have
been less regular with dramatic sales increases and decreases. In 2008,
the United States exported more than $15 million in dairy products but
those sales were a little more than half of what we exported during our
top year, 2005 ($30 million).
While the above mentioned products represent our largest exports,
the United States also exports products like pork, live cattle, dried
beans and peas, fresh and dry fruits including apples, grapes and
pears. U.S. agriculture sales to Cuba exponentially increased until
around 2005; however, after 2005 sales dropped as Cuba increasingly
turned to our competitors to fill its needs. This shift in purchases
was a result of the increasingly complex sale requirements, which
caused Cuba to view the United States as an unreliable supplier. The
Foreign Agriculture Service, United States Department of Agriculture,
trade data comparing the export information for 2009 compared to the
same period in 2008 shows our exports dropped by 23 percent.
According to the U.S. International Trade Commission (ITC) report,
``U.S. Agricultural Sales to Cuba: Certain Economic Effects of U.S.
Restrictions,'' Cuba's value of agricultural imports more than tripled
from approximately $500 million in 2000 to more than $1.8 billion in
2008. There is much more opportunity to expand the U.S. market share.
The United States should be the preferred supplier in Cuba given our
competitive prices, high-quality products and lower delivery cost due
to proximity of our countries. Instead, we have opened the door to
countries like the European Union, Brazil, Canada and Vietnam while
hindering ourselves. At this point our competitive disadvantage in the
market is not a result of the usual trade reasons, tariffs, partner-
imposed sanitary and phytosanitary measures or other non-tariff
barriers, but rather our own government-imposed restrictions.
Making U.S. Agriculture Competitive in the Cuban Market
The American Farm Bureau is not currently advocating fully lifting
the embargo, but we believe now is the time for Congress to take action
to ease some of the current restrictions. President Obama early last
year took action to eliminate the restrictions placed on Cuban American
travel and remittances, as well as restrictions allowing U.S.
telecommunication companies to do business in Cuba. Steps have also
been taken by the Administration and some within Congress to engage
with Cuba. This Congress passed a 1 year measure to ease restrictions
on ``cash payment in advance,'' and a measure to allow travel to Cuba
for agricultural sales to be done on a general license, which is
currently being implemented.
What we are asking for from Congress and the Administration is to
give U.S. farmers the competitive advantage in Cuba that they should
rightly have and the opportunity to increase U.S. agricultural exports.
We believe the way to make that happen is to return ``payment of cash
in advance'' to the commercial terms as intended by Congress, eliminate
the need to go through third country banks, issue visas for Cuban
agriculture inspectors and eliminating all travel restrictions on U.S.
citizen travel to Cuba.
The Office of Foreign Assets Control (OFAC) re-defining ``payment
of cash in advance'' negated what was the original intent of Congress,
ignored the commercial definition to create a special definition that
only applies to Cuba, increased the cost of purchasing our products and
negatively impact our sales. The current definition does nothing to
protect U.S. exporters but was put in place in an attempt to hinder
U.S. exports. ``Payment of cash in advance'' was the method of doing
business with Cuba prior to the change, and those who used this method
previously are supportive of returning to what Congress had intended.
The opposition has tried to argue against this bill based on Cuba's
credit worthiness and the risk to U.S. suppliers. This bill does not
allow credit nor are we asking for credit. This bill would still
require Cuba to pay for U.S. purchases in cash. The issue of credit and
Cuba's ability to pay does not apply to what is proposed.
U.S. citizen travel to Cuba will create a new demand for food in
the market, increasing the opportunity to sell U.S. agricultural
product. To meet the demand Cuba will have to import more food. Cuba
does not have sufficient agricultural production to meet its own
consumption. Travel will also have a positive impact on the Cuban
people and their food consumption habits. U.S. citizens traveling to
Cuba will use dollars and many of those dollars will flow back to the
Cuban people. This will increase the income of the Cuban people
allowing them to purchase higher valued food products they previously
could not afford.
Payment of Cash in Advance
On Feb. 22, 2005, the OFAC issued a regulation narrowing the
application of the term ``payment of cash in advance'' for sales to
Cuba. Under the new OFAC definition, cash payments for U.S.
agricultural goods sold to Cuba are restricted to payments received
prior to shipment of the goods from U.S. ports. This restriction is
contrary to the Trade Sanctions Reform and Export Enhancement Act of
2000 (Export Enhancement Act), which allows for the shipment of
agricultural goods under a broader interpretation of ``payment of cash
in advance'' terms, consistent with practices successfully used by U.S.
exporters.
Most contracts made with the Cuban Government for the purchase of
U.S. agricultural products have used ``payment of cash in advance'' as
the method of payment. Under its original interpretation, U.S.
agricultural products could be shipped to Cuba but all certificates,
title and ownership of the goods would only be transferred once payment
was received from Cuba. Contracts now being made with Cuba are done
under letters of credit from third party banks. These letters of credit
have increased the cost of doing business with the United States which
translates into a higher price for our commodities. The additional
dollars Cuba spends for these transactions do not go to the U.S. farmer
but rather the foreign bank carrying out the transaction.
Third Country Banks
Currently, Cuba must wire payments for U.S. goods through a third
country bank in order for U.S. banks to receive the cash for the U.S.
product to be delivered. This process comes with a high fee for
handling the transaction, increasing the cost of purchasing
agricultural goods from the United States. Having to go through a third
country bank puts U.S. products at a disadvantage to those of our
competitors. While U.S. telecommunications companies are authorized to
receive payments directly from their Cuban counterparts, U.S.
agriculture is singled out by law for the expensive, unnecessary and
discriminatory requirement that payments must flow through foreign
banks.
Removal of the Travel Ban
Lifting the travel restrictions on U.S. citizens will have a direct
impact on U.S. agricultural sales. Increased travel to Cuba by U.S.
citizens will boost food demand in the country and, coupled with other
reforms, U.S. industry would expect to meet the increased food needs.
The ITC study mentioned previously in this statement concurs that
visitors would boost the demand for imported agricultural products.
U.S. farmers have the capability to fulfill the demands of the Cuban
citizen and the added demand of the country's visitors. This new demand
also brings with it the opportunity to sell Cuba higher-valued
products, increasing the overall value of our exports to the country.
Increased travel will also bring much needed funds to purchase U.S.
commodities. Given that the United States would not extend credit to
Cuba, Cuba would still be required to purchase product from the U.S.
with cash. Those dollars received from U.S. visitors would be spent to
meet those food needs.
Denial of U.S. Visas
Cuban travel has been denied by the United States for important
meetings for Cuban officials, like veterinary officials, to confer with
U.S. suppliers, inspect facilities, discuss sanitary and phytosanitary
issues and verify U.S. procedures and standards associated with the
sale of U.S. food and agricultural exports to Cuba. Visits of this type
are routinely conducted by U.S. officials and U.S. importers in markets
that sell to the United States. It is also customary practice for
foreign purchasing agents and government technical teams to travel to
the U.S. to meet with U.S. suppliers and tour facilities. The denial of
the visas associated with these commercial visits from Cuban officials
has drastically limited the export of some U.S. products, hindering our
trade growth and is contrary to the spirit of the Export Enhancement
Act.
Conclusion
U.S. agriculture's goal is to make the United States the number one
supplier of food and agricultural product to Cuba. In order to achieve
this goal, Cuba must also view the United States as its preferred
supplier. Our competitors do not have the same obstacles in trading
with Cuba we face. Eliminating these restrictions will decrease the
advantages the United States has given our competitors and restore the
advantage to U.S. farmers. These actions will make it easier for Cuba
to purchase U.S. commodities and most importantly will reduce the cost
of purchasing our commodities. U.S. agriculture is not requesting the
embargo be lifted but rather for Congress to take the small step of
lifting key restrictions that will increase U.S. agriculture's
competitiveness in the market.
We hope that Members of this Committee, and the House, will support
Chairman Peterson's and Rep. Moran's Travel Reform and Export
Enhancement Act, H.R. 4645. The bill will reverse the restrictions on
``payment of cash in advance,'' eliminate the third country bank
requirement and lift the ban on travel. Passage of this bill will make
agriculture a strong player in the Cuban market and will increase U.S.
agricultural exports.
The Chairman. Thank you, Mr. Stallman, I appreciate that.
Mr. Johnson, welcome to the Committee.
STATEMENT OF ROGER JOHNSON, PRESIDENT, NATIONAL FARMERS UNION,
WASHINGTON, D.C.
Mr. Johnson. Thank you, Mr. Chairman and Members of the
Committee.
For the record, my name is Roger Johnson. I am President of
National Farmers Union, and a farmer from North Dakota. I am
formerly the North Dakota Agriculture Commissioner and in that
capacity I have personally lead eight trade-related missions to
Cuba. So I speak with some firsthand experience.
The National Farmers Union has long supported ending the
Cuban embargo. We think it is simply not achieving the goal
that it was intended to achieve. And so, consequently, we
clearly are in support of the Travel Restriction Reform and
Export Enhancement Act that is before us today. It at least
goes in the right direction by doing the right things. Allowing
for direct financial transactions will allow for significant
efficiencies in the marketplace to be realized, allowing for
the same sorts of payment requirements that are afforded to
other countries for our exporters, and, of course, allowing
U.S. citizens to travel to Cuba.
Since the passage of the 2000 TSRA, U.S. farmers have
earned about $4 billion from sales to the Cubans. They have had
an excellent repayment record. I know of no one who has not
been paid in the extensive trips that I have had there and the
contacts that I have made with U.S. suppliers.
Between 2000 and 2006, Cuba's food and export and ag
imports nearly doubled. We have picked up a significant share
of that, as has already been pointed out. We are very well
positioned to supply this market. One might argue that we are
the best positioned of any country in the world to supply the
Cuban market.
U.S. ag producers have already experienced positive impacts
since the passage of TSRA. Nonetheless, the current policy is
tepid and inconsistent with the policy that this country has
towards a number of other countries in the world; and, frankly,
the current policy which allows for the cash sale of food and
medicine to Cuba is getting a little old.
We need to continue to advance in this current policy.
Trade is based on relationships, and our word means something
and relationships mean something between trading partners. We
need to get beyond where we are at and get beyond the
diplomatic slaps in the face that the 2005 change in policy,
already referenced, that was intended to provide.
The current cash-only sales policy may seem to be in our
best interest. However, it is an inefficient system
characterized by small sales, the absence of long-term
contracts, unnecessarily high transaction costs, and exchange
rate losses, all of which hurt our competitiveness. Direct
banking transfers, if they were permitted between the U.S. and
Cuba for these products, would also add additional
efficiencies.
Our policy currently is designed to use food as a weapon,
and we would argue that that policy has failed. Just under 50
years ago, 60 percent of Cuba's food imports came from the U.S.
We ought to get back to that goal.
The International Trade Commission predicts that lifting
the ban on ag products would increase U.S. exports to Cuba to
between $900 million and about $1.2 billion, leading to an
increase of somewhere between $\1/4\-$\1/2\ billion annually.
We ought to do this. This bill would get us a long ways down
the road towards making that accomplishment.
That report also pointed out a number of factors that are
both positive and negative with respect to our relationship.
They are detailed on page four of my testimony. You can see the
three positive factors that we have deal with our competitive
prices and high quality of products, our lower cost of
delivery, and the smaller volumes that, because of our
proximity, we are able to move into that market on a just-in-
time basis.
But that report also details eight factors that hinder our
ability to access that market. This bill would go a long ways
towards eliminating a majority of those eight factors.
I realize that there are political factors to consider as
well when lifting the ban on travel to Cuba. As the Chairman
stated at the opening of this hearing, we have never been
supportive of military dictatorships. We do, however, feel this
embargo has failed. It is time to move on, and passing this
bill would at least be a significant step in the right
direction. Thank you.
[The prepared statement of Mr. Johnson follows:]
Prepared Statement of Roger Johnson, President, National Farmers Union,
Washington, D.C.
Chairman Peterson, Ranking Member Lucas and Members of the
Committee, thank you for the opportunity to testify about the
importance of agricultural trade with Cuba. My name is Roger Johnson
and I am President of the National Farmers Union (NFU). NFU is a
national organization that has represented family farmers and ranchers
and rural residents for more than 100 years. As a point of reference,
during my career I have personally led eight trade-related missions to
Cuba, so I speak from firsthand experience.
NFU has long supported ending the Cuban embargo and establishing
trade relations with Cuba. For this reason, NFU supports the Travel
Restriction Reform and Export Enhancement Act sponsored by House
Agriculture Committee Chairman Collin C. Peterson, Agriculture
Appropriations Chair Rosa L. DeLauro, Representative Jerry Moran and
Representative Jo Ann Emerson.
This bill would allow direct financial transactions for
agricultural sales to Cuba; require agricultural exports to Cuba to
meet the same payment requirements as exports to other countries; and
would allow U.S. citizens to travel to Cuba.
Since January 2009, 13 bills have been introduced in Congress to
ease restrictions on travel, financial transactions or agricultural
trade with Cuba. Clearly, in this case, politics is blocking good
policy decisions.
Trade with Cuba
Since passage of the 2000 Trade Sanctions and Reform Act (TSRA),
U.S. farmers have earned $4 billion from sales to the Cuban market and
Cubans have had an excellent payment record. However, due to continued
arbitrary restrictions on U.S. agricultural sales driven by Executive
Orders rather than Acts of Congress, U.S. producers have failed to
unlock the full market potential in Cuba. Cubans have begun to shift
their purchases of several commodities to other suppliers, such as
Vietnam, Canada, Brazil and the European Union (EU).
Expanding exports and trade are critical to expanding opportunities
for U.S. agricultural producers and will allow producers to provide the
highest quality food products to people around the world. Cuba relies
on imports for most of its food needs. Between 2000 and 2006, Cuba's
food and agricultural imports nearly doubled. Passage of such
legislation will increase exports, meaning millions of dollars for U.S.
agriculture.
U.S. producers are well-positioned to supply Cuba with additional
commodities, with the ability to reach three major Cuban ports in 1 day
or less, compared to 25 days from Brazil. Current U.S. policy hampers
our ability to supply the Cuban market, a market we once dominated.
Effects of U.S. Trade Restrictions with Cuba
U.S. agricultural producers have already experienced positive
impacts from the sale of agricultural products into the Cuban market
since the passage of TSRA. Nonetheless, our current policy is tepid and
inconsistent with policy the United States has with other countries.
Current policy allows for cash sale of food and medicine to Cuba, yet
direct banking exchanges are not allowed.
The current ``cash only'' sales policy may seem to be in the best
interest of the U.S.; however, it is an inefficient system,
characterized by small sales, the absence of long-term contracts,
unnecessarily high transaction costs, and exchange rate losses. This
policy needs to be changed so U.S. producers can benefit from full and
normalized trade relations with Cuba. If direct banking transfers were
permitted between the U.S. and Cuba for the purchase of American-made
products by Cuba, notable positive impacts on both countries' economies
would be possible, creating a win-win situation. Current U.S. policy is
designed to use food as a weapon, and it has failed.
Just under 50 years ago 60 percent of Cuba's food imports came from
the U.S. Our policy should allow domestic producers to reach that level
once again. More recently, agricultural trade with Cuba reached a value
of approximately $750 million before additional regulations, which were
designed as a diplomatic slap in the face, were put in place during the
Bush Administration. Following the additional restrictions,
agricultural sales have steadily declined with a recent report by the
International Trade Commission (ITC) showing approximately $290 million
in agricultural cash sales to Cuba.
Parties in both Cuba and the U.S. have increasingly cited how
cumbersome agricultural trade has become. Some are considering
abandoning trade altogether, with Cubans left to source their
commodities from other origins. The current embargo is not working.
Last year the U.S. Government purchased more than $300 million in
surplus U.S. agricultural goods in an attempt to support the market;
while opening the Cuban market would not fully offset these purchases,
it would certainly help. Ending the Cuban embargo would both save
taxpayer dollars and assure Cuba a consistent source of reasonably
priced, high-quality food.
As this cumbersome trade process continues, we have seen a ten
percent decrease in imports from the U.S. to Cuba in 2005 and an
additional decrease of four percent in 2006. Looking at the percentage
of market access the U.S. has in Cuba, clearly grains are the easiest
commodity to move because of the uncertain timeframe it will take to
get all of the necessary paperwork in line. Shipping is clearly not the
problem. The U.S. has almost no market share of value-added or
processed foods, which are usually more perishable and more costly to
ship, allowing Brazil and the EU to fill this demand. Value-added goods
also tend to yield higher returns for U.S. exporters and create more
jobs and economic activity than commodity sales. The very type of food
exports we most want are the ones our current restrictive policy
preclude.
The ITC predicts lifting the ban on agricultural goods would
increase U.S. exports to Cuba by between $924 million and $1.2 billion.
This would also increase the U.S. market share in Cuba compared to
other competing countries from the current 38 percent to between 49
percent and 64 percent.
U.S.--Cuba Trade Policy Recommendations
Lifting the current restriction on tourism would provide Cuba with
more U.S. dollars, which could then be used to purchase more U.S.
products, particularly more value-added agricultural products for the
food service and hotel trades. Many of these products could have a
significant impact on economic growth and support for rural farm and
ranch families.
Passage of this legislation would mean millions of dollars in
agricultural exports for U.S. producers and the economy. According to
the ITC report released in June 2009, there are only three major
factors that enhance the competitiveness of U.S. agricultural exports
to Cuba:
1. U.S. exporters offer competitive prices and high-quality
products.
2. U.S. exporters benefit from lower cost of delivery than
competing suppliers.
3. U.S. exporters can provide smaller volumes of individual
shipments on a just-in-time basis to smaller Cuban ports.
However, according to the same report, U.S. exporters are hampered
by eight major factors making the U.S. a less desirable trading partner
and decreasing market access:
1. U.S. exports cannot offer credit to Cuba for the purchases while
other trading partners to Cuba make concessions for trade with
Cuba.
2. The U.S. Government requires payment from Cuba in cash in
advance channeled through third-country banks, driving up
transaction fees.
3. When purchasing U.S. products, ALIMPORT may incur additional
storage and demurrage costs if the transactions paperwork is
not completed on schedule.
4. U.S. exporters wishing to travel to Cuba in order to complete
sales contracts find the travel licensing process to be
cumbersome, nontransparent and time consuming.
5. The U.S. restricts visits by Cubans for sales negotiations and
for sanitary and phytosanitary inspections of U.S. products and
processing facilities.
6. U.S. agriculture trade associations cannot use industry-
generated funds or U.S. Department of Agriculture Market Access
Program money for market research and promotion activities in
Cuba.
7. U.S. regulations penalize foreign vessels that dock in Cuban
ports, resulting in less competition among carriers and higher
maritime transportation costs.
8. The Cuban Government makes purchases from certain countries
based on geopolitical motivations.
Travel to Cuba
The Obama Administration has, by Executive Order, lifted part of
the travel ban for Cuban Americans to travel to Cuba to visit family.
Every American should be free to travel to and from Cuba.
The aforementioned ITC report clearly indicates that lifting the
travel ban will result in an influx of U.S. tourism. An enhanced
tourism industry would boost the demand for imported agricultural
products, particularly high-valued products from the U.S., and bring
more hard currency into the country, allowing ALIMPORT to buy more U.S.
agricultural products for the domestic Cuban population.
I realize there are political factors to consider when lifting the
ban on travel to Cuba. This is a sensitive topic, and as an
organization NFU may be criticized for supporting lifting this ban, but
I want to clearly state NFU has never been supportive of a military
dictatorship. However, this 50 year embargo has not worked for our
nation's farmers and ranchers and has only caused the Cuban people, not
the Cuban Government, to suffer.
Conclusion
NFU has clear, common-sense policy on Cuba. It is our
recommendation that the Cuban embargo be lifted. If that is not
possible, at minimum the eight impeding roadblocks outlined by the ITC
must be dissolved in order to increase U.S. exports to Cuba. Passage of
the Travel Restriction Reform and Export Enhancement Act would be a
significant step toward tearing down artificial walls put in place by
past Administrations and Congressional actions. I appreciate the
opportunity to testify today and look forward to responding to any
questions Committee Members may have.
The Chairman. Thank you, Roger--Mr. Johnson, Mr. President.
Mr. Johnson. You are welcome.
The Chairman. He is my neighbor. I can call him Roger.
Mr. Stallman, you mentioned that we are not viewed as a
stable supplier, and we have this 1 year fix that was put in
and it is apparently being implemented on part of this. Do you
think that is going to be enough to make any difference? Or do
we need a more permanent fix to make this work?
Mr. Stallman. No. I mean, obviously, as much as it is--it
is good, but it is not enough. You need more long-term
certainty when you are dealing with trade.
That is what I meant by not being viewed as a reliable
supplier. We made the change back in 2005, on a short-term
basis. And for longer term trade you need to have certainty
about what policy will be in terms of transactions. Having the
short-term implementation is good, but it is not enough.
The Chairman. Thank you.
Mr. Johnson, you have been to Cuba a bunch of times, as you
mentioned. Could you just tell us what the effects of that
travel were both in the United States and Cuba? And why did you
travel to Cuba? And how did that travel relate to U.S.
agriculture? Can you just elaborate a little bit more on that,
and on how the current policy is negatively affecting the
smaller sales?
Mr. Johnson. Sure, I would be pleased to, Mr. Chairman.
All of my trips to Cuba were in the order of trying to
advance trade. We led trade delegations, usually of North
Dakota companies, but often for our neighboring Minnesota
companies, as well, that went down with agricultural products.
We had to get specific licenses. That has been changed now, so
a general license will get folks down there. We are still
finding out how that will play out. It was a fairly cumbersome
process. To get the licenses, you had to license each
individual participant, and you had to demonstrate that their
reason for traveling exclusively related to selling food or ag
products.
I can tell you that the way the financial transactions have
to be handled is extraordinarily cumbersome. The way it used to
be is the goods would dock at the port, usually in Havana; and
before they could be off-loaded, the money had to be received.
But that is just a little piece of it. The money would normally
get wired across the ocean, converted into a foreign currency,
and then converted into the U.S. dollar. So you would have two
conversions, both of which would lose you some money in
transaction costs.
And then, because of time changes, a day later they would
get transferred back to the U.S. bank. It would get in the bank
in which--that would be paying the seller. In that case, the
North Dakota company or Minnesota company that would be selling
the products, or their broker.
And then that would have to be confirmed by the Federal
Government before word could be send back to Cuba, ``Yep, we
have the money. It is in the bank. Now you can offload the
ship.''
This is very inefficient. The Cubans told us repeatedly
five to 15 percent right off the top they accounted for just
because of that process.
Now, in 2005, when the Administration made that change--and
essentially same process, except that all this now had to
happen at the port in the U.S., instead of the port in Cuba--
there was a long period of time, 6 to 9 months, where the
policy had changed, but there was no official recognition of
the change. You saw enormous uncertainty in the market.
I think it was intended as a diplomatic slap in the face.
Clearly, that is what it was received as by the Cubans. There
were lots of concerns about that. We can go into that if you
want to pursue it more. But the system is extraordinarily
inefficient.
The last point I would like to make about this, we have--on
three of the trips, specifically the Cubans were interested in
potatoes coming out of the Red River Valley, both table stock
and seed potatoes. On two of those trips, we specifically
negotiated deals to sell table stock and seed potatoes to Cuba.
None of those sales have yet occurred, because of the
complexities of getting all these travel arrangements to allow
the Cuban inspectors to come up and to get our sanitary and
phytosanitary standards reconciled between the two countries,
since USDA can't talk to Cuba, only the State Department can.
We were left in our Department and the Minnesota Department
of Agriculture and the Department of Agriculture in the State
of Maine trying to negotiate those requirements with the Cubans
and then coming back to the State Department and to USDA. We
never got it all done. It just never happened, and the sales
have never happened as a result of it.
The Chairman. Thank you.
The gentleman from Oklahoma.
Mr. Lucas. Thank you, Mr. Chairman.
I do appreciate this hearing today, and I am very pleased
to have knowledgeable witnesses. Part of these hearings, of
course, is the exchange of information to better enlighten the
Committee to understand what is really going on.
First, before we move directly into the Cuba issue, on the
free trade agreements, can you reiterate, gentlemen, your
organizations' position, if you have a position, on the timely
efforts to move the free trade agreements with Panama,
Colombia, and Korea?
Mr. Stallman. Our Bureau has been supportive of passing
those agreements. We supported negotiating them, and we
supported passing them once they were negotiated. That applies
to Colombia, Panama, and South Korea. They are absolutely good
for American agriculture. We need to pass those agreements, and
obviously there are issues holding those up. We have
communicated that to the Administration and also to this
Congress.
Mr. Lucas. Thank you, Mr. Stallman.
Mr. Johnson.
Mr. Johnson. I don't believe that the Farmers Union has
taken a specific position on those three agreements.
I will say as a general matter our policy argues that trade
needs to be much more fair and that, in particular, we want
labor requirements to be part of trade agreements and
environmental requirements, currency rates, those sorts of
things. I will say that our annual convention begins in 2 days,
and I expect we may very well end up debating this issue there.
But, right, now I don't think we have a policy on those three
particular agreements.
Mr. Lucas. After the convention, if you decide to be
consistent, I would be most appreciative to know that and if
you would forward it to me.
Gentlemen, you are both obviously very good farmers or you
would not have been elected by your farm organization, so you
understand production agriculture hands on. Mr. Johnson, you
alluded to several trips to Cuba. Mr. Stallman, have you been
to Cuba?
Mr. Stallman. Yes, I have, not as many times as Mr.
Johnson, but I have been there.
Mr. Lucas. Absolutely. My question for both of you is, when
you have been in that country, have you spent any time out in
the countryside in addition to the being in the urban areas
working on the trade issues?
Mr. Stallman. We absolutely did. We went down with multiple
goals, one, obviously, to talk to all important government
officials, also to look at their port facilities and determine
what the transportation infrastructure was. But we also went
out into the countryside to try to get what was, frankly, a
superficial assessment of what their ability was to produce
food and what the opportunities were for imports. So we did
travel some in the country.
Mr. Lucas. I will admit I have not been there. So I ask you
this question, what were your observations about the quality of
the soil. Most assuredly good people, well-educated people,
would you say that if their system would permit it that they
have the potential to greatly increase their own agricultural
production?
Mr. Stallman. They definitely have potential. They have,
obviously, a tropical climate and soils decent enough to grow a
lot of crops suitable for that climate. They lack capital. The
people are willing to work. When I was there they were just
beginning to open up, I guess you would say, farmers markets
that would allow producers to come in and actually sell their
products, as opposed to having it sold to the government. So
that was a small step. The potential is there, but the
restriction on their system and lack of infrastructure
investment and capital is hindering their ability.
Mr. Lucas. The reason I bring that question up, when we do
business with the Cuban Government, we facilitate their ability
to not only meet the needs of their constituencies down there,
but to also continue to exist. It is one of the few examples of
Soviet-style communism that still exists in the world, which
means not a market-driven economy but a government-dominated
economy. Even in places like mainland China, where the
Communist party still attempts to maintain absolute political
control, they have adopted a more market-oriented process and,
consequently, have seen dramatic economic growth in the last 10
to 20 years.
I guess what I am getting at is, in your observations the
soil is good, the potential is there, good people clearly, but
don't you think that the system that they have that controls
the resources, isn't that impeding their ability? And would we
therefore--second question--would we therefore be continuing
the problems they have by directly or indirectly helping the
system survive?
That is a good question for you, Bob. I look forward to the
answer.
Mr. Stallman. The first part of that answer is that, yes,
there is no question their form of government and the type of
control that comes from the top from the Castro family, and the
military, inhibits their ability to do this.
In terms of what would happen based on our engagement and
opening up the travel ban, I think the more opportunity that we
have to interact with Cubans at all levels and the greater
opportunity there is for them to see the truth about America
versus the web of propaganda and lies that they are given by
the government. It enhances the opportunity to, ultimately,
move more towards democratic reforms. I think it is that
interaction and exchange that we want.
The government has maintained themselves in power over the
years by putting all of their problems on the backs of the
United States, or trying to, because of our policies. That is
what the government has done. But if the truth is known by the
Cuban people about Americans and about our form of government
and our capitalistic system, I think that will provide a great
opportunity for that exchange of information and ideas to
occur.
Mr. Lucas. Mr. Johnson?
Mr. Johnson. There were a whole bunch of questions, Ranking
Member. Let me see if I can kind of remember them in order.
First of all----
Mr. Lucas. The basic question is, do we--by making it
easier for the Cuban Government to buy things here, do we
facilitate their ability to hold on and keep the Cuban people
in this place they are trapped in now?
Mr. Johnson. I understand that question, and I agree fully
with what Mr. Stallman said. I firmly believe that the best way
to bring light, if you will, to the people down there is to
open up travel. I think the influx of American tourists that
would come into that country, and the exchange of views that
would occur between our citizens and their citizens, would be
healthy for both of our people.
And if you look at what has happened, the policy we put in
place some 50 years ago was designed to get rid of a system of
government. Ten U.S. Presidents have come and gone, and all we
have done is move from one Castro to a younger brother who is
not very young. We would argue that the policies we have used
to try and make the changes that I think you and I agree ought
to be made have simply not worked.
Mr. Lucas. And the contagion has spread to other countries
in Central and South America.
Tolerate me one more moment, Mr. Chairman. I can see where
the need to meet the basic food needs of the Cuban people
should be met. That is a humanitarian issue, meeting things
that are on those ration cards. And I understand they have an
amazing system for allocating out the calories that people get.
Meeting those needs, I can't argue with that for a moment.
I just don't want to facilitate things that wind up
enabling the regime to hold on and to spread its style of
governance around by using access to things that the average
Cuban citizen never sees. They probably don't drink much
bourbon, and they don't see any lobster tails, but those kind
of things help facilitate a tourism industry that brings real,
hard cash into the country. Those are the kind of things we
need to look at.
I realize that is more than the scope of this bill and,
perhaps, more than the scope of this hearing, but it is the
kind of thing we need to think about in our overall policies.
Thank you, Mr. Chairman.
The Chairman. I thank the gentleman.
The gentleman from Pennsylvania, Mr. Holden.
Mr. Holden. Mr. Johnson, I am having a rough time grasping
how this cash-in-advance provision works. I know you have
elaborated on it in some detail. Can you maybe elaborate a
little more and how the provisions in the Chairman and Mr.
Moran's bill would change that?
Mr. Johnson. Yes, I would be pleased to.
The basic provision of this bill relative to cash in
advance is simply to put in law what you already did with the
last appropriation bill, I think it was, that put it in place
for this year but that expires at the end of this fiscal year.
So this would simply extend that provision, going forward.
It would essentially return us to the policy that was in
place from the beginning in 2000 when we first had some opening
under the TSRA Act to the point in 2005 when the Administration
put a different definition on the term cash in advance than
what is used anywhere else in the world. So it would put us
back to the normal definition, if you will.
Now, related to that is the ability to do direct financial
transactions, which is also in this bill. It is essential to
get rid of 90 percent of that garbage that I talked about in
that very convoluted system. If you did that, instead of
sending the Cubans' money over to Europe, converting that into
a Euro or some other currency and then reconverting to a dollar
and then sending it back, you would just directly send the
dollars to the U.S. bank. That would take probably 2 or 3 or 4
days of delay out of the system, and it would take the
inefficiencies of currency conversions out of the system, which
can be very substantial if they need to happen in a very rapid
basis, as they always do in these kinds of transactions.
Mr. Holden. Mr. Stallman, I believe you said that EU and
Brazil and Canada are the three biggest--where Cuba imports
most of the agriculture products from; is that correct?
Mr. Stallman. Yes.
Mr. Holden. And I also believe you said that all sectors of
the U.S. agriculture economy would benefit from this
legislation. What sector do you think would benefit the most?
Mr. Stallman. Oh, gosh, that would be difficult. It would
probably vary over the years. I mean, rice was a huge export to
Cuba in the past. You know, they obviously eat a lot of pork.
Their market for dried beans--the whole list that I read are
potentials, and I don't know, ultimately, which one would
benefit.
The point is, in the aggregate, if we can remove some of
these restrictions that we have been talking about, you will
enhance the opportunity, basically, for all commodities that
would be desired by the Cubans to purchase.
Mr. Holden. Thank you. Thank you, Mr. Chairman.
The Chairman. I recognize the gentleman from Kansas, the
cosponsor, and thank him for his leadership. Mr. Moran.
Mr. Moran. Mr. Chairman, I thank you for holding this
hearing; and I am pleased to be your ally in regard to this
legislation.
I appreciate the testimony of the two Presidents of our
farm organizations. I don't have any questions. I just want to
kind of outline the history and my understanding of what we are
about here.
In July of 2000, I offered an amendment on the House floor,
as a relatively new Member of the House of Representatives,
that would prohibit the use of any money in an appropriation
bill from being used to enforce sanctions for food, medicine,
and agriculture products in a sale to Cuba.
The end result of that amendment--and it was a
controversial day. I remember it as part of my time in
Congress. It will stand out to me. But, ultimately, despite
being suggested that this bill or this amendment would be
overwhelmingly defeated, it passed by 301 to 116. A majority of
Republicans, a majority of Democratics said it is time to
change the policy.
It changed the history of our relationship between the
United States and Cuba, a history that had been in existence
for 40 years, of which there were no sales of any of those
products to Cuba. Again, we are not talking about trade. We are
talking about sales.
So the end result of that amendment and the broad support
here in that Congress, July of 2000--and, in fact, all the
Members to my right voted for that amendment. It is so long ago
that there is no one here that voted against that amendment.
They just weren't here at the time. So broad support among the
Agriculture Committee and a broad set of supporters among all
Members of the House; 301 to 116 said let's do something
different.
I remember my conversation on the House floor that said,
``In Kansas, we will try something once. If it doesn't work, we
probably will try it again. We might even try it a third time.
But after about 40 years, Kansans would decide let's try
something different. If our goal is to change the leadership of
Cuba, let's do something different than what we are doing,
because it is not working.''
And I will admit that my interest in this was very
provincial. It was about Kansas farmers. It was how do we get
another market in a very difficult economy in which we can sell
our products to. And, as a result, the Trade Sanctions and
Reform Export Enhancement Act of 2000 became law.
We were doing just fine until 2005 when the Treasury
Department decided to change the regulations and say that cash
in advance no longer meant, as it does every other place in our
relationship, it no longer means when the ship arrives in
Havana. It means when the ship leaves the United States. So we
added another set of 4, 5, 6, days, 2 weeks in which the Cubans
had to pay that much earlier.
We also said from the very beginning you have never been
able to finance this. There are no government subsidies in
these sales. We restricted the ability to use a U.S. bank in
those regulations. And so they then had to go to a third party
bank in a foreign country, get a letter of credit, and we
increased the cost of doing business with the United States.
As a result, after the 2005 change in regulations, we lost
20 to 30 percent of our exports. And so year after year I have
offered the amendment again to an appropriation bill that says,
no money can be spent in this appropriation bill to enforce
those new regulations which make no sense. And that amendment
has passed the house time and time again. That is what is in
this bill. It has been approved as most recently as last year
in an appropriation bill. We have said it is okay, and
sometimes when I have offered my amendment it has been adopted
by voice vote. And so the controversy that sometimes surrounds
this issue is pretty limited when it comes to the agricultural
side of what we are doing here.
As a result of the change in our laws, and despite the fact
that these restrictions made it more difficult and we were
losing market share, we are seen by the Cubans as an unreliable
selling partner, again not a trading partner, a selling
partner. We sold $708 million worth of agriculture commodities
to Cuba in 2008, and it is rice. They import rice from Vietnam
and China if they are not buying it from us.
This idea of whether or not the food actually gets to the
Cuban people, I don't understand that issue. Because when we
don't sell, all we are doing--this is a unilateral sanction.
All we are doing is restricting our ability for our farmers and
our agribusinesses to conduct business in Cuba.
And yet France, Argentina, Canada, they love our embargo.
They love the fact that we made this market more restrictive
because they fill it.
And so if you are interested in whether or not the Cuban
people are getting the food, that is not this bill. We can't
necessarily affect that. Because when we don't sell, somebody
else does. Those decisions are already made by someplace down
the road, not whether or not we agree to take cash.
All the agricultural side of this legislation does is
return us to the common days, the days before 2005, in which we
operated normally. And it is normal compared to around the
world.
And we deal with Communist countries on an ongoing basis in
a trading relationship in which we offer them credit. Who is
the United States biggest creditor? China. And yet we are
nervous about selling for cash up front agriculture
commodities, food, and medicine to a country 90 miles off our
shore. What a double standard we have created in this country.
In Kansas--and I hope to ask my Kansas witness today--we
would not object to selling Boeing aircraft to China, and yet
we worry whether or not we are going to sell wheat to Cuba. I
don't understand how we got ourselves in this position in which
we worry about this issue, cash up front, no government
subsidy. We are taking money out of the Cuban Government and
putting it into the pockets of farmers and American business,
agribusiness.
Finally--my time has expired a minute and 18 seconds ago--I
would just add my provincial interest started with Kansas
farmers and a desire to see that we have one more market. You
may recall the year 2000 was not a perfect year on farms across
this country, and every market mattered to us for our success.
And, again, Cuba is not the end all. It doesn't solve all
of our problems or doesn't make us all wealthy. But having
spent some time on this issue I am convinced, as has been
indicated today, that this is not just about the United States.
This is about how we change the Cuban people's opportunities.
Because economic freedom, the market system that we all say
we believe in, the free market system causes the Cuban people,
when they have the ability to buy consumer goods--in this case,
I am just talking about food, fill their diet. The more contact
we have with them economically, the more demands they will make
upon the Cuban Government to change for the opportunity for
liberty and freedom. That ultimately is what this is about.
Again, as I started out as just a provincial Kansas
Congressman wanting to take care of Kansas wheat farmers, I
think there is a much more noble cause to this than just that,
which is we can make a greater difference in the lives of
Cubans by dealing with them than by ignoring them.
Thank you, Mr. Chairman.
The Chairman. I thank the gentleman for his passion and
eloquent statement and for his persistence on the issue. I
recognize the gentleman for Iowa, Mr. Boswell.
Mr. Boswell. Thank you, Mr. Chairman. Thanks for having
this hearing.
And, Mr. Moran, I firmly confirm what you have said. If I
had 7 minutes, I would give it back to you and let you say it
again. Because you have said everything, and I totally agree
with you.
I, too, have been down there, Mr. Presidents, both of you.
I appreciate that but assume that you know who Mr. Alvarez is.
I spent a lot of time with him. I spent quite a bit of time
with Mr. Castro. Sometimes we would be entertained. I can tell
you about that a little bit.
But we went out in the country, and I think that Mr. Moran
is exactly right. I think you all have it right. We are just
denying ourselves markets. Because they can go elsewhere, and
they are, and learn about the process of getting the money to
pay for it and what they had--it cost them more, but they still
did it. And there we sat not being able to send a product that
we could have on the way down there so quick. And they want it,
and they can use it.
And as far as the other parts of the political side of it,
how many years do we have to wait to figure out that this is
not working? And it is not working. It is silliness to keep
this up.
So I am very supportive of the bill, in fact, if left up to
me, Mr. Chairman, I would probably expand it. We really are
just spiting ourselves by not taking advantage of this market;
and we are denying our producers, the farmers of Kansas, Iowa,
Minnesota, Texas, Oklahoma, and everywhere, the opportunity to
have a place to sell--not even trade, just to sell. I think
this ought to be done.
So I yield back the balance of my time. Or I could give it
to Mr. Moran, I suppose.
The Chairman. I think we heard enough out of him.
Mr. Boswell. We agree. It is time to do something.
The Chairman. All right. I thank the gentleman.
The gentleman from Texas, Mr. Neugebauer.
Mr. Neugebauer. Thank you.
I want to echo a lot of things that my good friend from
Kansas, Mr. Moran, said. I opposed the Administration's plan
when they went to cash before you ship it, cash in advance. I
think it is a little ridiculous that we have to pretend like we
are not having relations with Cuba and we have to trade through
a third country bank. I think that doesn't make sense as well.
I, too, have been to Cuba; and I know that that is a
wonderful country. It is unfortunate that such wonderful people
are having to live under this dictatorship, one that has truly
kept that country in the dark ages for a number of years.
I think when I look at this bill--H.R. 4645 I believe is
the number on it--is that I agree with most of the things that
the two witnesses said. I think that one of the things that I
am a little concerned about is that we can enhance business
travel. Where we are focusing on these trades, we are
facilitating people being able to put those deals together so
we can increase and expand the market for American agriculture.
I am not to the point, personally today, that I am ready to
open up the tourist trade, although for family members or
people who have family in Cuba, we should continue that
process. But when I was down there, it was represented to me by
the Cuban people that live in that country--there were some
wonderful hotels along the beach. The Cuban people are not
allowed to go into the lobbies of those hotels. I think it
would be an affront to the Cuban people for us to embrace the
support of those hotels when the Cuban people themselves cannot
go in there.
So, Mr. Chairman and Mr. Moran, I have a great deal of
respect for both of you; and I support a lot of the concepts of
your bill and would look forward to seeing that we could limit
some of the travel pieces of that where we could facilitate
being able to expand American agricultural markets, but at the
same time respecting and not causing a great injustice for us
to open up an opportunity that the Cuban people themselves do
not have.
I don't really have any questions for the panel, but I
would give them an opportunity to respond to the two or three
statements that have been made here. So, Mr. Stallman.
Mr. Stallman. Just a response from my visit out there,
being out in the streets and moving around the country. There
were tourists from a multitude of other countries from around
the world. They were moving around pretty freely and had
interactions with the Cuba people. And while you are absolutely
correct in your description of their resort hotel system that
they have there, having that opportunity for, once again, the
Cuban people to interact with American tourists, to be able to
hear about America, to me that undermines the messages they
receive from their government. And, once again, I think that
would be the quickest way to actually make progress on this
country's goal of figuring out how to change regimes and the
form of government there.
Mr. Neugebauer. Thank you.
Mr. Johnson.
Mr. Johnson. Yes, I certainly agree with what was just
said.
On the issue of the Cubans not being allowed into hotels, I
think that was the case, but it is my understanding that in the
transition between Fidel Castro to Raul that that was one of
the changes that has been made under the new government there,
that there is no longer a prohibition against the Cubans using
the hotels.
The fact of the matter is that their income levels are so
low that most of them couldn't afford to pay the room rates
that you and I pay when we go down there. I don't think it is a
prohibition. I think it is just a matter of the income level to
support it.
And, frankly, in some small part, this bill is about
helping to boost their income just a little bit, too. By
getting the food to them in a more efficient fashion at a lower
cost, getting it spread out a little further, maybe that helps
boost that income so a few of them can use those hotels and
resorts.
Mr. Neugebauer. I hear what you are saying, but my
observation is that none of that money really funnels to the
Cuban people. You can increase the GDP in that country
substantially, but, unfortunately, it stays in a very small
number of hands. And that really the overall quality of life--
and I am sure both of you know what the allocation of food is,
and it is a pretty nominal amount of sustenance that the people
themselves receive. So while it may increase the GDP of the
country, I don't think it increases the income of the Cuban
people.
With that being said, I am supportive of the trade pieces
of that and have been--do feel like--I don't understand the
logic behind the changes made in 2005, it wasn't the right
thing to do. I am supportive of returning to the way we were
doing it before, because that, as you both testified, that was
working.
Thank you, Mr. Chairman.
The Chairman. The gentlelady from Illinois, Mrs. Halvorson.
Mrs. Halvorson. I have had a lot of people tell me of their
concern about the travel portion of the bill versus the ag
portion. I know I have heard all of the reasons that you
believe it would help if we had travel, but this question will
be two-fold, I suppose. How you feel it would affect your
bottom line in agriculture? But, also, could you still support
the bill if the two were separated, if it did not have the
travel? If the travel wasn't expanded but we still fully
supported or expanded the ag portion?
So if the two of you could answer that, how you felt about
if the two were separated, or if they need to be together, or
what the bottom line on agriculture is.
Mr. Johnson. Well, I think I made it clear in my testimony
that we would go much further than the bill. And so, obviously,
anything that moves in the right direction is something that we
would be supportive of.
I would argue that in some small part, besides allowing the
tourists to come in and begin to change the system, which has
been adequately explained here and I fully concur with, another
part of that is the tourists will bring some dollars.
And so while this bill is not about trade, as Congressman
Moran so eloquently stated, it is about sales. There is a
little bit of the other part of the trade that happens with the
tourism, because it will bring some dollars into the Cuban
economy. Now, that does a couple of things, but, for
agriculture, one of the big things it does is it allows more
income into the system so that they can purchase more
agricultural products.
Number two, in my written testimony I didn't talk about
this because of time. I talked about the value-added in
agriculture that many of us, many of you have spent a lot of
time and effort working on to try and expand value-added in
agriculture so that we can export higher-value products instead
of just raw commodities.
The tourism industry--bringing U.S. tourism helps that part
of our export market a whole lot more than just doing the ag
piece that is in the bill. It will--number one, there will be a
demand for more of these value-added products from the tourists
who have higher expectations, if you will.
And, number two, that provides an opportunity--one of the
things that I discovered early on with the trade missions that
I led from North Dakota was that the Cubans are very astute
business people. They are not going to spend any more than they
have to. They were very tough negotiators, as they ought to be,
as we all are. Very capitalistic, frankly, in that regard. They
saw no need to spend any more than what they absolutely had to.
We tried to sell value-added products. In fact, our
Lieutenant Governor was the chair of the board of a pasta
company, number three in North America in terms of size, and
went down with me and on his own a couple of times trying to
sell pasta. I think we might have sold a little tiny piece of
one container.
Frankly, there just isn't the ability to pay for those
value-added products. We mostly sold--I would say 99 percent of
the products sold out of North Dakota--probably the same is
true across the board in the U.S. We mostly sold raw
commodities that ended up going into that ration distribution
system that has been talked about. It was to meet the
fundamental humanitarian needs of the Cuban people. And if they
had more income they would put more of that food into that
system.
Mrs. Halvorson. Mr. Stallman.
Mr. Stallman. We certainly support the travel provisions
that are in this bill. We have always, as my colleague has
said, supported any measures that move the ball forward with
respect to our trading relationships with Cuba.
Opening up the travel and the tourism, while all of that
GDP growth obviously does not go to the Cuban people, there
will be a lot of casual exchange of dollars. We did that when
we were down there, so some of those dollars will find their
way into Cuban's hands, and it will increase some Cuban's
purchasing power. That is in addition to what we have already
talked about, the interaction and exchange of ideas.
We would still support the bill even if it went back to
purpose specific travel, because it does move the ball forward,
but we would prefer to see all the provisions that are in the
bill remain.
Mrs. Halvorson. Thank you. I yield back.
The Chairman. I thank the gentlelady. The gentleman from
Texas, Mr. Conaway.
Mr. Conaway. Thank you, Mr. Chairman. I am supportive of
the ag issues in terms of being able to sell more U.S.
products, whether value-added or not, to Cuba. I have been
there. Mr. Moran and I went, he and I were there; there were
ten of us on the trip, nine of whom supported unlimited lifting
of the embargo with Cuba and one guy who didn't. He got thrown
under the bus at every single meeting that we had with the head
of the communist party and all those folks, and that guy was
me. But it was a great trip, very eye-opening.
I am not convinced that the lifting of the tourist travel
will have any impact that would help us further our goal of
freeing up the Cuban people. The Cuban people right now, in my
view, are muddling along reasonably okay. There is not enough
misery in the system for them to rear up against the
totalitarian government that they live under. There, they
control everything down to the point that they won't allow the
Cuban people to know the box scores on baseball games. I guess
they are afraid that the few Cuban players who have defected,
fled that regime, are doing really well, and they don't want
their folks at home to know that there is a life on the other
side of the deal.
I also hope, Mr. Stallman, Mr. Johnson, that the same
passion you bring to defending this, trying to do something
against this communist country, that you would bring to the
table when we talk about our one free, democratic friend in
South America, and that is Colombia.
Mr. Johnson, I hope next month at your meeting you will be
just as passionate for doing a free trade agreement. The labor
issues aside, that is false. We all know that. That is a stigma
and may have been true 20 years ago, but it is not the case
today. And so we have a great friend there that we poke a stick
in his eye every day that allows Hugo Chavez to do that.
So I am not convinced that U.S. travel--there is
unrestricted travel from around the world--Canadians and
anybody else can go in there--and it has not had any kind of
impact on the deal. So I support the Chairman and Mr. Moran's
bill with respect to all things agricultural-wise. I can't
support, at this stage, the lifting of the travel ban or
tourist travel ban that would be a part of it. So I hope that
we can count on your support for Colombia, Panama, and South
Korea's free trade agreements, because those are our friends
and we ought to treat our friends almost as good as we treat
someone that is not our friend. If we did this, in order for
that totalitarian government to remain in control, they have to
have a bogeyman, and that bogeyman will be the United States--
is the United States. If we had lifted all this and tried to
argue that the United States was not the bogeyman, then the
Cuban community in Miami would be. Somebody is going to be the
bogeyman for this totalitarian government to maintain their
strict controls over everything that has been going on down
there.
So I appreciate your comments, and look forward to your
help on the Colombia Free Trade Agreement, and Panama and South
Korea.
With that, Mr. Chairman, I yield back, short of the 7 or 8
minutes.
The Chairman. I thank the gentleman for his brevity. The
gentleman from California, Mr. Costa.
Mr. Costa. Thank you very much, Mr. Chairman. I do support
your efforts on this legislation, and I think that, frankly, we
have tried numerous efforts to deal with the oppressive regime
in Cuba, from the Kennedy Administration to the present-day
Administration. And all of those efforts have been
unsuccessful, if the ultimate judgment for success was removing
Castro from power and creating a more democratic regime.
By all standards, all of the efforts with both Democratic
and Republican Administrations have been unsuccessful, and
Castro, much to everybody's surprise, has outlived many
Presidents since that time, since that policy has been in
place.
My view is that, I mean, we have dealt with a lot of
repressive regimes, regimes that don't respect human rights as
we understand them today, whether it be in China or whether it
be in other parts of the world, and yet we do trade with them.
For the life of me, I can't understand why that same sort of
even-handedness should not be applied to Cuba.
As a matter of fact, frankly, we have seen changes in
places like China and others when we have engaged with them,
and we have seen greater freedoms become available to the
populations. So it seems to me that we ought to just create the
good old Yankee know-how and allow American farmers and
ranchers, dairymen, and others to engage in active trade.
I went to Cuba in 2002. I have viewed their efforts on
agriculture production both as it relates to fruits and
vegetables, and as it relates to dairy and livestock. And from
my own firsthand observations, having been a dairy farmer for
three generations, I think I know something about that
business, they have a long ways to go. What they do well is
sugar, and we don't need that. So the fact of the matter is
this legislation is good.
I want to get to a few questions. Mr. Johnson, you talked
about current policy that restricts producers to making smaller
sales and reduced long-term contracts. Can you elaborate on
that and how we can change them?
Mr. Johnson. Sure. Just the fact that you can't do direct
transactions makes it really impossible.
Mr. Costa. So that has to change?
Mr. Johnson. Yes. That has to change, the uncertainty that
swirls around what our policy is going to be.
Mr. Costa. Mr. Stallman made that point in his opening
comments. How much do third country banks charge on sales on
the average, and how should we change that in financing, when
we hopefully will change the policy whether through this
legislation or other activities?
But the financing, when I was there in 2002, was also an
issue because, obviously, the limit--everything they were doing
was in dollars at that time.
Mr. Johnson. Yes. What the Cubans have told me repeatedly
is that it is from five to 15 percent. Perhaps in a couple of
cases as much as 20 percent of the total value of what they
bought was eroded because of that convoluted transaction
arrangement I described. How much of that is from----
Mr. Costa. There has got to be a better way to do that.
Mr. Johnson. Of course. And this bill would in fact solve
the biggest part of that problem.
The ITC report, if I remember, concluded--I believe they
said from 2\1/2\ to ten percent of the value of the sales was
being chewed up in that exchange process.
Mr. Costa. Okay.
Mr. Stallman, you talked about, in your testimony, the need
for visas to be issued for Cubans to visit the U.S. for trade-
related purposes. Is this not included under the Travel
Restriction Reform and Export Enhancement Act? And if not,
should we include it in this legislation?
Mr. Stallman. We need to have that ability to have those
government officials from Cuba to come over. And it is the same
type of visa and courtesy that we actually provide every other
country in the world with respect to trade. They come over to
inspect facilities, look at phytosanitary issues, and we are
restricting government officials from coming to do that.
Now, frankly, that hasn't impacted that many sales yet
because of the other restrictions.
Mr. Costa. Quickly, before my time is up, you talked about
60 percent--before the Castro regime--of food was exported from
this country to Cuba. Obviously, we couldn't get back to that
overnight. But what market share at this point do the Europeans
and the South Americans have?
Mr. Stallman. Well, the Cubans increased their agricultural
imports, and I am probably thinking about 2008 figures, to $1.8
billion. We think we could have up to \2/3\ of that. So if we
had what we should have and got about $1.2 billion, then that
would leave about $600 million for the rest of the world, and
we would be more than happy with that because we would have the
advantage.
Mr. Costa. Thank you. My time has expired.
The Chairman. The chair thanks the gentleman. The gentleman
from Missouri.
Mr. Luetkemeyer. Thank you, Mr. Chairman.
This is an interesting bill from the standpoint that we
have agriculture and then we have tourism mixed in the same
bill, which is kind of a head-scratcher to me. In one situation
we are putting money in our pockets by trading with these
folks, and the other, by the tourism part of it, we are putting
money in their pockets, which is kind of--why would we want to
do that?
Question number one: What is the potential for Cuban trade
on the agricultural portion of this? Do you gentlemen have a
figure on that by any chance?
Mr. Stallman. Well, as I said, their total ag imports are
about $1.8 billion. So that would be the top of the line. We
obviously wouldn't get all of that. We think we could get \2/3\
of it.
Mr. Luetkemeyer. You think you could get \2/3\?
Mr. Stallman. Yes. If we did not have the restrictions that
exist.
Mr. Luetkemeyer. If I remember your calculations, we get
about \1/3\ of it right now.
Mr. Stallman. Roughly.
Mr. Luetkemeyer. So we would be able to double our exports
to them. Is that roughly what you both agree on?
Mr. Stallman. Approximately.
Mr. Luetkemeyer. Okay. I am just kind of curious. I have
had many jobs over my lifetime before I got here, and one of
them happened to be the Director of Tourism for the State of
Missouri. I can't go along with any of the analogies of what
you just told about what is going to happen with the tourism
aspect of this bill. It doesn't work that way.
The people in Cuba right now, Mr. Stallman, you made the
comment that we need to interact with them. I think Mr. Johnson
also made the same comment, that we need to interact with them
so they can understand how good a country we are, and that way
they will overthrow their government and be willing to look at
other issues.
I think they already know that. I think by the number of
people that try to escape from that country every chance they
get, I think they already know that. They are being oppressed
because they don't want anybody to have enough freedom to even
think about getting out. The longer we keep them depressed--our
government keeps them depressed, I think that they are headed
there.
So I am very curious about this, because I have grave
concerns about the travel portions of the bill. I think the ag
portion is good. But whenever we are setting there, Mr.
Stallman, you made the comment that purpose-specific travel, I
think that is where we need to head with this bill. I think if
we had purpose-specific travel restrictions or enhancements in
this bill, that would be what we need to do. But I don't think
we need to get into an area that is not agricultural. To say
that we are going to improve the wherewithal of the people of
Cuba by tourism, so they can buy our agricultural products, is
a stretch beyond which I can't go, because I can tell you that
is not the way it works.
So I kind of take exception to some of your testimony from
my own past, but I agree with what you--I appreciate your
position on the agricultural portion, because it is going to be
imperative that as we look for new areas for our own economy,
with our ag economy to expand, this is one of those places
where we can actually go.
I will yield back the balance of my time, Mr. Chairman. But
I do want to reiterate that I think that you and Mr. Moran, as
sponsors of the bill, I would hope and urge you to somehow
redefine this tourism portion of this, get a little more
travel-specific, purpose-specific in their travel there,
because we have gone well beyond what is in the best interest
of ourselves as trading partners.
Mr. Lucas. Would the gentleman yield before he yields back?
Mr. Luetkemeyer. Yes, I would.
Mr. Lucas. Just an observation on the tourism issue. You
have to bear in mind, of course, that in an economic system
that is so dysfunctional as they have down there, their version
of Communism, they have to have a way to generate the capital
to buy the agricultural goods.
Mr. Luetkemeyer. But you also have a country dominated by
the government which generates those things. It controls all
that.
Mr. Lucas. That is exactly right.
Mr. Luetkemeyer. Whenever you dump the money in there as a
tourist, that money does not go to the individuals. That money
goes back to the government. The government controls
everything.
Mr. Lucas. You are exactly right.
Mr. Luetkemeyer. The few pennies that fall through the
cracks that the people get will only barely feed their
families, whatever they have to. That is not going to come back
to us as a trading partner.
The tourism aspect of this bill is, quite frankly, it just
doesn't wash. I can tell you from being in the business, it
does not wash. But, again, I thank the sponsors of the bill,
certainly urge them to continue on with this. I think it is
imperative we do this for our agricultural community. But I
would ask them to pare down this travel portion of this.
Thank you, Mr. Chairman.
The Chairman. I thank the gentleman. The gentleman from
Nebraska, Mr. Smith.
Mr. Smith. Thank you, Mr. Chairman, and thank you to the
witnesses. This is interesting. I will say that I appreciate
the enthusiasm for increased velocity of trade. I have been
amazed at the heavy lifting, as Mr. Conaway pointed out, the
heavy lifting that these trade agreements, aside from the Cuban
issue, have been.
Now, to confirm. You suggested that our exports to Cuba
would double if the travel restriction is lifted.
Mr. Stallman. If the transactional restrictions and travel
restrictions are lifted, the potential is there for that to
happen. Yes, sir.
Mr. Smith. And that would be done with about how many
dollars' worth of travel and tourism generated? If we are going
to double the exports, that would be done with how many dollars
of tourism existing in Cuba? From either one of you.
Mr. Johnson. I think we are both going to guess.
Mr. Smith. Okay, That is fair.
Mr. Stallman. I am not even going to guess.
Mr. Johnson. Let me not guess then. Let me suggest that
probably the best answer to that is from the ITC report that
actually came to the same conclusion that we both have said a
number of times. The $1.8 billion is recorded in that report to
be roughly 60 to 65 percent ability to recapture ag markets.
And I believe if you read the report, it will give you the
assumptions. Perhaps it will give you the level of tourism
expected.
My memory tells me that a couple of years ago there was an
expectation that it might be as much as $1 billion worth of
tourism revenues that would accrue if it were opened up wide
from the U.S. to Cuba. And I will try to reconfirm that. And if
that is wrong, I will try to get back for the record, Mr.
Chairman.
Mr. Smith. One concern that I have is that there is a lot
more competition amidst the world of travel and tourism than
there would be with--of course, I am a bit biased, too--with an
exporting district in terms of agriculture. With high-quality
products that are available and accessible on demand and
otherwise, that there is just--it would be a lot harder for
Cuba to get tourism dollars than it would be for us to market
the agricultural products. Would you share that concern?
Mr. Johnson. Frankly, I would disagree. I think if Cuba was
open to U.S. tourism, you would see an awful lot of interest
from Americans to travel to Cuba. It has been the place you
can't travel to. For those who have been traveling, it is the
place you can't go.
One of the interesting things that I observed of all the
times I have been to Cuba, when there were more than one state
delegation there for different trade fairs, et cetera, the
largest state delegation every single time was from Florida.
And I thought, well, isn't that interesting? I mean, why are
the Floridians so interested in opening up trade with Cuba.
You know, you think about sugar, you think about citrus,
you think about what is their angle. It is their tourism
industry overwhelmingly. Why? Because a lot of their tourism
has to do with these cruise ships that travel around. And the
one place that is forbidden is Cuba. So they can sail
everyplace, and they have a lot of repeat customers. Apparently
people that go on cruise ships like to go. I wouldn't know
firsthand. But the one place that they want to go next is, they
want to stop in Cuba.
Mr. Smith. That is very interesting. And, Mr. Stallman,
would you wish to comment as well?
Mr. Stallman. I was just going to add on, and I don't think
it has been brought up, U.S. citizens can travel to Sudan, can
travel to Iran, but we are not allowed to travel to Cuba. You
know, philosophically, that makes no sense whatsoever.
Mr. Smith. I hear you. And I hope that we can arrive at
something. Clearly, our strategy to date hasn't gotten us a lot
of reforms. And so I hope that we can arrive at something where
we can move forward, promote democracy and freedom, and at the
same time opportunity here at home.
So with that I yield back. Thank you.
The Chairman. I thank the gentleman. The gentleman from
Iowa, Mr. King.
Mr. King. Thank you, Mr. Chairman. I appreciate being
recognized, and I appreciate the testimony of the witnesses.
I will say that I was of your opinion back in the 1990s,
and I took the initiative to go on a trip down to Cuba. I was
with the People to People mission, entirely legal and
supported, of course. And I went down there because I intended
to, with personal experience, ratify my opinion that we should
open up trade with Cuba.
There is nothing like going somewhere to learn the things
that support your position, that gives a person the authority
and the credibility to then come back and advocate for such a
position. And I can't think of another time in my life that I
went somewhere actually for that reason, or certainly had not
had an experience that turned me 180 degrees, like the time I
spent in Cuba.
If I had stayed with the People to People mission, we spent
our days being handled by Castro's minders, going from place to
place, listening to people in gray smocks answer questions that
were translated from English into Spanish, that were not the
questions that we were asking, and the answers that they were
giving were not the answers to the questions that were being
asked. It took me a little while to figure that out.
And myself and then state Senator David Miller went off on
our own, and we ended up picking up an individual; he actually
approached us down along Havana Harbor, and he became our guide
for 3 days. And we went all over that island in 3 days. And he
was a communist, a Marxist, and he was proud of Cuba and he was
a Cuban historian.
But throughout those long days I learned some things, in
spite of his intent to give us a 3 day commercial, and two of
those things stood out for me that I can't get past. One of
them is that when Castro nationalized the real property in
Cuba, which I think was 1963, 25 percent of that real property,
the deeds to that property, were in the hands of Americans. The
Americans are the only ones that have not been compensated for
that real estate. They hold their deeds today. And if there
were to be investments from Americans into Cuba, having
witnessed the Mariel boatlift, I can't imagine Castro doing
anything except selling that real property that belongs to
Americans back to other Americans to pit them against each
other. That would be one point.
Another point that was a surprise to me was to learn at
that time the exchange rate of the peso to the dollar was 21:1.
And one would think that Americans trading in Cuba, tourists
going to Cuba, would give the Cubans an opportunity to make
some money off of that endeavor, so maybe it lifts them up
economically and exchanges a little spirit of free enterprise.
But what really happens is--it has changed a little bit now
but the effect is the same--is that Cubans could at that time
earn American dollars, and they can hold them but they couldn't
spend them, unless they went to a dollar store where an
American dollar was worth 1 Peso, not 21 Pesos. Castro was
picking up the 20 peso villancicos out of the 21 Pesos to the
dollar. And that was going, and still goes, into his treasury
and into his coffers to fund the Administration, to fund his
brutal communist dictatorship.
Those are just two points that I couldn't get past. I
couldn't find a way to rationalize that, even though I went
down there to be able to ratify an opinion to opening up trade
to Cuba.
So where I sit today is that we have invested nearly a half
a--well, we have--a full half a century into waiting out the
ideological solution in Cuba. And I can't imagine we can wait
very much longer. But I am more patient than the witnesses
before us here. I am willing to wait out this ideological
solution because we have invested so much in it. And I would
say that Castro has been an exporter of his Marxist ideology in
the Western Hemisphere, and that changes the argument on
whether we allow trade into China or into Iran.
I understand the philosophy that has been voiced here, and
I would only draw that distinction. It is our back door. He has
exported his brand of Marxism. He has been influential not just
in the Western Hemisphere, but in places like Angola as well.
I am not opposed to getting food to Cubans. And I would
hope that if we do something here, we can limit our endeavor to
getting food to Cubans, rather than inadvertently propping up a
communist regime. When that day comes of the ideological
solution, if we don't have a plan in place, if we don't have a
way to encourage the Cubans anymore than we have encouraged the
Iranians when they took to the streets, then those 11 million
Cubans down there that have been now cursed with a half a
century of living under the slavery of the communist dictator
Castro may well see another half of a century.
So that is how I look at this. And I hope we can find a
solution that doesn't play into the hands of Castro. And I am
going to just pass up my chance to ask a question, Mr.
Chairman. I appreciate being recognized, and I appreciate the
witnesses.
The Chairman. I thank the gentleman. Would the gentleman
answer a question? Are you in favor of selling Boeing Aircraft
to China and other things that we are doing which are propping
up that communist regime?
Mr. King. Let's figure out how to work on that endeavor as
well, Mr. Chairman, because it does light up my attention.
The Chairman. I thank the gentleman.
I want to thank the witnesses for being with us. You guys
did a great job, as usual, and we appreciate your taking the
time and being patient.
I will call the next panel. We have Mr. Mike Wagner with
the U.S. Rice Producers Association and Owner/Operator of the
Two Brooks Farm on behalf the USA Rice Federation from Sumner,
Mississippi; Mr. Jerry McReynolds, wheat producer and President
of the National Association of Wheat Growers from Woodston,
Kansas.
Mr. Moran, do you want to say something?
Mr. Moran. I am happy to say something about Mr.
McReynolds. I am delighted that he is here as a witness. Mr.
McReynolds is a farmer in my home county of Rooks County,
Kansas. He and his family are highly respected and highly
regarded, and anything that happens good in our home county
usually involves somebody with the last name of McReynolds. And
Jerry has continued that commitment, especially in agriculture.
He is now the President of the National Association of
Wheat Growers, was a previous President of the Kansas
Association of Wheat Growers, and serves on our Kansas Farm
Bureau Board of Directors since 1998. Just an all around good
guy and somebody who has a lot of credibility with lots of
Kansans.
Thank you, Mr. Chairman.
The Chairman. I thank the gentleman. And welcome, Mr.
McReynolds.
Mr. John Wilson, Senior Vice President of Marketing and
Industry Affairs for DFA, on behalf of the National Milk
Producers Federation of Kansas.
Mr. Barton Schott, corn producer and First Vice President
of National Corn Growers, from Kulm, North Dakota. Home of
Angie Dickinson, right? She is a little bit better looking than
you, but not much.
And, Mr. Scott Fritz, soybean producer and Board Member of
the American Soybean Association from Winamac, Indiana.
Gentlemen, welcome to the Committee. We look forward to
your testimony.
And we will start with Mr. Wagner. You are recognized for 5
minutes. Your statements will be made part of the record. And
welcome to the Committee.
STATEMENT OF MIKE WAGNER, OWNER/OPERATOR, TWO BROOKS FARM;
MEMBER, BOARD OF DIRECTORS, U.S. RICE PRODUCERS ASSOCIATION,
SUMNER, MS; ON BEHALF OF USA RICE FEDERATION
Mr. Wagner. Thank you, Mr. Chairman. Mr. Chairman and
Members of the Committee, I am Mike Wagner, a rice farmer from
Sumner, Mississippi. I appear today on behalf of the U.S. Rice
Producers Association and the USA Rice Federation. I would like
to acknowledge Mr. Jackie Loewer, a fellow farmer from Branch,
Louisiana, who is here today. Our organizations represent rice
producers in all rice producing states, as well as rice
millers, merchants, and exporters.
I would like to preface my statements by stating we do not
support Castro's regime.
As a first-time witness before Congress, I am especially
honored and humbled to appear before you today. After almost 50
years, one thing is clear: Our Cuban policy is ineffective. It
punishes U.S. farmers and costs U.S. jobs.
In the 1950s, Cuba was the largest export market for U.S.
rice. In 1959, Cuba accounted for 51 percent of all U.S. rice
exports. After Congress provided for agricultural trade with
Cuba in 2000, Cuba rapidly became our fastest growing market
for U.S. rice. In 2004, the Cubans bought $64 million worth of
U.S. rice, providing 1,400 U.S. jobs. As the chart from page
five of my prepared statement reflects, it established Cuba as
our fourth largest milled rice customer.
In 2005, OFAC issued a rule revising the rules governing
the payment terms for these sales to Cuba. As this chart from
page seven of my prepared statement indicates, U.S. rice sales
to Cuba plummeted from $64 million in 2004 to zero in 2009 and
2010.
At the same time of the rule's imposition, the Cubans had
purchased more than $1 billion in U.S. food and farm goods.
Cuban buyers generally paid by cash and paid promptly. There
was no extension of credit to Cuba.
Cuba has the potential to once again become a top export
market for U.S. rice. But no reasonable buyer can rely on an
export seller for food supplies, knowing that the exporting
country's government can and will change export policies at a
whim. As a result, U.S. agriculture has been relegated to a
residual supplier of rice and other farm goods to Cuba.
Current policy drives most payments for sales to Cuba to be
made by a letter of credit issued by a third country bank. This
increases transaction costs, enriches foreign banks at the
expense of U.S. farmers, and drives U.S. jobs overseas.
We appreciate that this week OFAC redefined temporarily the
term cash in advance for purposes of agriculture sales to Cuba.
This needs to be made permanent, and payments should be
authorized to be made directly to U.S. banks.
By contrast, U.S. law authorizes telecommunications
companies to make payments directly to Cuba. Eight U.S.
companies did make payments totaling hundreds of millions of
dollars directly to Cuba. As illustrated by the comparative
charts from page ten of my statement, this discriminates
against U.S. agriculture. If U.S. multinationals can make
payments directly to Cuba, then why should U.S. farmers be
forced to use foreign banks? Congress should change the law to
allow payments for U.S. agriculture products to be made
directly to U.S. banks.
The U.S. International Trade Commission concluded that
removing these restrictions would increase U.S. rice exports to
the island by $43 million per year, to more than $80 million.
Instead, U.S. policies have driven rice exports to zero.
Our travel restrictions impose ever-changing bureaucratic
red tape on travel to Cuba to seek new agriculture sales. We
are disappointed that our government continues to restrict the
freedom of Americans to engage with the people of only one
country on Earth, Cuba.
The ITC concluded that if restrictions on travel of U.S.
citizens to Cuba were lifted, gains valued in millions of
dollars per year would be made in exports of U.S. processed
foods, poultry, beef, pork, and fish.
The damage done since 2005 to our reputation as a reliable
supplier can be repaired, but not until the Cubans are
convinced that our government will not unilaterally void
contracts or otherwise restrict trade.
We agree with much of what President Obama said in his
State of the Union address about the need to increase our
exports and support U.S. jobs. Unfortunately, our Cuba policy
ignores the President's wise advice. It reduces U.S. employment
by choking off trade with Cuba; it decreases U.S. exports, and
cedes this important market to our competitors.
To begin to address this, the President should state
publicly that the United States Government will not impose any
new restrictions on sales of food and agriculture products to
Cuba. This would reassure producers, exporters, and Cuba that
our government will not prevent us from reliably supplying the
Cuban market.
To better address all of these issues, we strongly support
the enactment of H.R. 4645. I look forward to addressing any
questions you might have.
[The prepared statement of Mr. Wagner follows:]
Prepared Statement of Mike Wagner, Owner/Operator, Two Brooks Farm;
Member, Board of Directors, U.S. Rice Producers Association, Sumner,
MS; on Behalf of USA Rice Federation
Introduction
Good morning Mr. Chairman and Members of the Committee. I am Mike
Wagner, a rice farmer from Sumner, Mississippi. I am the current
President of the Mississippi Rice Council, and serve on the Board of
Directors of the U.S. Rice Producers Association. My testimony today is
on behalf of both the U.S. Rice Producers Association and the USA Rice
Federation. Together our organizations represent rice producers in all
of the major rice producing states of Arkansas, California, Louisiana,
Missouri, Mississippi, and Texas--as well as rice millers, merchants,
exporters and related industries. As a first time witness before the
Congress, I am especially honored and humbled to appear before you
today.
Thank you for holding this timely hearing to review the state of
U.S. agricultural sales to Cuba. It is unfortunate that this once-
vibrant market for U.S. agricultural goods is being thwarted by U.S.
policies. It is especially frustrating to rice producers and the rice
industry that successive Administrations continue to implement policies
contrary to Congressional intent to the detriment of rice producers,
the U.S. rice industry, and indeed all of U.S. agriculture.
Similarly, it is sad that our antiquated, ineffective policy
restricts the rights of American citizens to travel to Cuba. It is the
ONLY country in the world that our government prohibits American
citizens to visit. After almost 50 years of the United States
unilaterally choking off exports and travel to Cuba, one thing is
clear: it is a policy that is not only ineffective, but one that also
punishes U.S. farmers, and costs U.S. jobs in related businesses.
We applaud the efforts of Chairman Peterson and Congressman Moran
to enact legislation to begin to create jobs in the United States by
rationalizing agricultural sales to Cuba and to open travel there for
all U.S. citizens.
Cuba: America's Largest Natural Rice Market
In 1951, Cuba was the destination for 252,878 metric tons of U.S.
rice, approximately $52 million in sales that represented 51% of U.S.
rice exports at that time. Rice exports to Cuba during the period
between 1951 and 1960 averaged approximately 169,000 metric tons,
valued at $37 million annually and accounted for 25% of all rice
exports for the decade.\1\ Following the overthrow of the Batista
Government in 1959, the unilateral U.S. embargo closed the Cuban market
in 1960.
---------------------------------------------------------------------------
\1\ A total of 1.7 MMT, based on U.S. Department of Commerce
estimates (See Attachment A).
---------------------------------------------------------------------------
The U.S. rice industry has grown tremendously in the past 40 years.
U.S. rice production is projected to increase from last year to
approximately 237 million hundredweights (cwts) in 2010, up 17 million
cwts from 2009 production. On average, approximately 50% of the U.S.
crop moves into export channels. For the 2009 marketing year, USDA
projects 99 million cwts in rice exports.
In addition to shutting off exports to Cuba, export embargoes
imposed unilaterally by our government represent one of the greatest
impediments to the enhanced exports of U.S. rice. For example, the
largest market for U.S. rice in the 1950s was Cuba, in the 1970s it was
Iran, and in the 1980s it was Iraq. Unfortunately for rice producers
and the rice industry, unilateral embargoes imposed by our own
government later negatively affected each of these important markets.
Rice farmers have known for decades what the U.S. Department of
Agriculture concluded in 1997, that ``Of all grains exported by the
United States, rice has been particularly hard-hit by trade
restrictions.'' \2\ The Department went on to note that such unilateral
trade restrictions had put more than 13 percent of projected global
rice import demand off-limits to U.S. farmers and exporters.
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\2\ A Review of U.S. Trade Restrictions and Grain Exports, Foreign
Agriculture Service, U.S. Department of Agriculture, http://
www.fas.usda.gov/grain/circular/1997/97-09/feature/trd_rstr.htm.
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Fortunately, as policymakers have recognized the ineffectiveness of
trade embargoes, each of these embargoes has been lifted. Only the
embargo against trade with and travel to Cuba remains. It is widely
recognized as having been a failure, and it should be ended.
The 2000 Export Enhancement Act Reopens Rice Trade With Cuba
Thanks to the leadership of Senators Byron Dorgan, Richard Lugar,
Representative Jo Ann Emerson and many others, Congress provided for
the resumption of trade with Cuba when it passed the Trade Sanctions
Reform and Export Enhancement Act of 2000. The Act sought to achieve
its goal of enhancing U.S. agricultural export opportunities by
explicitly exempting sales of food and medicine from the exercise of
any economic embargo. In order to prevent the extension of credit to
Cuba by any U.S. entity, the Act limited the financing terms of sales
to Cuba to either--
(A) Payment of cash in advance; or
(B) Financing by third country financial institutions (excluding
United States persons or Government of Cuba entities), except
that such financing may be confirmed or advised by a United
States financial institution.
Cuba first made purchases of U.S. agricultural products under the
new Export Enhancement Act authorities in December 2001. Between 2001
and early 2005, Cuba contracted to purchase approximately $1.25 billion
worth of U.S. agricultural goods. These purchases included shipments of
nearly 320,000 tons of U.S. rice, worth a reported $81 million. In 2004
the Cubans bought $64 million worth of U.S. rice--more than their
purchases of any other commodity. This established Cuba as our fastest
growing market overall, and one of the top five customers for long
grain rice.
Annual Growth Rate of Rice Exports 2000-2004 Tonnage Basis
In 2004 alone, the U.S. exported 177,000 tons of rice to Cuba worth
an estimated $64 million with a total economic impact on local U.S.
economies of $220 million and provided for up to 1,400 jobs.
Cuba has the potential to once again become a top export market for
U.S. rice, representing a 400,000 to 600,000 MT export market under
normal commercial trade and travel relations.
Largest U.S. Milled Rice Export Markets, 2004
OFAC's Cash in Advance ``Reinterpretation'' Imposed Unwarranted Trade
Restrictions and Crippled U.S. Exports
Beginning in November of 2004 the Treasury Department's Office of
Foreign Assets Control (OFAC) began holding up payments to U.S. sellers
doing business with Cuba, and began imposing new regulatory reviews
and/or licensing requirements on U.S. sellers and their banks. On
February 22, 2005, OFAC issued a Final Rule revising the regulations
governing the payment terms permitted for the sale of licensed
agricultural products to Cuba (70 Fed. Reg. 9225; the ``Final Rule'').
The Final Rule was published without any prior notice to Congress or to
the exporting community, nor was any opportunity afforded for comment
on the Final Rule by the agricultural or exporting communities.
Rice producers and the rice industry were particularly disappointed
that in imposing this new restriction on exports to Cuba, OFAC ignored
the requirement in section 903 of the 2000 Export Enhancement Act that
prohibits the President from imposing any new restriction or condition
on commercial export sales of agricultural commodities unless the
President submits a report to Congress regarding the restriction 60
days before its imposition, AND the Congress enacts a joint resolution
approving the report.\3\ It is difficult for rice farmers to agree with
OFAC that the new ``interpretation'' was not a restriction or condition
on trade when the interpretation rendered invalid $250 million worth of
open agricultural export contracts, and imposed expensive new
requirements to finance trades through banks in foreign countries.
---------------------------------------------------------------------------
\3\ Section 903(a) of the Export Enhancement Act (22 U.S.C.
2207(a)) reads as follows:
``Sec. 903. Restriction.
``(a) New Sanctions. Except as provided in sections 7203 and 7204
of this title and notwith-
standing any other provision of law, the President may not impose a
unilateral agricultural
sanction or unilateral medical sanction against a foreign country
or foreign entity, unless--
``(1) not later than 60 days before the sanction is proposed to
be imposed, the President
submits a report to Congress that--
``(A) describes the activity proposed to be prohibited,
restricted, or conditioned; and
``(B) describes the actions by the foreign country or foreign
entity that justify the sanc-
tion; and
``(2) there is enacted into law a joint resolution stating the
approval of Congress for the
report submitted under paragraph (1).''
Section 902(6) and 902(2)(E) of the Act make clear that the
prohibited unilateral agricultural sanctions under section 903(a)
include ``any prohibition, restriction, or condition on carrying out''
``any commercial export sale of agricultural commodities''.
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As we predicted at the time of the imposition of the Final Rule, it
devastated the market for sales of U.S. rice to Cuba. As the following
chart indicates, U.S. rice sales to Cuba plummeted from $64 million in
2004 to ZERO in 2009.
No reasonable buyer can rely on an export seller for critical food
supplies knowing that the exporting country's government can (and will)
change export policies at a whim. As a result, U.S. agriculture has
been relegated to a position as a secondary, residual supplier for rice
and many other agricultural goods to Cuba.
Another result of the Rule has been to drive most if not all
payments for remaining U.S. agricultural sales to Cuba to be conducted
via a letter of credit issued by a third country (non-Cuban) bank. As
illustrated in the chart below, this requirement drives up the
transaction costs to U.S. sellers and Cuba alike, and reduces the
competitiveness of U.S. agricultural products to Cuba. These costs will
fall disproportionately on small exporters, many of whom will be run
out of the market by the increased costs and complexities of the trade.
The costs of these reduced sales will ultimately be borne by U.S.
farmers. Effectively the Rule enriches foreign banks at the expense of
U.S. farmers, processors, and exporters; and drives the jobs associated
with these activities to overseas competitors.
Congress Should Clarify and Reiterate the Operation of Cash Sales Under
the Enhancement Act
We strongly urge Congress to enact legislation reiterating the
intent of Congress that the payment of cash in advance under the 2000
Export Enhancement Act was indeed intended to enhance trade, not to
restrict it. This issue is addressed in H.R. 4645, the Travel
Restriction Reform and Export Enhancement Act, which was introduced on
February 23, 2010 by Chairman Peterson and cosponsored by
Representatives Jerry Moran, Jo Ann Emerson, Rosa DeLauro, and 36 other
Members of the House of Representatives. We urge the swift enactment of
this legislation to reiterate the intent of Congress that exports
financed by the payment of cash in advance be allowed to continue on
the same basis that had been successfully used for $1 billion in
exports during 2001 through 2004, before the U.S. rice sales to Cuba
were killed off by the OFAC 2005 Final Rule.
Congress Should Begin To Correct the Discriminatory Treatment Of U.S.
Farmers By Authorizing Direct Transfers From Cuba to U.S.
Financial Institutions
As described above, current U.S. law discriminates against American
farmers and agricultural exporters. It prohibits Cuba from directly
paying U.S. sellers for their purchases. Even safe and secure payments
by bank letters of credit are required to be routed through third
country banks. This requirement unnecessarily drives up the cost of
U.S. exports, discourages U.S. sales, and costs U.S. jobs. There is no
offsetting benefit to this policy except to enhance the profits of
foreign banks.
By contrast, U.S. law authorizes telecommunications service
providers to make service related payments directly to Cuba. In fact,
eight U.S. companies make payments totaling hundreds of millions of
dollars directly to Cuba. According to published reports, these
payments totaled $150 million in 2007 and $120 million in 2008, and
will likely increase since the Obama Administration has broadened the
services that U.S. telecom firms may provide to Cuba. The obvious
discriminatory disparity between the treatment afforded U.S. farmers
and exporters, and multinational telecommunications companies is
illustrated by the following comparative flow charts.
Opponents of agricultural sales to Cuba argue that allowing direct
payments by Cuba to U.S. sellers will somehow benefit the Cuban
Government. But at the same time, some of these opponents SUPPORTED
legislation providing for the direct payment of HUNDREDS OF MILLIONS OF
DOLLARS TO THE CUBAN GOVERNMENT EACH YEAR as compensation for services
provided by U.S. telecommunications companies.
If U.S. multinationals can make payments directly TO Cuba, then why
should U.S. farmers be disadvantaged? Congress should change the law to
allow U.S. farmers and their exporters to be paid directly by Cuba.
Legislation to begin to correct this discrimination is included in
the Travel Restriction Reform and Export Enhancement Act (H.R. 4645).
Rice producers and the rice industry strongly support the enactment of
this provision to stop the discrimination against U.S. agriculture and
to support U.S. employment.
Together, these modest rationalizations of agricultural export
terms would significantly enhance U.S. exports. A comprehensive study
by the U.S. International Trade Commission (ITC) during the Bush
Administration concluded that the Treasury Department's restrictions on
agricultural payment terms had a ``substantial negative effect on the
sales of agricultural products to Cuba.'' The ITC also found that
removing these restrictions would increase annual U.S. agricultural
sales to Cuba by more than $300 million.\4\
---------------------------------------------------------------------------
\4\ ``U.S. Agricultural Sales to Cuba; Certain Economic Effects of
U.S. Restrictions''; Investigation No. 332-489; USITC Publication 3932;
July 2007.
---------------------------------------------------------------------------
In the case of rice, the ITC concluded that the lifting of these
unnecessary restrictions could increase U.S. rice exports to the island
by $43 million per year. As of 2006, U.S. rice enjoyed a 77 percent
share of Cuban imports, for sales valued at $40 million. The
restrictive policies of the United States have driven those exports to
zero. The enactment of H.R. 4645 could reverse this trend and give U.S.
rice producers, processors, exporters and those whom they employ a
fighting chance to regain this key market.
Congress Should Open Travel for All U.S. Citizens to Cuba: A Mutual
Benefit for Both U.S. and Cuban Citizens
The rice industry also strongly supports the freedom of U.S.
citizens to travel to and from Cuba. We continue to be disappointed
that our government continues to restrict the freedom of Americans to
travel to and engage with the people of only one country on Earth:
Cuba. These restrictions also frustrate the intent of the Export
Enhancement Act of 2000 by imposing ever-changing bureaucratic red tape
requirements for travel to Cuba to facilitate new agriculture sales.
This policy is widely acknowledged to be a failure, and should be
relaxed to allow U.S. citizens to travel to Cuba.
Specifically, we support the reform of these burdensome and costly
travel restrictions as provided for in H.R. 4645. We also support H.R.
874, the ``Freedom to Travel to Cuba Act,'' introduced by Congressman
William Delahunt, and currently cosponsored by 178 other Members of the
House.
The legislation would lift all restrictions on U.S. citizens
traveling to Cuba, and will have a direct impact on U.S. agricultural
sales. Increased travel to Cuba will boost food demand in the country
and provide the funds to purchase U.S. commodities. U.S. producers and
the agriculture industry would expect to meet the increased food needs.
The U.S. International Trade Commission concluded that if
restrictions on travel of U.S. citizens to Cuba were lifted, gains in
exports valued in the millions of dollars per year would be made in
exports of U.S. processed foods, poultry, beef and pork, and fish.
In addition, lifting the travel ban will reflect the desires of the
American people. Public opinion polls show that about 64 percent of
Americans \5\ and \2/3\ of Cuban-Americans \6\ support the freedom of
U.S. citizens to travel to Cuba.
---------------------------------------------------------------------------
\5\ According to the CNN/Opinion Research Corp. poll conducted
April 3-5, 2009, 64 percent of the 1,023 Americans surveyed by
telephone thought the U.S. Government should allow citizens to travel
to Cuba. And 71 percent of those polled said that the U.S. should
reestablish diplomatic relations with Cuba.
\6\ According to the 2009 Bendixen & Associates poll, \2/3\ of
Cuban and Cuban American adults--67 percent--support the lifting of
travel restrictions for all Americans so that they can also travel to
Cuba freely.
---------------------------------------------------------------------------
We strongly support the enactment of this provision and H.R. 4645
in its entirety, and urge each of the Committee's Members to cosponsor
and support the enactment of this important legislation.
Congress Should Insist on Strict Compliance With Section 903 of the
2000 Export Enhancement Act
Congress should insist that OFAC, and Administrations both now and
in the future respect the requirement in section 903 of the 2000 Export
Enhancement Act that prohibits the imposition of new trade restrictions
or conditions absent the prior notice to, and approval by, Congress.
Rice producers are very concerned that absent this vigilant protection
of Congress' rights, there will be nothing to stop the total shut down
of exports to Cuba by future unwarranted ``interpretations'' of the Act
by overzealous or politically driven Administrations.
The President Should Reassure U.S. Agriculture and Our Cuban Customers
That the Administration Will Not ``Go Backwards'' on
Agricultural Sales to Cuba
The damage done since 2005 to our reputation as a reliable supplier
of agriculture and food products to Cuba can be repaired over time. But
until the Cubans are convinced that our government will not
unilaterally void contracts or otherwise restrict trade, we will
continue to be relegated to a residual supplier to the Cuban market.
There is one thing that the Administration could do immediately to
repair U.S. agriculture's reputation as a reliable supplier and to
reassure Cuban and other buyers. This would not cost any money, nor
does it involve changing the embargo in any way.
To accomplish this, the President should simply state publicly that
the United States Government will not impose new restrictions on sales
of food and agriculture products to Cuba. That progress made in opening
and servicing these markets will not be opposed or destroyed by
government intervention. Such a statement, and its faithful
implementation by the Administration, could go a long way to reassuring
U.S. producers and exporters, and Cuba, that the United States
Government will not prevent U.S. agriculture from reliably supplying
the Cuban market.
Conclusion: A No-Cost, One-Way Trade Opportunity That Benefits U.S.
Farmers, Workers, and the Public
Rice producers and the rice industry have paid a high price for our
government's failed policy toward Cuba. First in 1960, and again in
2005, Democratic and Republican Administration's alike have driven
exports to one of our largest rice markets from robust levels to
literally nothing.
The U.S. rice industry in the Mississippi Delta and along the Gulf
Coast has a tremendous transportation advantage over their Asian
competitors in reaching the Cuban rice market. In the 1950's and again
between 2001 and 2005, U.S. rice farmers and millers had built sales to
the Cuban rice market with high-quality rice that Cuban consumers
prefer over Asian rice. Unfortunately, actions by our own government
effectively killed that market. The Cuban demand for food imports is
largely being met by a number of U.S. agriculture's key competitors in
the global market such as Canada, Brazil, and Vietnam. And this is the
result almost entirely of actions by our own government.
U.S. rice farmers have been told that export markets are our
markets of the future. We agree with much of what President Obama said
in his State of the Union speech last month about the need to increase
our exports:
``We need to export more of our goods. Because the more
products we make and sell to other countries, the more jobs we
support right here in America. So tonight, we set a new goal:
We will double our exports over the next 5 years, an increase
that will support two million jobs in America. To help meet
this goal, we're launching a National Export Initiative that
will help farmers and small businesses increase their exports,
and reform export controls consistent with national security.
We have to seek new markets aggressively, just as our
competitors are. If America sits on the sidelines while other
nations sign trade deals, we will lose the chance to create
jobs on our shores. But realizing those benefits also means
enforcing those agreements so our trading partners play by the
rules. And that's why we'll continue to shape a Doha trade
agreement that opens global markets, and why we will strengthen
our trade relations in Asia and with key partners like South
Korea and Panama and Colombia.''
Rice farmers and the entire rice industry support these goals to
increase exports and support U.S. jobs. Unfortunately, with respect to
Cuba, our government's policy ignores all of the President's wise
advice. U.S. Government policy reduces U.S. employment by choking off
trade with Cuba. That policy continues to decrease U.S. exports, and
cedes this important market to our global competitors. Rather than
aggressively contending for the Cuban market, our government does
indeed sit on the sidelines, while blocking our own team from taking
the field.
When these markets are closed off, everyone in the industry is
hurt, and farmers predictably pay the ultimate costs of lost markets
from their own pockets. These are unnecessary costs that rice farmers
should not be asked to pay, especially when pending budget proposals
would reduce the farm safety net on which farmers depend here at home.
All we are asking is that the law governing food sales to Cuba be
allowed to operate as Congress intended; that the discriminatory
treatment of U.S. farmers in regard to these sales be corrected; and
that American citizens be allowed to travel to Cuba and take the
engagement of our values and economic activity with them--as they can
often do in every other country on Earth.
We strongly support the enactment of the H.R. 4645 Travel
Restriction Reform and Export Enhancement Act. This legislation
represents a modest, sensible first step to fulfilling the intent of
the Export Enhancement Act of 2000 and the promise brought by the
engagement of the U.S. people with those we seek to feed in Cuba.
I look forward to addressing any questions that you may have.
Thank you.
Attachment A
---------------------------------------------------------------------------
* Alvarez, J. and W.A. Messina, Jr., Cuba's Rice Industry:
Potential Imports From Florida, International Working Paper 92-27, Food
and Resource Economics Department, Institute of Food and Agricultural
Sciences, University of Florida, Gainesville, Florida, September 1992.
Cuba's Share of Total U.S. Rice Exports, by volume and value, 1951-1961 *
Table 9. Cuba's share of total U.S. rice exports, by volume and value, 1951-1961
----------------------------------------------------------------------------------------------------------------
Year U.S. exports Cuban imports from U.S. Cuba's share a
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Quant. Value Quant. Value Quant. Value
Metric tn million $'s metric tn million $'s --%--
----------------------------------------------------------------------------------------------------------------
1951 493,498 94 252,878 52 51.2 55.3
1952 800,402 157 219,282 50 27.4 31.8
1953 707,332 154 253,786 50 35.9 32.5
1954 568,862 107 162,532 38 28.6 35.5
1955 454,454 81 96,702 21 21.3 25.9
1956 824,010 132 144,826 27 17.6 20.4
1957 740,928 124 187,048 40 25.2 32.3
1958 573,856 97 187,048 40 32.6 41.2
1959 690,080 105 171,612 36 24.9 34.2
1960 893,472 130 15,890 17 1.8 13.1
1961 806,758 106 (b) (b) (b) (b)
----------------------------------------------------------------------------------------------------------------
a Calculated by the authors.
b Minimal amounts before the economic embargo was totally enforced.
Source: U.S. Department of Commerce (various issues).
The Chairman. Thank you very much, Mr. Wagner. I appreciate
it.
Mr. McReynolds, welcome to the Committee.
STATEMENT OF JERRY McREYNOLDS, PRESIDENT, NATIONAL ASSOCIATION
OF WHEAT GROWERS; WHEAT PRODUCER, WOODSTON, KS
Mr. McReynolds. Thank you, Chairman Peterson, Ranking
Member Lucas, Congressman Moran, and Members of the Committee.
My name is Jerry McReynolds. I am a wheat and sorghum
farmer from Woodston, Kansas, and currently serve as President
of the National Association of Wheat Growers. Thank you for
holding this hearing and allowing me to share some of my
experiences regarding our efforts to sell wheat to Cuba.
I visited Cuba; had the opportunity in 2003 with my
daughter as part of a small group of Kansas wheat producers on
an educational mission. Seeing the situation firsthand was a
unique experience for me, and we found that the Cuban people
were very warm, very open, and enjoyed discussing American
life.
As a part of this mission, our group had the opportunity to
meet with Pedro Alvarez, who is the head of ALIMPORT, Cuba's
food import company. Mr. Alvarez expressed to us his sincere
desire and eagerness to purchase Kansas wheat, both for quality
and for the country's needs. In fact, he held pen in hand and
was ready to sign an agreement, which we did not have and could
not have because of the restrictive policies.
My take-home message from this trip was simply that the
Cubans want and need our wheat. However, current policy with
respect to agricultural trade and travel with Cuba is
unnecessarily impeding U.S. sales of wheat to the island.
With no domestic production of wheat, Cuba is the largest
importer of wheat and wheat products in the Caribbean. Over the
past 3 years, Cuba's population of 11.4 million consumed, on
average, 800,000 metric tons of wheat per year, and the
nation's grain consumption is increasing, driven by both
population and income growth.
The bottom line is this: The Cubans need the wheat, and
will continue to source it wherever it is most competitive.
The U.S. should be able to boast about maintaining a lion's
share of that growing Cuban market just as we do elsewhere in
the Caribbean. Instead, we have maintained roughly 38 percent
of the market compared to an 85 percent share in other
Caribbean nations.
A 2007 report by the U.S. International Trade Commission
said we could hold 65 percent of the Cuban market if the
financial and travel restrictions were removed, constituting an
additional $34 million of export. We would argue our market
share could and should be actually closer to the 85 percent
level, contributing closer to $100 million in market gains.
Despite our clear competitive advantage on transportation
and logistics and, arguably, the superior quality of wheat, our
European Union, Canadian, and Argentine competitors continue to
hold a significant portion of that market. This is attributable
to their more favorable trade terms; specifically, the fact
that these countries are not subject to the financing and
travel restrictions that we face.
This year's situation is a perfect example. Sales to the
Cuban market are down 65 percent from last year. The entire
113,000+ metric tons sold have already been shipped, and there
are no outstanding sales on the books to load out. Moreover,
the Cubans do not have the budgetary resources to make any more
purchases from the U.S. this year, virtually handing that
market to our Canadian and European Union competitors.
The current year's dire sales situation highlights an often
overlooked reason for our declining sales: Cuba lacks cash,
which U.S. law requires in advance for purchases of food and
medicine. This only encourages Cubans to go to our competitors,
such as Canada, as they can access lines of credit to purchase
their wheat.
We encourage and recognize the challenges associated with
offering lines of credit to Cuba, and are not advocating any
movement in that direction presently. But we recognize what can
be done to infuse cash into the country to enable them to
purchase our agricultural products: Lift the ban on travel.
Coupled with eased trade restrictions on agricultural exports,
increased travel to Cuba will boost food demand in the country
which U.S. growers will be able to fulfill. And it will also
bring needed funds to citizens of Cuba for purchases of U.S.
commodities.
All in all, we believe existing policies that impede travel
and sales of our agricultural products to the nation seem to
serve no function other than to decrease our sector's
competitiveness. We believe the time is right for some
meaningful act and a meaningful change.
The Travel Restriction Reform and Export Enhancement Act,
H.R. 4645, sponsored by Chairman Peterson and Representative
Moran, would be a great catalyst to provide an opportunity for
significant new sales of wheat to Cuba, boosting income in the
United States, in the U.S. heartland, and adding critical
resources to the U.S. economy. The legislation would make
incremental changes that would allow the U.S. farmer the
ability to conduct a more normal business function with a
country that needs our agricultural goods to feed people.
At a time when our economy needs every possible boost, and
when President Obama has made a popular pledge to double U.S.
exports--and it is only 90 miles off of our coast.
I want to thank you, Chairman Peterson and Congressman
Moran, and all of you Committee Members here today. We look
forward to working with you and we urge you to support H.R.
4645. Thank you for this opportunity to testify.
[The prepared statement of Mr. McReynolds follows:]
Prepared Statement of Jerry McReynolds, President, National Association
of Wheat Growers; Wheat Producer, Woodston, KS
Chairman Peterson, Ranking Member Lucas and Members of the
Committee, my name is Jerry McReynolds. I am a wheat and sorghum farmer
from Woodston, Kansas, and currently serve as the President of the
National Association of Wheat Growers. Thank you for holding this
hearing and allowing me the privilege of coming here today to share
some of my personal experiences, and the experience of the industry in
which I operate, with respect to our ability to sell wheat to Cuba.
The wheat industry has long been engaged in the discussion
surrounding U.S. trade policy toward Cuba. Though we do not profess to
be foreign policy experts on most occasions, we do know enormous
amounts about selling wheat around the world, and, in an average year,
we export about half of our production.
I visited the island nation of Cuba with my daughter as part of a
small group of U.S. wheat producers on a 2003 educational mission.
Seeing the situation first-hand was a unique experience, and we found
the Cuban people warm and very open to discussing ``American life''. We
also saw that Cuban farmers lacked the tools, equipment and supplies
that they needed to produce their own food. Planting and harvesting
equipment was outdated and in ill-repair, and most farmers there
cultivated small gardens by hand, leaving the oxen for use in larger
fields. And we learned that Cuba has to import wheat for all of its
consumption needs.
As a part of this mission, our group had the opportunity to meet
with Pedro Alvarez, the head of ALIMPORT, Cuba's food import company.
Mr. Alvarez expressed to us a sincere eagerness to purchase Kansas
wheat, recognizing both the quality of our product and the country's
need for it. In fact, he held a pen in hand, ready to sign an agreement
to buy U.S. wheat, but was simply unable due to our country's
restrictive policies.
My take-home message from this trip was this: The Cubans want and
need our wheat. However, current policy with respect to agricultural
trade and travel with Cuba is unnecessarily impeding U.S. sales of
wheat to the island nation.
Cuban Market Potential
With no domestic production of wheat, Cuba is the largest importer
of wheat and wheat products in the Caribbean. Over the past 3 years,
Cuba's population of 11.4 million consumed on average 800,000 metric
tons (MT) of wheat per year, and the nation's grain consumption is
increasing, driven by both population and income growth. Despite three
hurricanes and a global economic crisis, Cuba's economy grew 4.3
percent last year. Five new pasta plants have been built, a flour mill
doubled in capacity and a new milling facility has been built.
Despite this news of recent economic growth, the fact hasn't
changed that Cuba remains reliant on agricultural imports. With no
resources available to purchase fertilizer or pesticides, it's my
understanding that the Cuban Government is now relying on small organic
farms for food production. While a respectable and novel approach to
solve Cuba's food needs, these farms are simply too small and
production techniques too limited to produce enough food on a large
scale to sustainably feed Cuba's growing population. Bottom line: the
Cubans need wheat and will continue to source it where it is most
competitive.
Impact of Trade and Travel Restrictions on U.S. Wheat Sales to Cuba
The U.S. should be able to boast maintaining a lion's share of the
growing Cuban wheat market just as we do elsewhere in the Caribbean.
Instead, we have maintained roughly 38 percent of the market compared
to an 85 percent share in other Caribbean nations. A 2007 report by the
U.S. International Trade Commission (ITC) indicates that the U.S. could
hold 65 percent of the Cuban market if the financial and travel
restrictions were removed, contributing an additional $34 million
dollars of exports. We would argue our market share could, and should,
reach closer to 85 percent, contributing closer to $100 million in new
market gains.
While Cuba's proximity to major U.S. export facilities gives the
U.S. a clear competitive advantage on transportation and logistics, and
we continue to boast a product of superior quality, our European Union,
Canadian and Argentine competitors continue to hold a significant
portion of the Cuban market due to their more favorable trade terms.
Despite our clear competitive advantage in the country, our
unrealized market share can be attributed largely to the financing and
travel restrictions in place that are not constraining the ability of
our competitors to sell their product to Cuba.
As background, the wheat industry has been allowed to sell into the
Cuban market since the Trade Sanctions Reform and Export Enhancement
Act (TSRA) took effect in 2001. On Feb. 22, 2005, the Treasury
Department's Office of Foreign Assets Control (OFAC) amended the
regulations regarding payment to sellers. The change required cash
payment in advance or letters of credit from a foreign third-party
financial institution on all agricultural commodity sales to Cuba. This
change meant that exporters would have to receive payment before the
shipment even leaves port for Cuba. This put an end to the ability of
ALIMPORT, Cuba's food import agency, to directly pay sellers upon
arrival of the shipment, as is consistent with normal business
practices, and quickly depressed our sales into the market.
After payment rules were amended, wheat sales to Cuba dropped more
than 25 percent in marketing year 2006, to only 28 percent of the Cuban
wheat market. Sales rebounded the following 2 years, driven largely by
global economic concerns, but have again fallen sharply this past year.
U.S. Share of Cuban Wheat Market
The 2007 ITC report stated that the new financial regulations have
``had a substantial negative effect on the sale of agricultural
products to Cuba.'' Easing the payment restrictions will allow U.S.
wheat growers to capitalize on several comparative advantages in
regards to wheat exports. Proximity provides a logistical and price
advantage for U.S. growers. Freight rates from U.S. ports to Cuba are
about 33 percent less than rates from Europe and significantly less
than from Canada. Domestic storage and internal infrastructure require
Cuba to purchase smaller shipments that arrive exactly on schedule, so
a limited transit time is particularly crucial in this market; a
shipment from U.S. ports takes a matter of days as compared to 25 days
when shipped from Brazil. Other competitive advantages that could be
enjoyed by U.S. growers include world-class marketing capabilities and
the handling capacity of U.S. ports.
Despite these clear competitive advantages, Cuba will look to other
sources for their food needs while financial and travel restrictions
are still in place. This threat of continued diminishing market share
has hit home this year more powerfully than ever, as current year wheat
sales to the country are less than a third of where they should be.
This year's sales into the Cuban market are down 65 percent,
totaling 113,100 metric tons versus 357,700 metric tons for the same
time period in the 2008-2009 marketing year. The entire 113,100 metric
tons has already been shipped, and there are no outstanding sales on
the books to load out. Moreover, the Cubans do not have the budgetary
resources to make any more purchases from the U.S. this year, virtually
handing the market to our Canadian and European Union competitors who
will offer them credit.
Cuban Purchases of U.S. Wheat
The current year's dire sales situation highlights an often-
overlooked reason for our declining sales levels. In addition to the
cumbersome and cost-prohibitive environment created by our restrictive
financing terms, another significant reason cited for these declining
sales levels is Cuba's lack of cash, which U.S. law requires in advance
for purchases of food and medicine. This only encourages Cubans to go
to our competitors, such as Canada, where they can access lines of
credit to purchase their wheat.
Though we recognize the challenges associated with offering lines
of credit to the country and are, therefore, not advocating any
movement in that direction, it is important to recognize that there is
something more reasonable that can be done to infuse cash into the
country to enable them to purchase our agricultural products--lift the
ban on travel.
Removing the restrictions on agricultural trade alone will not be
enough to maintain (or restore) our ability to sell wheat into the
Cuban market. This is why we support coupling these changes with a
lifting of the travel ban. Coupled with eased trade restrictions on
agricultural exports, increased travel to Cuba will boost food demand
in the country which U.S. growers will be able to fulfill. And, as
cited above, it will also bring much needed funds to citizens of Cuba
for purchase of U.S. commodities.
The Time Is Right for Legislative Action
A number of bills have been introduced to clarify the payment rules
and ease travel restrictions hamstringing our ability to sell wheat to
Cuba. Countless attempts have been made in annual appropriations
processes to include language to resolve some of these longstanding
issues. Just recently we have begun to see some positive movement,
signaling the time is right for some real, meaningful change.
The Omnibus Appropriations Act of 2009 amended the TSRA to permit
travel related to commercial marketing, sales negotiation, accompanied
delivery or servicing of agricultural commodities. The FY 2010
Financial Services Appropriations bill clarified that ``payment of cash
in advance'' should be interpreted to mean payment of cash when the
buyer takes physical possession of the product rather than prior to it
leaving U.S. ports. These both were positive steps, but we need more
than temporary fixes; we need a permanent solution.
The Travel Restriction Reform and Export Enhancement Act (H.R.
4645) sponsored by House Agriculture Committee Chairman Collin Peterson
and Rep. Jerry Moran would be a great catalyst to providing an
opportunity for significant new sales of wheat to Cuba, boosting income
in the U.S. heartland and adding critical resources to the U.S.
economy.
This legislation will eliminate the need to go through third
country banks to conduct a normal business transaction, thereby
eliminating the added cost of doing business that is currently
hindering sales and decreasing the competitiveness of U.S. wheat. It
will also permanently clarify the ``payment of cash in advance''
provision and bring it in line with the requirements of exports to
other countries. Thirdly, the legislation will allow all U.S. citizens
freedom of travel to Cuba, reducing the red tape for us as farmers and
agricultural trade associations to make sales to the country. This will
also allow us to conduct the technical and trade servicing activities
that we conduct as part of our export development business around the
world resulting in an increased demand for our exports to feed the
growing number of visitors to Cuba.
As important as it is to recognize what this legislation would
accomplish, it is equally beneficial to clarify what it does NOT do.
The legislation does not lift the embargo on the country. It does not
allow Cuba to export their products to the U.S., nor does it change the
travel restrictions for Cubans to visit the U.S. It does not even allow
us to extend credit to the country.
The legislation simply would make incremental changes that would
allow the U.S. farmer the ability to conduct more normal business
functions with a country that needs our agricultural goods to feed its
people.
Existing policies that impede travel and sales of agricultural
products to the nation seem to serve no function other than to decrease
our sector's competitiveness. Canada, Argentina and even the European
Union all have access to the Cuban market and are taking market share
that should be ours.
At a time when our economy needs every possible boost, and when
President Obama has made a popular pledge to double U.S. exports, I
would contend there is no better time than to re-examine just why
exactly we are being out-competed in a market just 90 miles off our
shore.
The time is right for the U.S. to consider incremental, common-
sense policy changes that would enable our industry to realize the full
potential of the Cuban market.
Conclusion
I, a Kansas farmer, recognize that many are tied to maintaining our
current policy toward Cuba at all costs. My question to them is this:
to what end? If the goal in maintaining our policy is to affect change
in the nation, perhaps it is time to re-evaluate the means to achieving
that end. Let's start on a small, incremental scale by re-evaluating
the restrictions placed on agricultural trade and travel.
I would like to thank Chairman Collin Peterson and Congressman
Moran, as well as other Committee Members here today who have long been
champions of making these incremental improvements and common-sense
changes to our policy. I would respectfully urge the rest of the
Committee and others in Congress to help us achieve this long-awaited
change by supporting H.R. 4645, the Travel Restriction Reform and
Export Enhancement Act.
Thank you for the opportunity to testify today on behalf of our
nation's wheat growers.
The Chairman. Thank you, Mr. McReynolds. I appreciate that.
Mr. Wilson, welcome to the Committee.
STATEMENT OF JOHN J. WILSON, SENIOR VICE PRESIDENT, MARKETING
AND INDUSTRY AFFAIRS, DAIRY FARMERS OF AMERICA; MEMBER, BOARD
OF DIRECTORS, NATIONAL MILK PRODUCERS FEDERATION, KANSAS CITY,
MO
Mr. Wilson. Thank you. Chairman Peterson, Ranking Member
Lucas, and Members of the Agriculture Committee, thank you for
the opportunity to testify about the importance of expanding
U.S. agricultural trade to Cuba.
My name is John Wilson, and I am Vice President of
Marketing and Industry Affairs for Dairy Farmers of America. I
also serve on the Board of Directors for National Milk
Producers Federation and the Board of Directors for the U.S.
Dairy Export Council. DFA, National Milk, and USDEC have worked
in a complementary way for several years to expand the
prospects for U.S. dairy exports, including to the Cuban
market.
I would like to begin by expressing our strong appreciation
to the many Members of this Committee that worked tirelessly
with us over the past year to address a dire price/cost squeeze
throughout the producer community. That catastrophic situation
was brought on in large part due to an abrupt decline in
exports of dairy markets demand that began in 2008 and
persisted throughout much of 2009.
National Milk believes that efforts to help regain the
ground that we lost last year with our exports are essential to
helping stimulate further recovery for farmers, and in putting
the U.S. dairy industry on a firmer footing, going forward.
One such positive step in the right direction for the dairy
industry is the subject of this hearing today. In National Milk
Producers Federation's view, there are two critical sides to
the coin in terms of stimulating greater dairy product sales to
Cuba. The first involves unnecessary technical and regulatory
barriers to greater sales. The second involves the greater
demand that eliminating the restrictions on Americans' rights
to travel to Cuba would generate.
We are greatly pleased to see that Chairman Peterson and
Congressman Moran have just introduced legislation that would
tackle both these important sides of the equation. We are
urging all Members of Congress to support the Travel
Restriction Reform and Export Enhancement Act. In our view, it
is a very beneficial step forward for American agriculture.
As this Committee is aware, legislation was passed in 2000
that allowed for the export of agricultural products to Cuba.
This enabled us to sell dairy products to a new market. The
peak years for our industry were in 2004 and 2005, during which
we approximately sold $30 million worth of dairy products each
year, before new restrictions on agricultural sales were
introduced by the previous Administration.
In 2005, however, the Administration redefined the meaning
of TSREEA's cash in advance requirement in a way that
dramatically impacted future contracted sales and violated the
express intent of Congress to encourage noncredit agricultural
sales to Cuba. That regulatory change dramatically impacted
future contracts of dairy products with Cuba. This was seen by
a drop in sales of U.S. dairy products to Cuba of more than
half the following year.
Compared to a strong increase in U.S. dairy exports to most
other markets over the past 5 years, sales to Cuba since 2005
have never again even approached their prior level.
The Fiscal Year 2010 appropriations language on this issue
was very helpful; but because it is not a permanent change and
will only be in effect for this fiscal year, it does not
provide the certainty businesses need to enter into longer-term
contracts with Cuba.
Besides addressing technical matters related to the ease of
conducting agricultural sales to Cuba, we firmly believe that
stimulating additional demand by allowing Americans to travel
freely to Cuba would also provide a much-needed additional
boost to U.S. sales of dairy products. Wider travel by the
American people to Cuba would also stimulate greater sales of
dairy products there, as the additional influx of visitors
bring demand for more value-added products such as cheese.
On behalf of America's dairy producers and the many dairy
processors who are also supportive of the measures mentioned in
my testimony, I respectfully ask Congress to pass the Travel
Restriction Reform and Export Enhancement Act to help expand
the export opportunities for the U.S. dairy industry.
We look forward to enjoying the impact that this
legislation would have on our ability to more easily provide
the Cuban people, and those Americans wishing to travel to
Cuba, with the nutritious and safe foods that we produce in
such abundance here in the United States.
Again, thank you for the opportunity to testify about this
important matter.
[The prepared statement of Mr. Wilson follows:]
Prepared Statement of John J. Wilson, Senior Vice President, Marketing
and Industry Affairs, Dairy Farmers of America; Member, Board of
Directors, National Milk Producers Federation, Kansas City, MO
Chairman Peterson, Ranking Member Lucas, and Members of the
Agriculture Committee: thank you for the opportunity to testify about
the importance of expanding U.S. agricultural trade to Cuba. My name is
John Wilson and I am the Sr. Vice President of Marketing & Industry
Affairs for Dairy Farmers of America (DFA) and I also serve on the
Board of Directors for the National Milk Producers Federation (NMPF).
Dairy Farmers of America is a dairy marketing cooperative that
serves and is owned by dairy farmers in 48 states. DFA is one of the
country's most diversified manufacturers of dairy products, food
components and ingredients, and is a leader in formulating and
packaging shelf-stable dairy products. Our cooperative's success is
built on the success of its producer-members, who raise their dairy
herd, and their families, on family farms across the nation.
NMPF develops and carries out policies that advance the well being
of dairy producers and the cooperatives they own. The members of NMPF's
31 cooperatives produce the majority of the U.S. milk supply, making
NMPF the voice of more than 40,000 dairy producers on Capitol Hill and
with government agencies. I am offering this testimony on the behalf of
NMPF's nation-wide membership. DFA is also a member of the U.S. Dairy
Export Council, which has long worked jointly with NMPF on issues
relating to expanding U.S. dairy exports, including to the Cuban
market.
I would like to begin by expressing strong appreciation to the many
Members of this Committee that worked tirelessly with DFA and NMPF over
the past year to address a dire price-cost squeeze throughout the
producer community. That catastrophic situation was brought on in large
part due to an abrupt decline in export market demand beginning in mid-
2008.
That shortfall in export demand was brought on due to an ill-fated
combination of cyclically high prices that began to weaken demand just
at the onset of the global economic crisis, combined with a resurgence
of milk supplies in Oceania as New Zealand and Australia's drought
problems abated. This combination of events contributed to a sudden
imbalance whereby global demand fell significantly short of available
supplies. Because the U.S. market had gradually increased production to
respond to the international market signals being sent in recent years
that indicated higher demand for U.S. dairy products, U.S. producers
found the rug pulled out from under them when such a significant
portion of the market for U.S. milk evaporated in the latter part of
2008.
In addition to the strong efforts by this Committee and by the U.S.
Department of Agriculture to help support dairy producers' economic
recovery this past year, NMPF believes that efforts to help regain the
ground lost in 2009 in U.S. participation in the global dairy market
are essential to helping stimulate further recovery in the dairy sector
and to putting the U.S. dairy industry on a firmer footing going
forward. It is because of this that NMPF supports measures designed to
expand U.S. dairy exports and offer positive net trading opportunities
to America's hard-working dairy producers.
One such item that would be a positive step in the right direction
for the dairy industry pertains to expanding agriculture trade to Cuba.
Cuba is a market where we should be a natural preferred seller due to
our strong proximity advantages, but regulatory hurdles imposed by our
own government have thwarted our ability to best supply this market. A
June 2009 International Trade Commission Updated Study on U.S.
Agricultural Sales to Cuba found that doing away with all of the
financing and travel restrictions on U.S. agricultural exports to Cuba
would have boosted 2008 dairy sales to Cuba from $13 million to between
$39 and $87 million and increased our market share that year from a
mere 6% to a much more respectable 18 to 42 percent. Although current
legislation would not extend that far and NMPF is not actively seeking
an end to the ban on extending credit to Cuba, these figures clearly
suggest that easing the agricultural trade and the overall travel
restrictions now in place would yield impressive gains for U.S. dairy
exports.
In NMPF's view there are two critical sides to the coin in terms of
stimulating greater dairy product sales to Cuba. The first involves
unnecessary technical and regulatory barriers to greater sales,
introduced either by the prior Administration's interpretation of the
2000 Trade Sanctions Reform and Export Enhancement Act (TSREEA) or by
TSREEA itself. The second pertains to abolishing the restrictions on
Americans' rights to travel to Cuba. The latter is relevant because
greater travel to Cuba by American tourists would be expected to
significantly boost sales of U.S. agricultural products to that country
as well as to improve the ease with which our members could make the
necessary in-person connections to better conduct business with Cuba.
Because it addresses both these critical sides of the equation,
NMPF and its members, as well as both dairy producers and processors in
the U.S. Dairy Export Council, are extremely supportive of the newly
introduced Travel Restriction Reform and Export Enhancement Act, H.R.
4645. In our view, this bill, sponsored by Chairman Peterson and
Representative Moran, provides the best prospect for addressing the
most significant issues hindering greater sales of U.S. agriculture
products to Cuba. As mentioned earlier, expanding U.S. dairy exports,
particularly in a way that provides net benefits to American dairy
farmers, is viewed as a key ingredient to helping restore profitability
in our dairy industry.
Technical/Regulatory Issues of Concern:
TSREEA allowed for the export of agricultural products, including
dairy, to Cuba. This enabled us to sell dairy products--primarily
nonfat dry milk but also other products--to a new market. The peak
years for our industry were in 2004 and 2005 during which approximately
$30M of dairy products were sold each year before further restrictions
on agricultural sales came into effect.
TSREEA requires payment of ``cash in advance'' in order to ensure
that no credit is extended to the Cuban Government. NMPF agrees with
this legislative intent and is not disputing the clear desire of
Congress and of many throughout America to not extend credit to the
Cuban authorities.
Under the first several years of TSREEA, products were exported
using procedures normally followed when selling on payment terms
commonly known as ``cash in advance,'' as required in the original
Office of Foreign Asset Control (OFAC) regulations. Specifically, the
procedure entailed (1) shipping the product from a U.S. port, and (2)
advising the Cuban buyer of its shipping status (an ``on-board'' bill
of lading is prepared by the shipping company). At this point, the
process began for full payment in advance of the buyer having ownership
of the product. Once full payment is received, the ``on board'' bills
of lading--the shipping documents that allow the buyer to gain control
of the product--were released to the buyer. It is important to note
that under this commonly used international trading practice, the Cuban
buyer did not gain control and ownership of the product until payment
was made. This practice fully complied with the spirit and the letter
of TSREEA.
In 2005, however, OFAC ``redefined'' the meaning of the ``cash in
advance'' requirement in TSREEA in a way that dramatically impacted
future contracted sales and violated the express intent of Congress to
encourage non-credit agricultural sales to Cuba. In effect, the new
OFAC ruling required cash payments from Cuba before the U.S.
commodities could even leave the U.S. port. Although a letter of credit
option was also permitted as another payment avenue, the overall impact
was to add further complexity and cost to making the sale.
That regulatory change dramatically impacted future contracts of
dairy products with Cuba. This was seen by a drop in sales of U.S.
dairy products to Cuba of more than half the following year (to $13
million in 2006). Rather than growing as global U.S. dairy exports did
between 2004 and 2008, sales to Cuba since then have ranged from
minimal (e.g., approximately $1 million in 2007 and approximately $3
million in 2009) to only half of peak sales in prior years (e.g., $16
million in 2008 when global demand was quite tight and so Cuba was
likely driven to seek out alternative sellers).
NMPF urges Congress to act to clarify the intent of Congress with
respect to the ``cash in advance'' requirement before further
opportunities are foregone in Cuba. We greatly appreciate the clarity
provided by Congress in the FY 2010 Omnibus Appropriations bill on this
point and are looking forward to a rule being issued by OFAC on this
matter. However, while very welcome, the appropriations process only
provides resolution and clarity for the length of the fiscal year. As a
business that frequently enters into supply contracts over long
periods, this uncertainty is not helpful to securing business.
Therefore, we believe strongly that a more permanent resolution in
statute is required. That is why the inclusion of this element in the
Travel Restriction Reform and Export Enhancement Act is so critical in
our view.
Along similar lines, we applaud the Travel Restriction Reform and
Export Enhancement Act's addressing the unnecessary cost involved in
TSREEA's ``direct banking'' provision which requires routing of payment
through a third-country bank to conduct agricultural trade. This
prohibition against allowing direct payments to be made to U.S. banks
for agricultural sales serves no useful purpose in our view. It merely
makes sales transactions more complicated and costly due to the fees
charged for these additional transactions. We agree with Chairman
Peterson and Mr. Moran that it is time for Congress to eliminate those
TSREEA regulatory measures that have been found to serve no useful
purpose, are not in keeping with the spirit of TSREEA, and have served
only to make sales more costly without serving a logical policy goal
(such as the direct banking provisions).
It is clear that we are now among the least-preferred of suppliers
given these technical and regulatory impediments to U.S. agricultural
sales to Cuba. The U.S. should be actively working to expand
agricultural exports--in line with the long-standing goals of many
bipartisan Congressional leaders and with the President's recently
stated aim to double U.S. exports over the next several years.
Americans Traveling to Cuba:
NMPF believes that permitting all Americans to travel to Cuba
without restriction would provide an additional boost to U.S. sales of
dairy products to Cuba. Eliminating travel restrictions to Cuba would
open up new opportunities for our members to more easily travel to Cuba
to further encourage sales of U.S. dairy products there. Additionally,
wider travel by the American people to Cuba would stimulate greater
sales of dairy products in that dairy-importing nation. This would
benefit America's dairy industry through greater sales opportunities
but would also bring our policy with respect to Cuba more in line with
how the U.S. treats other countries, including dictatorships and
repressive regimes that surely rival the Cuban Government's
oppressiveness and humanitarian violations.
Rather than being a sanction on Cuba, the ban on travel by
Americans is a restriction placed by our own government on American
citizens. The U.S. Government does not restrict travel to any other
country, including state sponsors of terrorism like Iran, Syria, and
Sudan, as well as North Korea, Burma, and Uzbekistan. Additionally,
although the travel ban is very strongly supported by an extremely
vocal and active minority in the U.S., recent public opinion polls show
that 64 percent of Americans \1\ and \2/3\ of Cuban-Americans \2\
support the freedom of U.S. citizens to travel to Cuba.
---------------------------------------------------------------------------
\1\ According to the CNN/Opinion Research Corp. poll conducted
April 3-5, 2009, 64 percent of the 1,023 Americans surveyed by
telephone thought the U.S. Government should allow citizens to travel
to Cuba. And 71 percent of those polled said that the U.S. should
reestablish diplomatic relations with Cuba.
\2\ According to the 2009 Bendixen & Associates poll, \2/3\ of
Cuban and Cuban American adults--67 percent--support the lifting of
travel restrictions for all Americans so that they can also travel to
Cuba freely.
---------------------------------------------------------------------------
NMPF strongly supports an end to the restrictions on Americans'
ability to travel freely where they choose. That is why we are so
pleased to see the Travel Restriction Reform and Export Enhancement Act
marry action related to American travel with the technical changes
necessary to better facilitate non-credit sales of agricultural
products to Cuba.
Conclusion:
We respectfully ask the Members of this Committee and others in
Congress to support the Travel Restriction Reform and Export
Enhancement Act which will greatly improve American agriculture's
ability to provide the Cuban people and those Americans wishing to
travel to Cuba with the nutritious and safe foods that we produce in
such abundance here in the United States. The U.S. dairy industry
firmly believes that it is critical that we work to expand
opportunities for our dairy exports to allow our dairy producers, as
well as their dairy manufacturing partners, to grow and prosper.
Improving our ability to export to Cuba by doing away with many of the
barriers the U.S. Government has erected to us in that market is a very
important step in the right direction.
The Chairman. Thank you, Mr. Wilson, for your testimony.
Mr. Schott, you are recognized.
STATEMENT OF BARTON SCHOTT, FIRST VICE PRESIDENT,
NATIONAL CORN GROWERS ASSOCIATION; CORN, SOYBEAN, AND WHEAT
PRODUCER, KULM, ND
Mr. Schott. Chairman Peterson and Members of the
Agriculture Committee, thank you for the opportunity to testify
about the importance of expanding U.S. trade to Cuba.
My name is Barton Scott. I am the First Vice President of
National Corn Growers. I am a family farmer from Kulm, North
Dakota. I farm with my three sons. We grow soybeans, wheat, and
corn on our farm. And I am here today on behalf of NCGA, which
represents 35,000 dues-paying corn growers. NCGA and its
affiliated state associations work together to advance corn
growers' interests.
If I can leave you one thing to remember today, it is that
the Cuban embargo is working. It is working against U.S.
farmers and ranchers. Everyone at this table has felt the
economic effect of this embargo, but I cannot believe that we
were the group meant to be targeted.
U.S. ranchers and farmers need the increased one-way trade
that the newly introduced Travel Restriction Reform and Export
Enhancement Act provides, and I thank Chairman Peterson and Mr.
Moran for the support of this important legislation.
This bill ends the embargo's effect on corn farmers by
providing an opportunity, not only to protect and preserve
current and trend-line goal of U.S. sales to Cuba, but also to
increase the demand for DDGS and other value-added products
such as poultry.
Despite numerous weather issues in 2009, U.S. producers set
all-time records in national average yields and total
production. Our growers produced 13.1 billion bushels of corn,
have met all market demands, and are building stocks. To
maintain stocks in an appropriate level that does not
negatively impact pricing, we must pursue both export markets
for corn and U.S.-produced livestock products.
Corn farmers are more fortunate than other U.S.
commodities. We currently do move some bulk corn to Cuba.
According to USDA Foreign Agricultural Service data, during the
2008-2009 marketing year, Cuba was our tenth largest exporting
market. Corn farmers currently have 91 percent average share of
the Cuban corn imports. However, we make these sales under
competitive disadvantage and in spite of the cash in advance
and the third-party banking restrictions in place right now.
As I mentioned earlier, we are producing a record amount of
corn in the U.S., while at the same time our strong regional
competitors, such as Brazil and Argentina, do not face these
same obstacles to export with Cuba. The immediate elimination
of both of these costs would help, certainly, maintain our
current exports of bulk corn in light of ever-increasing
international competition.
This bill would also help increase sales of DDGS at a
critical time. A past increase in Cuban imports of DDGS from
marketing year 2007 and 2008 to marketing year 2008 and 2009
was almost 50 percent, indicating fast-growing interest in this
product.
Corn markets: U.S. corn markets are also directly impacted
by increased export sales of value-added products such as meat.
U.S. chicken producers export relatively significant quantities
of meat to Cuba. In 2008, poultry exports to Cuba, primarily
chicken, reached 146,000 metric tons. During 2009, a slight
retraction saw exports over 138,000 metric tons.
To put this into perspective, it takes approximately 79
bushels of corn to produce 1 metric ton of poultry under the
2:1 conversion ratio of corn to white and/or dark meat. So to
meet 2009 poultry exports to Cuba, the U.S. corn industry fed
10.9 billion bushels of corn.
This bill also lifts travel restrictions to Cuba. A portion
of this bill is integral to actually increasing demand for
corn. Without travel, the increased demand for value-added
products would not be significant. U.S. tourism in Cuba will
boost demand for American products. This increased economic
activity will also lead to improvements to the Cuban diet. And
as their consumers sought out more animal proteins, and over
the past decade as Cuban chicken consumption has increased,
Cuban chicken production declined. Export projections for these
value-added products would certainly increase past and current
trend lines.
Actual increase in corn demand here in the U.S. from trade
with Cuba is an important component to the benefits from better
trade with Cuba, especially in light of their record corn
production. As an example, one of the best ways to predict
future growth is to look at consumption patterns of other
Caribbean islands, specifically the Dominican Republic. Through
the last decade, Dominican Republic's per-capita chicken
consumption has been just over twice the amount of Cuba. In our
estimation, it is reasonable to assume that Cuban chicken
consumption would grow over time to match that of the Dominican
Republic. If the import of domestic production ratio of chicken
remains somewhat the same, doubling U.S. chicken exports to
277,000 metric tons would require almost 22 million bushels of
corn.
In conclusion, I ask for this Committee's support to end
the embargo's effect on farmers like myself across America.
Sometimes there are unintended consequences from a decision,
and here we have a perfect opportunity to fix it.
We strongly believe that U.S. corn farmers can continue to
be the number one reliable supplier to our customers around the
globe, but we need the changes this legislation can do, and I
think the time is right for those changes.
Again, I greatly appreciate the opportunity to testify on
this important opportunity for corn farmers. Thank you.
[The prepared statement of Mr. Schott follows:]
Prepared Statement of Barton Schott, First Vice President, National
Corn Growers Association; Corn, Soybean, and Wheat Producer, Kulm, ND
Chairman Peterson, Ranking Member Lucas, and Members of the
Agriculture Committee, thank you for the opportunity to testify about
the importance of expanding U.S. agricultural trade to Cuba. My name is
Bart Schott and I am the First Vice President of the National Corn
Growers Association (NCGA). I am a third generation farmer from Kulm,
North Dakota where I farm with my sons, raising corn, soybeans and
spring wheat. I am here today on behalf of NCGA, which was founded in
1957, and represents over 35,000 dues-paying corn growers. NCGA and its
affiliated state associations work together to help protect and advance
corn growers' interests.
U.S. Corn Production
Despite numerous weather issues in 2009, U.S. corn producers set
all time records in national average yields and total production. Our
growers produced over 13.1 billion bushels of corn, have met all market
demands and are building stocks. To maintain stocks at an appropriate
level that does not negatively impact prices, we must pursue both
export markets for corn and U.S. produced livestock products.
U.S Corn Supply and Demand
------------------------------------------------------------------------
(mil bushel) 2007-08 2008-09 2009-10
------------------------------------------------------------------------
Carry-in 1,304 1,624 1,673
Average Yield 151 153.9 165.2
Production 13,038 12,092 13,151
Supply 14,362 13,729 14,834
Feed & Residual 5,913 5,246 5,550
Ethanol 3,049 3,677 4,200
FSI 1,338 1,276 1,270
Export 2,437 1,858 2,050
Carry-out 1,624 1,673 1,764
------------------------------------------------------------------------
Source: USDA, WASDE.
Corn Sales to Cuba
Cuba is currently an important market for U.S. corn. According to
the United States Department of Agriculture (USDA) Foreign Agricultural
Service (FAS) data, during the 2008-2009 marketing year, Cuba was our
tenth largest export market. U.S. corn farmers currently have a 91
percent \1\ average share of Cuban corn imports. In calendar year 2009,
U.S. corn exports to Cuba were down to 24 million bushel, off the then
peak in 2008 of 30.9 million bushels. The estimated value \2\ of Cuban
corn imports was $134.0 million during marketing year 2007-08 and
$104.6 million in marketing year 2008-09. This is a significant change
from when our corn producers first entered the Cuban market in 2001,
exporting that year slightly less than 1 million bushels of corn.
---------------------------------------------------------------------------
\1\ Average calculated based on USDA FAS data from marketing years
2006-07, 2007-08 and 2008-09.
\2\ Estimated value calculated based on USDA National Agricultural
Statistics Service average U.S. corn price for that year.
---------------------------------------------------------------------------
The growth in corn-based ethanol production has led to the
increased production of Distillers Dried Grains (DDGS). This high
protein feed is a direct co-product of the ethanol industry. In
marketing year 2008-09, Cuba imported 146,500 metric tons of DDGS from
the U.S.\3\
---------------------------------------------------------------------------
\3\ Data source USDA FAS.
---------------------------------------------------------------------------
Value-Added Products
U.S. corn markets are directly impacted by increased exports of
value-added products such as meat. U.S. chicken producers export
relatively significant quantities of meat to Cuba. In 2008, poultry
exports to Cuba, primarily chicken, reached 146,000 metric tons.\4\
During 2009, a slight retraction saw exports of 138,000 metric tons.
---------------------------------------------------------------------------
\4\ Data source USDA FAS.
---------------------------------------------------------------------------
To put this into perspective, it takes approximately 79 bushels of
corn to produce 1 metric ton of poultry, under a 2:1 conversion ratio
of corn to white and/or dark meat. So, to meet 2009's poultry exports
to Cuba, the U.S. broiler industry fed 10.9 million bushels of corn.
Unnecessary Restrictions to Agricultural Trade with Cuba
The 2000 Trade Sanctions Reform and Export Enhancement Act (TSREEA)
created exemptions that allow for the export of U.S. medical supplies
and food (agricultural products) to Cuba. However, in 2005, the Office
of Foreign Asset Control (OFAC) changed the meaning of ``cash in
advance'' under TSREEA to require cash payments from Cuba before food
leaves a U.S. port instead of allowing for payment prior to change in
title of goods, which generally occurs at the port of destination.
While NCGA appreciates the clear direction to roll back this
requirement in the FY 2010 Omnibus Appropriations bill, this law only
provides resolution regarding this issue for the rest of the fiscal
year. It is not a permanent fix, and American producers will eventually
continue to function with this disadvantage which is not shared by our
competitors in supplying the Cuban market with food. Simply put, the
time value of money can be a significant factor in the decision of
where and from whom to buy a commodity or any other product.
TSREEA also involves a ``direct banking'' provision which
necessitates payments from Cuba to U.S. suppliers through a third-
country bank. This requirement adds yet another additional cost to each
transaction involving the sale of agricultural goods to Cuba.
Currently, there are significant restrictions on American citizens'
travel to Cuba. Unfortunately, this greatly limits the opportunities
for increased agricultural trade with this country. Increased travel to
Cuba by Americans would boost sales of U.S. agricultural products,
especially value-added agricultural products.
The Travel Restriction Reform and Export Enhancement Act
NCGA strongly supports the newly introduced Travel Restriction
Reform and Export Enhancement Act regarding Cuba and thank Chairman
Peterson and Mr. Moran for their support of this important legislation.
This bill provides an opportunity not only to protect and preserve
current and trendline growth of U.S. sales of corn to Cuba, but to
increase demand for DDGS and other corn value-added products such as
poultry.
Corn farmers are more fortunate than other U.S. commodities, as we
currently do move some bulk corn to Cuba. However, we do so under a
competitive disadvantage and in spite of the two requirements mentioned
earlier, the definition of cash in advance and the third party banking
restriction. As mentioned, we are producing record amounts of corn in
the U.S., while at the same time our strong regional competitors, such
as Brazil and Argentina, do not face these same obstacles to export
with Cuba. The immediate elimination of both these costs would
certainly help maintain our current exports of bulk corn in light of
ever increasing international competition.
These changes would also help increase sales of DDGS at a critical
time. A past increase in Cuban imports of DDGS from marketing year
2007-08 to marketing year 2008-09 was almost 50 percent, indicating
fast growing Cuban interest in this product. We need to capitalize now
on this opportunity, but unfortunately, policies such as cash in
advance and third party banking disproportionately penalize more
expensive agricultural products, such DDGS.
This bill would also lift travel restrictions to Cuba. This portion
of the bill is integral to actually increasing the demand for corn.
Without travel, the increased demand for value-added agricultural
products will not be as significant. U.S. tourism in Cuba will boost
demand for American products. This increased economic activity would
also lead to improvements in the Cuban diet, as their consumers sought
out more animal proteins. Over the past decade, as Cuban chicken
consumption has increased, Cuban chicken production declined.\5\ As
such, export projections for these value-added products would certainly
increase past their current trendlines. Actual increases in corn demand
here in the U.S. from trade with Cuba is a very important component of
the benefits from better trade with Cuba, especially in light of recent
record corn production.
---------------------------------------------------------------------------
\5\ In 2009, approximately 14 percent of the chicken consumed in
Cuba was locally produced.
---------------------------------------------------------------------------
As an example, one of the best corollaries to examine regarding
predictions for future growth is to look at the consumption patterns of
other Caribbean islands, specifically the Dominican Republic, which has
some of the same general cultural background as Cuba. Through the last
decade, the Dominican Republic's per capita chicken consumption has
been just over twice the amount of Cuba. In our estimation, it is
reasonable to assume that Cuban chicken consumption could grow over
time to match that of the Dominican Republic. If the import to domestic
production ratio of chicken remained somewhat the same, doubling U.S.
chicken exports to 277,000 metric tons would require almost 22 million
bushels of corn.
Conclusion
NCGA respectfully requests that the Members of this Committee and
others in Congress support the Travel Restriction Reform and Export
Enhancement Act. Our members want to preserve our current corn exports,
increase our export of DDGS at a critical point in the Cuban market and
importantly, significantly increase demand for corn through
opportunities in value-added corn products through travel-related
economic activity. We believe that U.S. corn farmers can continue to be
the number one reliable supplier to our customers around the globe, but
need the changes wrought in this legislation and believe the time is
right for those changes. Again, I greatly appreciate the opportunity to
testify on this important opportunity for corn farmers.
The Chairman. Thank you, Mr. Schott, for your testimony.
And, Mr. Fritz, welcome to the Committee.
STATEMENT OF SCOTT E. FRITZ, OWNER/OPERATOR
(PRESIDENT/TREASURER), FRITZ BLACK SAND FARM, INC.; MEMBER,
BOARD OF DIRECTORS, AMERICAN SOYBEAN
ASSOCIATION, WINAMAC, IN
Mr. Fritz. Good afternoon, Mr. Chairman. And thank you, and
thanks to the Members of the Committee and the fellow members
of the panel and staff that are here in the room today.
I am Scott Fritz, a soybean and corn farmer from Winamac,
Indiana, and a Member of the Board of Directors of the American
Soybean Association, or ASA. ASA is the advocate and
representative of the U.S. soybean farmers on policy issues. We
are pleased to have the opportunity to appear before you today
on the important issue of agriculture trade with Cuba.
ASA commends you, Mr. Chairman, and the Members of the
Committee, for seeking to normalize trade and travel between
the United States and Cuba. An initial step in this direction
was taken with the enactment of the Trade Sanctions Reform and
Export Enhancement Act, or TSRA, in the year 2000, which lifted
sanctions on commercial sales of U.S. agriculture commodities
to Cuba.
As a result of this legislation, Cuba has become a key
importer of U.S. soybeans, soybean meal, and soybean oil.
According to the U.S. International Trade Commission, soybean
and soybean product exports to Cuba more than doubled from
$61.6 million in the year 2002 to $134.7 million in the year
2008. Soybeans, soybean meal, and soybean oil represent 19
percent of the value of total U.S. exports to Cuba in the year
2008, and was 25 percent of the total value in the year 2009.
While this performance certainly represents an improvement
after the long-standing trade embargo, there is significant
potential to further increase soy exports to Cuba. In 2008,
Cuba imported a total of 496,000 metric tons of soybean,
soybean meal, and soybean oil from all sources. Of this total,
282,000 metric tons, or 58 percent, were purchased from the
United States.
However, the U.S. soybean industry is uniquely positioned
to significantly increase its share of the Cuban market. U.S.
ships can reach the three major Cuban ports in 1 day, compared
to up to 25 days from Brazil or Argentina. As a result, our
shipping costs are much lower than for our South America
competitors, giving us a natural advantage in supplying the
Cuban market.
Unfortunately, TSRA imposes significant financing and
licensing conditions on U.S. export sales to Cuba. All
transactions must be paid in cash prior to shipment, commercial
and government financing or credit is prohibited, export
licenses are required, and all transactions must be handled by
a third-party bank.
A list of these and other factors that weaken the
competitive position of U.S. agriculture exports to Cuba is
attached to my statement. These restrictions nullify our
natural competitive advantage in exporting to Cuba. Their
elimination would enable the U.S. to further increase its
market share of soybean and soybean products exports to that
country.
ASA strongly supports the Travel Restriction Reform and
Export Enhancement Act, which would eliminate the financing and
travel restrictions affecting trade with Cuba.
Necessary policy changes include the following:
Allow direct banking. At present, all financial
transactions with Cuba must be handled by third-party banks
outside the United States.
The second point: The payment-in-advance rule should be
eliminated. In fact, the U.S. does not impose this requirement
on sales to any other country.
The third point: Unrestricted travel to Cuba should be
allowed. Currently, farmers and companies selling goods to Cuba
must apply for a license before traveling there, and there is
no guarantee the licenses will be granted in a timely manner.
And the time and resources required to apply for license are
burdensome, particularly to farmers and small businesses.
U.S. economic sanctions against Cuba have cost U.S. farmers
and businesses billions of dollars in exports to the Cuban
market. In a time of economic downturn, we can no longer sit on
the sidelines and watch our competitors continue to supply a
market where we have a natural competitive advantage.
ASA strongly supports the Travel Restriction Reform and
Export Enhancement Act which eliminates financial and travel
restrictions on Cuba, and which would be consistent with the
Administration's goal to double exports in the next 5 years.
U.S. farmers stand ready to meet Cuban demand on soybean
products, but U.S. policy must change.
Thank you again, Mr. Chairman, for the opportunity for the
American Soybean Association to present its views on this
important issue. And I would be happy to respond to any
questions.
[The prepared statement of Mr. Fritz follows:]
Prepared Statement of Scott E. Fritz, Owner/Operator (President/
Treasurer), Fritz Black Sand Farm, Inc.; Member, Board of Directors,
American Soybean Association, Winamac, IN
Good morning, Mr. Chairman and Members of the Committee. I am Scott
Fritz, a soybean and corn producer from Winamac, Indiana, and a Member
of the Board of Directors of the American Soybean Association (ASA).
ASA is the advocate and representative of U.S. soybean farmers on
policy issues. We are pleased to have the opportunity to appear before
you today on the important issue of agricultural trade with Cuba.
ASA commends you, Mr. Chairman, and other Members of the Committee,
for seeking to normalize trade and travel between the United States and
Cuba. An initial step in this direction was taken with enactment of the
Trade Sanctions Reform and Export Enhancement Act, or TSRA, in 2000,
which lifted sanctions on commercial sales of U.S. agricultural
commodities to Cuba. As a result of this legislation, Cuba has become a
key importer of U.S. soybeans, soybean meal and soybean oil. According
to the U.S. International Trade Commission, soybean and soybean product
exports to Cuba more than doubled, from $61.6 million in 2002 to $134.7
million in 2008. Soybeans, soybean meal and soybean oil represented 19
% of the value of total U.S. exports to Cuba in 2008.
While this performance certainly represents an improvement after
the long-standing trade embargo, there is significant potential to
further increase soy exports to Cuba. In 2008, Cuba imported a total of
496,000 metric tons of soybean, soybean meal and soybean oil from all
sources. Of this total, 282,000 metric tons, or 58 percent, were
purchased from the United States. However, the U.S. soybean industry is
uniquely positioned to significantly increase its share of the Cuban
market. U.S. ships can reach the three major Cuban ports in 1 day,
compared to 25 days from Brazil or Argentina. As a result, our shipping
costs are much lower than for our South American competitors, giving us
a natural advantage in supplying the Cuban market.
Unfortunately, TSRA imposes significant financing and licensing
conditions on U.S. export sales to Cuba. All transactions must be paid
in cash prior to shipment, commercial and government financing or
credit is prohibited, export licenses are required, and all
transactions must be handled by a third-party bank. A list of these and
other factors that weaken the competitive position of U.S. agricultural
exports to Cuba is attached to my statement. These restrictions nullify
our natural advantage in exporting to Cuba. Their elimination would
enable the U.S. to further increase its market share for soybean and
soybean product exports to that country.
ASA strongly supports the Travel Restriction Reform and Export
Enhancement Act, which would eliminate financing and travel
restrictions affecting trade with Cuba. Necessary policy changes
include the following:
Direct Banking Should Be Allowed--At present, all financial
transactions with Cuba must be handled by third-party banks
outside the United States. This requirement results in
unnecessary costs and delays for U.S. businesses, which must
receive payment from Cuba through a third-country bank, rather
than a U.S. bank.
The ``Payment in Advance'' Rule Should be Eliminated--Under
the Payment in Advance Rule, a product sold to Cuba must be
paid for in cash prior to shipment from U.S. ports. This
contrasts with the normal business practice of paying for goods
after arrival, when title to the goods changes hands. The U.S.
does not impose this requirement on sales to any other country.
Unrestricted Travel to Cuba Should be Allowed--Currently,
farmers and companies selling goods to Cuba must apply for a
license before traveling there. There is no guarantee that
licenses will be granted in a timely manner, and the time and
resources required to apply for the license are a burden,
particularly to farmers and small businesses.
Removing the financing restrictions will make U.S. agricultural
products more competitive because it would reduce Cuba's cost of
purchasing U.S. products. The ITC estimates that such costs would be
lowered by from 2.5 to 10 percent of the purchase price. The Commission
also estimates that, in the absence of financing restrictions, U.S.
exports to Cuba would have been from 11 to 26 percent higher in 2008.
If the travel ban is eliminated, the number of U.S. citizens
traveling to Cuba annually would increase to between 500,000 and 1.0
million. This growth in travel to Cuba would bring in more hard
currency, enabling the Cuban state-trading agency, ALIMPORT, to buy
more U.S. agricultural products. Ending the travel ban would also
benefit the U.S. economy by creating much-needed American jobs in the
tourism and airline industries.
U.S. economic sanctions against Cuba have cost U.S. farmers and
businesses billions of Dollars in exports to the Cuban market. In a
time of economic downturn, we can no longer sit on the sidelines and
watch our competitors continue to supply a market where we have a
natural advantage. ASA strongly supports the Travel Restriction Reform
and Export Enhancement Act, which eliminates financial and travel
restrictions on Cuba, and which would be consistent with the
Administration's goal to double exports in the next 5 years. U.S.
farmers stand ready to meet Cuban demand for soybean products, but U.S.
policy must change. Legislation can ``correct an economic blind spot
that has allowed other countries to chip away at America's
international competitiveness.''
Thank you, again, Mr. Chairman, for the opportunity for the
American Soybean Association to present its views on this important
issue. I would be happy to respond to any questions.
Source: ``U.S. Agricultural Sales to Cuba: Certain Economic Effects
of U.S. Restrictions'' U.S. International Trade Commission, June 2009.
http://www.usitc.gov/publications/332/working_papers/ID-22.pdf.
Factors Weakening the Competitive Position of U.S. Agricultural
Products in the Cuban Market
U.S. exporters cannot offer credit to Cuba for the purchase
of U.S. products. Most U.S. competitors make concessions to
finance trade with Cuba.
U.S. regulations require U.S. exports to Cuba to be paid
``cash in advance.'' Payments are made through letters of
credit through third-country banks. The regulations are a
particular concern for small and medium-sized exporters because
they do not have established commercial relationships with the
appropriate foreign banks.
When purchasing U.S. products, ALIMPORT may incur additional
storage and demurrage costs if the transactions paperwork is
not completed on schedule.
U.S. exporters wishing to travel to Cuba in order to
complete sales contracts find the travel licensing process to
be cumbersome, nontransparent, and time consuming.
The United States restricts visits by Cubans for sales
negotiations and for SPS inspections of U.S. products and
processing facilities.
U.S. agricultural trade associations cannot use industry-
generated national Checkoff funds, USDA Foreign Market
Development funds, or USDA Market Access Program allocations
for market research and promotion activities in Cuba.
U.S. regulations penalize foreign vessels that dock in Cuban
ports prior to arrival in the U.S., resulting is less
competition between carriers and higher transportation costs.
The Chairman. Thank you very much, Mr. Fritz.
And I thank all of the panel members for their testimony.
I was visiting with my staff about the discrepancy between
the different commodities in terms of how it has impacted you.
Mr. Wagner, do you know why rice has been--it seems like
you are hit harder than the others in terms of the markets you
have lost. Is there an easy explanation for this?
Mr. Wagner. I think I can say that Mr. Alvarez was quite
miffed that he had to pay cash in advance in the fashion that
he did. And every time in the last 30 or 40 years that
sanctions have been imposed, it has been the rice farmers that
have really lost. We lost the Cuban market, we lost the Iranian
market, we have lost the Iraqi market. The Vietnamese have
captured the Cuban rice market.
The Chairman. I think corn and soybean--corn went up,
actually, in terms of the percentage of the market that you
have. Am I right about that?
Mr. Schott. Currently, we are selling them 91 percent of
their corn needs.
The Chairman. And you used to be, rice used to be, what,
50, 60 percent or more?
Mr. Wagner. Of our exports? Yes.
The Chairman. Of the imports that Cuba was getting, you
were a big percentage of that market at one time.
Mr. Wagner. Fifty percent of our exports went to Cuba.
The Chairman. And they were buying the majority of their
rice from the U.S. at that time.
Mr. Wagner. Correct.
The Chairman. So I guess I was wondering, is it a
difference of freight rates or something? Is that having an
impact?
Mr. Wagner. Presently?
The Chairman. Well, corn I guess is bulkier than wheat or
rice in terms of--is that some of the impact? I mean, how is
Vietnam able to send it over here? Are they giving them some
kind of better terms?
Mr. Wagner. One, they offer credit, which we do not. Two,
they have an inferior product which is more affordable since
they are so cash-strapped.
The Chairman. So that is part of the deal.
Mr. Wagner. That is a lot of it.
The Chairman. And the corn, I heard you say you are
starting to sell DDGS now to Cuba. Is that correct?
Mr. Schott. Yes, Mr. Chairman. There is a big demand for
DDGS for their livestock and poultry industry. They want to
grow their dairy industry down there. And because of the price
of DDGS and the protein, they are real interested in purchasing
more of that.
The Chairman. And apparently, Mr. McReynolds, there has
been an increase in where they have built some new pasta plants
and milling capacity in Cuba. Am I correct about that?
Mr. McReynolds. My understanding, yes.
The Chairman. Has that increased your sales to Cuba or does
that have any impact, or has that gone some other place?
Mr. McReynolds. Well, of course, our sales at this point in
time are really down, about 14 percent of--and at one time we
were at the 48 percent level.
The Chairman. So the Canadians have picked a lot of this
up?
Mr. McReynolds. Competitors have picked that up, which they
are going to get the product somewhere.
The Chairman. I understand. I am just trying to figure out
where it is coming from. I guess Canada is probably our biggest
competitor with Cuba.
Mr. McReynolds. Generally.
The Chairman. Probably more than Argentina. Argentina has
got that export tax.
Mr. McReynolds. Right.
The Chairman. And with the corn, that basically would have
to come from Argentina, too, because Brazil doesn't really grow
that much corn. I mean, they have some. They grow it as a kind
of secondary crop. But they are more a competitor in soybeans,
I would guess, Brazil would be. Right?
Mr. Schott. Right. But Brazil is increasing their corn
acres pretty quick.
The Chairman. Because they are increasing their soybean
acres. I mean, they are using it kind of as a rotation crop or
a second crop with soybeans, as I understand it.
Mr. Schott. That is correct.
The Chairman. But they are not really focused on corn. When
I was down in Argentina the last time, there was a lot of
transition going, in Argentina, to corn in what would be their
equivalent of our corn belt. You know, they have plowed up a
lot of pasture land and are planting corn. If the government
down there doesn't kill them off before they get started, they
might be our best allies in that regard. But I was just trying
to get some sense of why it was different in different areas.
But I guess Vietnam has lower quality rice, it is probably
cheaper, and they are giving them some kind of break, financing
and whatever.
Mr. Wagner. Correct. It has been about a third cheaper per
metric ton last year.
The Chairman. But if we get back under normal situations,
you would probably get a fair amount of that market back, I
would guess.
Mr. Wagner. We would, especially when you put some money
into the Cubans' pockets.
The Chairman. All right. Thank you very much. The gentleman
from Oklahoma.
Mr. Lucas. Thank you, Mr. Chairman. And just the question I
had asked the previous panel and I ask you: On the free trade
agreements out there that are pending--Panama, Colombia,
Korea--I assume, gentlemen, your organizations are all
supporters of those?
Mr. Schott. NCGA, their policy is in support of the FTAs.
Correct.
Mr. Fritz. The American Soybean Association does indeed
support the FTAs.
Mr. Wilson. The National Milk Producers and Dairy Farmers
of America both would say yes.
Mr. McReynolds. National Association of Wheat Growers
supports those.
Mr. Lucas. Thank you very much.
And let's focus for a moment on what the Chairman was
looking at just a moment ago, talking about the freight rates
and the competition and the economics of it all.
Mr. Wagner, once again, you said the chief competitor for
the Cuban market in rice were the Vietnamese. Do you know what
the freight rate difference is between shipping from New
Orleans or wherever the main port would be for that sort of
product and, say, shipping from Vietnam?
Mr. Wagner. Two years ago, if I remember right, it was ten
times. It was something like, $1,000 per metric ton to ship
from the Far East to that market. I couldn't say what it would
have been for us because we weren't players in the market, but
it is substantially less. Obviously, it is a 30 to 40 day trip
from Vietnam or Thailand through the Panama Canal to Cuba. We
can make it in 2 days. We can ship it on smaller vessels. All
those costs are--savings in costs are passed on to the Cubans
and they could buy more product.
Mr. Lucas. Mr. McReynolds, I assume as was mentioned a
moment ago, the Canadians would be the leading competitor on
wheat. Do you have any idea what the freight difference is
between shipping Canadian wheat to Cuba versus from New Orleans
or Galveston, wherever, in the United States?
Mr. McReynolds. Well, I don't have those off the top of my
head. We can get those to you and to the Committee. But in
days, it takes about 2 days, as was stated earlier. And from
Canada, it takes 7 to 8 days to make that trip. So the
transportation costs are certainly higher.
Mr. Lucas. It was a fascinating statistic, Mr. Wilson your
commodity group's estimate.
Mr. Wilson. I certainly should get you a better number. If
I can guess, if you would like for me to take a guess, probably
something north of 10 cents a pound on whether it be nonfat dry
milk or cheese.
Mr. Lucas. And your leading competitor in the Cuban market
right now would be New Zealand?
Mr. Wilson. Probably New Zealand, Australia and Europe. We
are not exactly sure what the combination is but they would be
the three biggest competitors.
Mr. Lucas. And the product that you would primarily be
selling down there would be powder.
Mr. Wilson. Most likely nonfat dry milk. That is what we
were selling the most before. But certainly with the tourism
aspect to this, we think it could be a very viable market for
cheese and many other dairy products, for that matter, as
Americans go down there and eat.
Mr. Lucas. Mr. Schott, on your commodity group your leading
competitor would be from where?
Mr. Schott. Well, we are targeting Argentina and Brazil.
Mr. Lucas. So how would the freight rates--would you
estimate or can you find me information later between shipping
from the U.S. and coming from South America?
Mr. Schott. I am not prepared to answer that question but I
can get you the data.
Mr. Lucas. That is a good answer.
Mr. Fritz. As I stated in my written statement, we think it
is 1 day to ship from the United States to Cuba, where it could
be up to 25 days of shipping time from South America. Now I
realize that South America would be coming out of a
northeastern port or it could be coming out of Argentina. I
have heard the number, I am sorry I don't have the number, the
cost of Panamax ships per day--the difference would be
somewhere between 15 to 20 days, and it doesn't take long for
that to add up quickly.
Mr. Lucas. So a substantial trade difference given an
equitable situation then. I think, gentlemen, you will find
that most of us on this Committee want your producers to have
an opportunity to do their business and to demonstrate their
economic efficiency.
As you have heard various comments and the various Members
of all perspectives, there is a sensitivity about the
government down there. I suspect my good colleagues with their
legislation will perhaps in some modified form have more
success than they might realize today. But, nonetheless, we do
need to remember we are dealing with a country that, because of
its horrible economic and political system, cannot feed itself.
If they didn't have the political system, the economic system
they have right now, they would be dramatically less dependent
on you and on the farmers that I represent, that you represent
too.
So in the actions we take here, while we want to make sure
our farmers have access to those opportunities, we also need to
bear in mind the consequences to the people that we are
affecting and to the region as a whole.
I appreciate the Chairman tolerating my editorial comment
at the end there, and I yield back.
The Chairman. Thank you. The gentleman from Kansas.
Mr. Moran. I remember hearing at least one time, Mr.
Wagner, that Cuba imports \1/5\ of the world's rice. Is my
recollection at all correct? And the point that was made to me
is while they consume 20 percent of the world's rice, they are
consuming not U.S. rice, but China, Vietnamese--you are shaking
your head so maybe my recollection is wrong.
Mr. Wagner. They import up to half a billion metric tons a
year.
Mr. Moran. And rice would be a major product in the Cuban
diet.
Mr. Wagner. Oh, yes. They eat up to 150 pounds a year. They
started eating rice in 1512. It is written in history.
Mr. Moran. And let me join in the comments about the Cuban
Government. Nothing that anybody is doing with this legislation
or any efforts here is to put any stamp of approval upon the
dictatorship that has lasted so long and has created so many
economic and freedom burdens upon the Cuban people. I just want
to comment, and most of my focus in my time in Congress, almost
exclusively, has been on the agricultural side. Although as I
said earlier, I believe that the other component of this
legislation, the ability to travel by U.S. citizens to Cuba,
enhances the opportunity for Cuban freedom, liberty, and
economic opportunity.
But I do want to comment about the conversation that we
have had on this Committee. Somehow we got on the conversation
about tourism. This is not a bill that creates tourism. This is
a bill that authorizes travel by United States citizens. If you
want to talk about it from the Cuban perspective, you can, I
suppose. But, what we are really doing here is creating freedom
and liberty for Americans, United States citizens, about what
country they can visit. As has been indicated, we do not place
restrictions like we do on Cuba on any other travel by U.S.
citizens to any other country.
One of the leaders in this effort in regard to travel has
been the Congressman from Arizona, Mr. Flake. And every time I
have heard him speak about this issue, it is not about boosting
the Cuban economy, it is about liberty for American citizens.
And part of what I came to Congress to do is to promote freedom
and liberty in the United States.
I believe one of the primary responsibilities we have as
Members of Congress is to see that another generation of
Americans have the liberties and freedoms that we are
authorized and guaranteed under our United States Constitution.
I think the focus of the comments of some of my colleagues
on the Committee, as they talk about creating a tourism
industry in Cuba, is really misguided. What we are talking
about here is authorizing the liberty of American people to
travel to another country.
I yield back and therefore give back the 2\1/2\ minutes
that I exceeded the last time I was given the microphone.
The Chairman. So recognized, and I thank the gentleman.
The gentleman from Iowa, Mr. King.
Mr. King. Thank you, Mr. Chairman. I really didn't
anticipate to have Mr. Moran inspire me quite so much, but a
point that I made earlier is about the liberty of the Cuban
people. And I think that is something we should take into
consideration. We are the vanguard of liberty for the world.
And it is part of what remains of the Monroe Doctrine. It is
our global position that has put our troops in harm's way on
every continent that I can think of.
But I take you back to these circumstances. There is a
limit to what the Cubans can buy. In fact they are limited,
they can't buy anything from you. All business is conducted by
ALIMPORT, which is Castro's organization. He decides who gets
the proceeds and who does not. He is able to distribute the
foodstuffs to the people who support him, and he is able to
keep it away from the people who do not support him. He does
use it as a tool. I am just not hearing this in the dialogue on
how Castro would be able to use some of this as a tool.
Here are some things: I just asked them to put together for
me some of the items that are on the ration card. And I haven't
heard dialogue either about the rationing in Cuba, and this is
updated exactly today. Here are the rations: If you are between
0 and 7 years old or a pregnant woman--I don't know any other
gender that can become pregnant--you can purchase a liter of
milk every day and meat when available. The ration per person
per month, 5 pounds of rice; 4 pounds of sugar; 1-2 bags of
salt, whatever size they are; one tube of toothpaste for up to
four persons in a household; 8 ounces of grains, other types of
grains than rice; a quarter pound of cooking oil per person per
month; a half a bar of soap per person per month; two bags of
coffee per person per month; four eggs per person per month. A
couple of omelettes a month would be the ration on the eggs.
I think we need to think of this in the context of what it
is like in a country that is so politically manipulated that
people are scared to death to even get to know their neighbor,
and having food used as a tool against them for political
purposes.
And so I just pose this question this way, to each of you,
and maybe I can articulate it enough so that it can allow you
to each provide an answer. I know that we have talked about the
economics of this, and my life has been wrapped up in the
economics of ag commodities and the necessity for us to have
good markets. It is everywhere around me. I look from my house
and I will see either corn or soybean. I love that. I love that
in the middle of my life for all these years that I have been
blessed with.
But this discussion that we have had is about the economic
impact on our ag producers, and that is the only focus that I
have heard. And I am not charging that you have a
responsibility beyond that, but I would just ask the question,
starting with Mr. Wagner: Has a discussion about the promotion
of this liberty that Mr. Moran so eloquently talks about
promoting it to the Cuban people, has that also been a part of
the discussion as you look at your policy. Or have these
policies by your organization and each of you been confined to
the economic question solely as your testimony apparently has
been?
Mr. Wagner. No, we have talked about the moral side of this
as well and it--something came to mind last night. How can you
export freedom when there is such a shortage of it in this
country? If we don't have the freedom to travel there and carry
on commerce there, I don't know how we are going to export and
change those people's way of life.
Mr. King. Mr. Wagner, though, is it then this rationale--it
doesn't have to be the position of your organization--but is it
the rationale that Americans traveling to and trading with
Cubans does export freedom and liberty to them because it is
contagious? That is what I believed when I went there, but I no
longer believe that. But is that close to the position that is
being discussed?
Mr. Wagner. I think we have some evidence of that in
history in the USSR and China to some degree, and in Vietnam.
That we are open trading partners with Vietnam now. We just
finished a war with them, what, 30 years ago.
Mr. King. Thank you, Mr. Wagner. Mr. McReynolds.
Mr. McReynolds. I just go back to my experiences there and
realize it wasn't a long period of time. But the Cuban people
were very eager to communicate with us and just eager to--just
little things; know a little more about the United States,
about America, about schools and universities. I was
overwhelmed with their eagerness to have a better understanding
of our life and what we did in our lifestyles and our families.
And so, when you have that free travel opportunity, you
open a whole new world up to people that have that opportunity.
And to restrict U.S.--I don't see the rationale there at all.
And we have the opportunity to go to other places in the world,
why would we be restricted there? I think it opens up a whole
new world to Cuban people.
I think even our interaction with our guide and with the
people that we associated with, which was a cross-section of
individuals, I got the impression that they benefited from us
being there. I guess I would like to think that. But I
certainly did.
Mr. King. I learned to love the people and to that
sentiment I would agree. That result, of course we did not, but
I would ask, Mr. Chairman, if I could allow the witnesses on
down the line to respond to a similar question with the time we
have.
Mr. Wilson? Thank you, Mr. Chairman.
Mr. Wilson. Well, I would say our initial reason is
economic, because we do see it will benefit U.S. dairy farmers
by being able to adequately compete with dairy farmers from
other parts of world. However, along those lines, you can't
avoid getting into the other aspects of this argument. I think
in one sense you would say, okay, we have been doing this for
my whole lifetime essentially.
Mr. King. Castro's whole lifetime.
Mr. Wilson. And we really haven't made any progress there.
I guess we look back from 100,000 feet in the world and you see
how communication, partly through the Internet, but
communication has changed the world just in the last few years,
really. And it has changed a lot of countries and the way they
treat their people in the last few years.
And so perhaps allowing U.S. citizens the freedom of going
to Cuba, whether it be tourists or whether it be on business or
whatever. There has to be some interaction with the common
people in those----
Mr. King. You recognize that enriches the regime. Every
dollar spent down there, a large share of it goes into the
hands of Castro.
Mr. Wilson. We are not going to change that overnight, but
we have to take this in steps. And we would believe that it is
a positive step to allow people from the United States to go
there. How are they any different from China? We have said that
before here.
Mr. King. Thank you. Mr. Schott.
Mr. Schott. Yes. Our policy is economic as well, and I am
not reinventing the wheel here; we talked with our leadership
about these issues and we know what you are talking about. But
we do look at China and say, we are sending food to China right
now and that is an oppressive nation. And so that is how we
deal with the situation on the corn board.
Mr. King. Thank you. Mr. Fritz.
Mr. Fritz. Thank you, Mr. King. I think this answer is
perhaps in two parts. The American Soybean Association, of
course, had a long history of supporting free and open trade
and opposing restrictions. With that said, I have promoted U.S.
export cost savings in many countries of the world, serving on
the ASA Trade Policy and International Affairs Committee.
What you learn when you travel is you learn the cultures of
the country and you learn to understand the people. You learn
to tolerate other cultures and you appreciate them for what
they are.
Specifically, what I see happening in Cuba is that when we
have visitors, any visitors, American visitors or visitors from
other parts of the world in Cuba, in effect we are holding the
government accountable because we have eyes on the ground. We
have people seeing what is going on. We have the ability to
bring back those stories of discrimination and poor respect for
human rights.
Specifically to this bill, we exported 496,000 metric tons
of soybean meal and soybean oil to Cuba. That is a lot of food
and a lot of protein for a lot of people, not just members of
the regime. So in regards to this bill, I see this bill as a
way of doing business and doing business better than what we
had before. But what is it all about? It is all about feeding
hungry people.
Mr. King. Thank you, Mr. Fritz.
In conclusion, Mr. Chairman, I want to thank all the
witnesses. And I want to just put this into the record: that
one of my goals, one of my very high goals and dreams in life,
is to swim ashore at the Bay of Pigs and walk out onto a free
Cuba. I hope we all live to see that day.
The Chairman. Mr. King, I think from your comments that you
must have supported the Russian grain embargo.
Mr. King. I think what I saw----
The Chairman. Maybe you are not old enough to remember
that.
Mr. King. I am a very youthful individual, Mr. Chairman.
What I saw happen with the Russians----
The Chairman. The problem is the people are going to get
this stuff someplace. Just us cutting it off, all we are doing
is hurting ourselves. Whether they buy it from the U.S. or buy
it from Vietnam or wherever they buy it, isn't going to do a
thing about the problems we are talking about.
We have groups here that I don't always agree with, the
Human Rights Watch and so forth, that have exactly the opposite
position that you do, that they say that this bill will help
these human rights problems. So we are cutting off our nose to
spite our face here. This is crazy, and we are going to
disagree on that, but it has gone on long enough.
Mr. King. Thank you for the endorsement of my sanity, and I
yield back the balance of my time.
Mr. Lucas. I think the Chairman has many words of wisdom
there. Let's pass those three free trade agreements and get on
with it everywhere.
The Chairman. All right.
So, Mr. Lucas, that is the final word?
Mr. Lucas. Final word.
The Chairman. All right. So under the rules of the
Committee, a record of today's hearing will remain open for 10
calendar days to receive additional material and supplemental
written responses from the witnesses to any questions posed by
a Member. And this hearing of the Committee on Agriculture is
adjourned.
[Whereupon, at 4:00 p.m., the Committee was adjourned.]
[Material submitted for inclusion in the record follows:]
Submitted Letter by Hon. Collin C. Peterson; on Behalf of Rev. Howard
J. Hubbard, Bishop of Albany; Chairman, Committee on International
Justice and Peace, United States Conference of Catholic Bishops
March 10, 2010
Hon. Collin C. Peterson,
Chairman,
Committee on Agriculture,
U.S. House of Representatives,
Washington, D.C.
Dear Chairman Peterson:
As Chairman of the Committee on International Justice and Peace of
the United States Conference of Catholic Bishops (USCCB) I write to
express support for H.R. 4645, the Travel Restriction Reform and Export
Enhancement Act. This bipartisan bill removes obstacles to legal sales
of United States agricultural commodities to Cuba and ends restrictions
on all Americans traveling to Cuba. Our Conference of Bishops supports
both objectives of this legislation as ways to advance the goal of
increasing engagement with the people of Cuba.
The USCCB has for many years consistently called for relaxing the
sanctions against Cuba. These policies have largely failed to promote
greater freedom, democracy and respect for human rights in Cuba. At the
same time, our nation's counterproductive policies have unnecessarily
alienated many other countries in the hemisphere. Improving the lives
of the Cuban people and encouraging democracy and human rights in Cuba
will best be advanced through more, rather than less, contact between
the Cuban and American people. Removing the barriers to agricultural
exports to Cuba, and thus deepening the trade relationship, is one step
toward this goal.
While our Conference welcomed the Administration's lifting of
travel restrictions for Cuban Americans, ongoing restrictions on the
ability of other Americans to travel to Cuba, even when accompanying
their Cuban American relatives, remain objectionable. No one should be
prevented from supporting a spouse in visiting a dying relative or
attending a family funeral simply because he or she is not Cuban
American. We welcome H.R. 4645 because it lifts all restrictions on
travel by all U.S. citizens to Cuba and removes unnecessary obstacles
to trade.
Sincerely yours,
Bishop of Albany and Chairman,
Committee on International Justice and Peace.
______
Submitted Letter by Hon. Collin C. Peterson; on Behalf of Jose Miguel
Vivanco, Executive Director, Americas Division, Human Rights Watch
Washington, D.C.--March 11, 2010
Hon. Collin C. Peterson,
Chairman,
Committee on Agriculture,
U.S. House of Representatives,
Washington, D.C.
Dear Mr. Chairman,
I would like to congratulate you on convening this timely and
important hearing of the United States House of Representatives
Committee on Agriculture on U.S. travel and agricultural trade with
Cuba. Human Rights Watch fully supports the Travel Restriction Reform
and Export Enhancement Act (H.R. 4645), which would remove obstacles to
legal sales of U.S. agricultural commodities to Cuba and abolish
restrictions on travel to the island. We believe the proposed
legislation, as well as similar legislation in the United States Senate
(S. 1089), represents a necessary step towards ending a U.S. policy
that has failed for decades to have any impact whatsoever on improving
human rights in Cuba.
In November 2009, Human Rights Watch released a 123-page report
(http://www.hrw.org/en/node/86554) on human rights in Cuba under Raul
Castro. The report concludes that rather than dismantle Cuba's
repressive machinery, Raul Castro has kept it firmly in place and fully
active. Scores of political prisoners arrested under Fidel Castro
continue to languish in Cuba's prisons, and Raul Castro's Government
has used Draconian laws and sham trials to incarcerate scores more who
have dared to exercise their fundamental freedoms.
The death in custody on February 23, 2010, of political prisoner
Orlando Zapata Tamayo after an 85 day hunger strike served as a tragic
reminder of the abuse suffered by those who dare to criticize the
Castro Government, and the lack of recourse for victims of repression.
In the aftermath of Zapata's tragic death, some have argued that the
U.S. embargo policy should not be changed, or that restrictions on
trade and travel should be tightened further. Human Rights Watch
disagrees.
Efforts by the U.S. Government to press for change by imposing a
sweeping ban on trade and travel have proven to be a costly and
misguided failure. The embargo has done nothing to improve the
situation of human rights in Cuba, and imposes indiscriminate hardship
on the Cuban population as a whole. It has provided the Cuban
Government with an excuse for its problems and pretext for its abuses.
Rather than isolating Cuba, the policy has isolated the United States,
enabling the Castro Government to garner sympathy abroad while
simultaneously alienating Washington's potential allies.
There is no question: the Cuban Government bears full and exclusive
responsibility for the abuses it commits. However, so long as the
embargo remains in place, the Castro Government will continue to
manipulate U.S. policy to cast itself as a Latin American David
standing up to a U.S. Goliath, a role it exploits skillfully. Ending
the travel ban and removing obstacles to agricultural trade are steps
in the right direction toward reforming this failed policy, and
Congress should act swiftly to pass the Travel Restriction Reform and
Export Enhancement Act.
Eliminating barriers to agricultural trade and lifting the travel
ban will not, by themselves, bring an end to the Raul Castro
Government's repression. As a result, Human Rights Watch recommends
that the U.S. Government replace its failed embargo policy with a more
effective, multilateral approach. Our report lays out a proposal for
the United States to work with allies in the European Union, Canada,
and Latin America to forge a new coalition that will exert targeted
pressure on the Raul Castro Government to end its human rights abuses.
I would ask that you please share this statement with Members of
your Committee, and I would be very grateful if you would include this
letter in the record of your hearing.
Sincerely,
______
Submitted Report by AgriLIFE Research, Texas A&M University
Estimated Economic Impacts of the Travel Restriction Reform and Export
Enhancement Act of 2010
March 11, 2010
Introduction
The following report was prepared for submission to the House
Committee on Agriculture, United States House of Representatives, March
11, 2010 related to the public hearing on H.R. 4645, the Travel
Restriction Reform and Export Enhancement Act.
The analyses and report were prepared by the Center for North
American Studies (CNAS). Contributors were, Principal Author, C. Parr
Rosson III, Professor and Director; Co-author, Flynn J. Adcock,
International Program Coordinator; and Research Assistant, Eric
Manthei. All are located in the Center for North American Studies,
Department of Agricultural Economics, Texas AgriLife Research/AgriLife
Extension, Texas A&M University.
Key Findings, Assumptions and Limitations of the Analysis
In 2009, U.S. exports to Cuba were $528 million, supported $1.6
billion in total business activity, and provided 8,600 jobs throughout
the U.S. economy. If U.S. travel and financial restrictions are
removed, up to $365 million/year in additional U.S. exports could
result, requiring $1.1 billion in business activity and 6,000 new jobs.
While U.S. agriculture is estimated to receive major economic gains
from increased exports, non-agricultural sectors such as business and
financial services, real estate, wholesale and retail trade, and health
care are also important beneficiaries of increased exports to Cuba,
receiving up to 45 percent of the gains in some cases.
The results of this analysis assume that any increase in U.S.
exports to Cuba is a `net' increase in the U.S. export position.
Otherwise, the economic impacts presented here would overestimate the
effects of U.S. exports to Cuba on the U.S. economy. A second
assumption is that Cuba's tourist industry follows a similar
developmental pattern to other Caribbean countries in terms of food and
beverage consumption and imports. Third, the results of a report by the
U.S. International Trade Commission (U.S. Agricultural Sales to Cuba:
Certain Economic Effects of U.S. Restrictions, USITC 3932, July 2007)
were used to estimate the value of U.S. exports to Cuba if travel and
financial restrictions are modified. Displacement of U.S. tourism is
assumed to be minimal. Finally, the results should not be combined, or
added together, because they were estimated using separate economic
impact analyses and double counting would result.
Importance of Legislation for Improving U.S. Competitive Position in
Cuba
Allowing U.S. citizens/permanent residents to travel to Cuba and
U.S. firms to utilize modified financing methods will improve the U.S.
competitive position in the Cuban market. New financing provisions
would allow U.S. exporters to recover lost markets for rice and forest
products, for example, creating new jobs and economic activity.
It is also important to maintain the U.S. competitive position for
wheat, corn, and soybean meal. For January-February 2010, U.S. exports
of corn to Cuba were down 47 percent compared to the same period in
2009, while wheat exports are off 69 percent and soybean meal exports
had fallen 55 percent. The majority of these declines in exports are
attributed to increased costs associated with financial restrictions,
demurrage on vessels, currency conversion costs, and higher costs
associated with using letters of credit (ALIMPORT staff, 3/2/2010).
Recently implemented cash in advance rules will provide a temporary
respite, but will not alleviate the problem entirely.
Consequently, Cuba appears to be diversifying its suppliers by
shifting away from U.S. firms in favor of Brazil, Canada, China and
Vietnam. Credit terms are often offered by these countries, allowing
ALIMPORT (Importada de Alimentos--the Cuban Food Import Agency) to
conserve its hard currency and use credit to make larger purchases over
a longer period of time. The net result is a loss of U.S.
competitiveness and market share, followed by declining exports. If
conditions do not improve and if alternative markets are not developed,
negative economic impacts will occur in terms of lost business activity
and employment.
Background
The Trade Sanctions Reform and Export Enhancement Act of 2000,
allows certain exceptions for the exportation of U.S. agricultural
products and medicines to Cuba. Since passage of the TSREEA, U.S.
agricultural and food exports to Cuba have expanded, reaching a record
$711 million in 2008. This was almost \2/3\ higher than 2007. Last year
(2009) was quite different however, as U.S. exports to Cuba declined 26
percent to $528 million. This large drop-off was attributed to a 15
percent decline in Cuba's per capita tourist earnings, a 30 percent
drop in Cuban export earnings from nickel sales, and weak export sales
of sugar and tobacco. Another major set of factors was the relative
high cost of U.S. products due to somewhat onerous U.S. financial
requirements. Together, these factors severely limited the ability of
ALIMPORT to purchase U.S. products on a cash basis. Despite this
decline, Cuba remains the sixth largest U.S. agricultural market in the
Latin American/Caribbean region.
U.S. exports to Cuba are highly concentrated in a few key sectors.
For 2009, the major U.S. exports to Cuba included frozen broilers/
turkeys and other poultry ($144 million), soybeans and soybean products
($133 million) corn ($120 million), and wheat ($73 million). These four
product categories represented 89 percent of total U.S. agricultural
exports to Cuba. Other important U.S. exports were animal feeds ($26
million), pork ($11 million), dry beans ($4.3 million), and processed
foods and phosphate fertilizers ($3 million) each. Minor exports were
apples, pears and grapes ($2.6 million), margarine ($2.2 million), and
treated poles ($1.7 million).
U.S. agricultural exports to Cuba of $528 million in 2009 required
8,588 jobs and generated $1.6 billion in total economic activity. CNAS
estimates indicate that for every $1 of U.S. agricultural exports to
Cuba in 2009, an additional $1.96 in business activity was required to
support those exports.
These economic impacts of food and other agricultural exports to
Cuba were estimated using IMPLAN, an input/output model. IMPLAN is
maintained by Minnesota IMPLAN Group, Austin, Minnesota. Economic
multipliers for each sector of the economy were used to estimate how a
change in one sector affects business activity and employment in the
other sectors of the economy.
Business activity refers to the total output of a sector, such as
corn, and the value of all purchased inputs used to produce corn for
export. Business activity also includes employee compensation,
proprietor income, rents and royalties, and payment of indirect
business taxes. Employment is reported as total jobs, with full-time
and part-time jobs counting the same.
Economic Impacts of Removing U.S. Travel Restrictions to Cuba
Two scenarios were analyzed to estimate the economic impacts of
removing U.S. travel restrictions to Cuba. Both scenarios focus only on
the export of high value products, mainly processed foods, beverages,
horticultural products and seafood. This analysis assumes that all
travel restrictions are removed and that visitors remain in Cuba
between 4.5 and 7 days.
Scenario 1: Short Run (Years 1-2)
The short run analysis provides estimates of U.S. exports and
economic activity before Cuba has time to adjust to the increased
number of tourists/visitors from the United States by increasing hotel
room capacity, and improving critical infrastructure such as power
generation and transportation. It also assumes that visitors remain in
Cuba for 4.5 days. Based on the USITC report, 538,000 additional
visitors were estimated to arrive and spend $50/day for food/drink.
CNAS estimates that the U.S. share of tourist expenditures on food/
drink would be 40 percent.
This results in additional U.S. food/drink exports to Cuba of $48.4
million/year (table 1). Major exports would be frozen broilers/turkeys/
eggs ($8 million), beef, pork, edible offal ($6.3 million),
miscellaneous processed foods ($5.5 million), flour/malt ($3.3
million), dry milk/cheese ($3 million), canned fruits/vegetables ($2.9
million), soft drinks ($2.5 million), distilled spirits/wines/beer
($2.4 million), fruits ($2.4 million), fats/oils ($2 million). Other
exports include condiments, vegetables/melons, snack foods, refined
sugar, seafood, and frozen desserts.
The additional $48.4 million in exports would be expected to
require $116.7 million in additional business activity, creating a
total economic impact of $165.1 million and 786 new jobs. About 38
percent of the economic impact would be attributable directly to new
exports. The largest share of new economic activity (62 percent, or
$102 million), would result from input purchases and household spending
in sectors that support exports, but do not actually export. About $14
million of this new total business activity is agriculturally related
activities such as grain and oilseed production, ranching, forestry,
fishing, and corn milling. Together, these sectors require 153 new jobs
to support new U.S. exports to Cuba.
Business services, such as legal, accounting and technical
consulting require $11 million in business activity and 84 new jobs.
Additional food processing supports $8 million in business activity,
while real estate, wholesale trade and finance require $7.3 million, $7
million, and $6.4 million in business activity, respectively. These
sectors also require 89 new jobs. Other sectors required to support new
exports include: petroleum ($8.8 million), transportation ($4.8
million), wood processing ($3 million), and retail trade and food/drink
establishments ($4.7 million).
Scenario 2: Long Run (Minimum of 5 Years)
Two long run scenarios are reported. The first assumes that U.S.
tourists to Cuba stay 4.5 days, while the second scenario assumes
tourists stay 7.0 days and daily food expenditures rise to $60 per day.
Over the long run, it is also assumed that Cuba's tourist industry
adjusts to the increased demand for services by renovating existing
hotels and facilities, building new facilities and improving critical
infrastructure. As these improvements occur, it is estimated that 2.0
million U.S. tourists would visit Cuba annually.
Assuming new tourists stay 4.5 days, U.S. exports are estimated to
increase by $180 million/year million to meet the increased demand for
high value foods/drink products (table 1). This would lead to a total
economic impact of $614 million in business activity and 2,923 new
jobs. As was the case in Scenario 1, slightly more than \1/3\ of the
economic impact would occur in sectors that are exporting products to
Cuba. Slightly more than half ($200 million) of the non-export related
business activity is expected to occur in other agriculture activities,
business services, food production, real estate, wholesale trade and
finance. About 55 percent of the new jobs associated with increased
exports, 2,252, would occur in the previously noted non-export sectors
of the economy. The remainder of the new jobs, 671, would be in
petroleum, transportation, health care, food/drink establishments,
retail trade and other sectors.
Table 1. Estimated Economic Impacts of Increased U.S. Tourism to Cuba
(Million Dollars)
----------------------------------------------------------------------------------------------------------------
Short Run 4.5 Day Stay Long Run 4.5 Day Stay 2 Long Run 7 Day Stay 2
538,000 New Tourists Million New Tourists Million New Tourists
--------------------------------------------------------------------------
Total Total Total
Exports Business Exports Business Exports Business
Activity Activity Activity
----------------------------------------------------------------------------------------------------------------
Top Exported Products
Poultry Meat and Eggs $8.1 $13.6 $30.0 $50.5 $56.0 $94.2
Pork, Beef and Products $6.3 $8.8 $23.4 $31.9 $43.6 $59.6
Miscellaneous Food Products $5.5 $5.8 $20.9 $22.0 $39.2 $41.3
Flour and Malts $3.3 $4.1 $12.4 $15.4 $23.2 $28.8
Dry Milk and Cheese $3.0 $4.0 $11.3 $15.1 $21.1 $28.3
Canned Fruits/Vegetables $2.9 $3.4 $10.7 $12.5 $19.9 $23.3
Soft Drinks $2.5 $2.8 $9.3 $10.3 $17.4 $19.2
Spirits/Wine/Beer $2.4 $2.8 $9.1 $10.6 $17.0 $19.7
Fruits $2.4 $2.9 $8.9 $10.7 $16.6 $20.1
Top Supporting Sectors
Ag Related Activities N/A $14.0 N/A $51.9 N/A $96.9
Business Services N/A $11.1 N/A $41.2 N/A $76.8
Oil, Gas, and Petroleum Products N/A $8.7 N/A $32.4 N/A $60.4
Other Food Production N/A $8.0 N/A $29.9 N/A $55.8
--------------------------------------------------------------------------
Total Estimated Impacts
Business Activity $48.4 165.1 $180.0 $614.2 $336.0 $1,146.5
Employment (# of Jobs) 181 786 671 2,923 1,252 5,456
----------------------------------------------------------------------------------------------------------------
Assumptions for 4.5 day stay scenarios are that $50 per day per person spent by 538,000 visitors in the Short
Run and 2.0 million visitors in the Long Run. These assumptions are taken from the U.S. International Trade
Commission Report entitled U.S. Agricultural Sales to Cuba: Certain Economic Effects of U.S. Restrictions,
USITC Publication 3932, July 2007. For the Long Run 7 day stay scenario, 2.0 million visitors spend $60 per
day each. For all scenarios, it is assumed that the U.S. achieves 40 percent of the market share for these
food expenditures and the export pattern follows the U.S. export pattern to other Caribbean nations for
consumer-oriented food products.
Note: for supporting sectors, there are no exports resulting in N/A for those export values.
Assuming U.S. visitors remain in Cuba for a 7.0 day stay and spend
$60/day on food results in additional U.S. exports of $336 million/year
(table 1). These additional exports would require $810.5 million in
business activity, for a total economic impact of $1.15 billion, which
would support 5,456 new jobs.
The total business activity due solely to new exports is $433.6
million. In terms of the impacts by sector due to increased exports,
$94.2 million is attributed to frozen broilers/turkeys and eggs, $59.6
million to pork, beef and edible offal, $41.3 to processed foods, $28.8
million to flour and malt products, $28.3 dry milk and cheese, $23.3 to
canned/preserved fruits and vegetables, $20.1 million to fruits, $19.2
million to soft drinks, $18.7 to wine/beer/distilled sprits, $17.6 to
fats/oils, $14 million to bakery goods, and $10.4 million to vegetables
and melons. Other important impacts occur in snack foods, sugar,
breakfast foods, confectionaries, seafood and frozen desserts.
The business activity attributed to important non-export sectors
includes: other agriculture such as grain and oilseed production,
ranching, forestry and fishing ($96.9 million), business services
($76.8 million), petroleum ($60.4 million), other food processing
($55.8 million), real estate ($50.5 million), finance ($48.4 million),
transportation ($33.5 million), food, drink and retail ($30.6 million),
health care ($27.5 million), and forestry ($21.3 million).
More than \3/4\ of the jobs associated with these additional
exports, 4,202, occur in the non-export sectors. Other agriculture
accounts for 1,062 jobs, followed by business services (582 jobs), food
and drink retail (507), health care (303), wholesale trade (247),
transportation (194), finance (186), and real estate (181). All of the
other sectors account for 785 jobs.
Economic Impacts of Modifying Payment Terms and Financial Requirements
Reducing the cost and time necessary to process payment for U.S.
exports to Cuba would have major economic impacts in terms of increased
exports and economic activity. U.S. exports to Cuba would be expected
to rise by $271.2 million/year, requiring an additional $561.9 million
in business activity for a total economic impact of $833.1 million and
supporting 4,478 new jobs (table 2).
Processed and other food products sectors are estimated to require
$246.6 million in business activity and 1,228 new jobs to support
additional exports to Cuba. Grain sectors, mainly corn, rice and wheat,
would require $87 million in additional business activity and 767 new
jobs. Dairy products would require $40.3 million in additional business
activity, followed by poultry products ($30.9 million), forestry
products ($23.2 million), beef, pork and edible offal ($20 million),
seafood ($12.1 million), soybean meal and oil ($12.2 million), and
animal feeds ($9.9 million). There would be 1,138 new jobs required to
produce and market these additional exports to Cuba. Most of these jobs
would be concentrated in the grains sector (767), poultry (141) and
forestry (97).
Important economic impacts would occur among the non-export sectors
as well. In fact, about 42 percent of the business activity and 47
percent of the jobs are associated with non-export sector production.
Other agriculture business activity is estimated to be $72 million,
followed by petroleum at $34.6 million, business services ($32.2
million), real estate ($30 million), food, drink and retail ($23.8
million), finance ($22.9 million), wholesale trade ($20.5 million),
health care ($13.2 million), and forestry ($6.8 million).
There are 2,112 new jobs required in the non-export sectors to
support additional exports to Cuba. The major sectors impacted are
other agriculture (641), business services (250), health care (145),
food, drink and retail (133), real estate (120), wholesale trade (105),
finance (95) and transportation (85).
Table 2. Estimated Economic Impacts of Elimination of U.S. Restrictions on Financing Exports and Restrictions on
Travel to Cuba
(Million Dollars)
----------------------------------------------------------------------------------------------------------------
Removal of Finance Removal of Finance and
Restrictions Travel Restrictions
-------------------------------------------------
Total Total
Exports Business Exports Business
Activity Activity
----------------------------------------------------------------------------------------------------------------
Top Exported Products
Grains (Rice, Wheat, Corn) $78.7 $87.2 $122.7 $134.7
Other Food and Ag Products $49.5 $161.6 $57.5 $187.8
Dry Milk and Other Dairy $35.0 $40.4 $50.0 $57.8
Poultry Meats $27.3 $30.9 $35.2 $40.0
Processed Food Products $26.0 $84.9 $34.5 $112.7
Wood Products (Lumber) $21.5 $23.2 $21.5 $23.3
Pork, Beef and Products $14.5 $20.0 $18.8 $25.9
Seafood Products $11.5 $12.1 $15.0 $15.8
Soy Complex $5.9 $12.2 $8.1 $16.7
Top Supporting Sectors
Other Ag Related N/A $72.0 N/A $92.1
Business Services N/A $32.2 N/A $43.6
Real Estate N/A $29.7 N/A $41.6
Financial Services N/A $22.9 N/A $31.6
Wholesale Trade N/A $20.5 N/A $27.9
-------------------------------------------------
Total Estimated Impacts
Business Activity $271.2 $833.1 $365.2 $1,104.1
Employment (# of Jobs) 2,366 4,478 3,104 6,004
----------------------------------------------------------------------------------------------------------------
Assumptions for increased exports are based upon the U.S. International Trade Commission Report entitled U.S.
Agricultural Sales to Cuba: Certain Economic Effects of U.S. Restrictions, USITC Publication 3932, July 2007.
USITC estimates of the percentage changes for 2006 baseline exports were applied to 2009 exports. The actual
USITC estimated dollar value of exports was used for rice, dairy products, beef, seafood and wood products.
Other Food and Ag Products include fresh horticultural products, cotton, livestock, and seeds for planting.
Note: for supporting sectors, there are no exports resulting in N/A for those export values.
Economic Impacts of Removing Financial Constraints and Allowing Travel
to Cuba
There are some additional economic benefits of allowing increased
travel, while simultaneously removing financial constraints on U.S.
exports to Cuba. U.S. exports are estimated to rise by $365.2 million/
year, while the total economic impact would be $1.1 billion, requiring
6,004 new jobs (table 2).
As in the previous analyses, most of the major gains in business
activity would occur for food products and processed foods ($300.5
million), grains ($134.7 million), dairy ($57.8 million), poultry ($40
million), beef/pork ($25.9 million), forestry ($23.3 million), seafood
($15.8 million), the soy complex ($16.9 million), and animal feeds
($13.3 million).
Major gains in business activity would also occur for non-export
sectors as well. Other agriculture would require $92 million, followed
by petroleum ($48.3 million), business services ($43.6 million), real
estate ($41.6 million), finance ($31.6 million), wholesale trade ($27.9
million), food, drink and retail ($32.4 million), transportation ($18.4
million), health care ($17.8 million), food processing ($11.3 million)
and forestry ($9.2 million).
Employment occurring in non-export sectors would be expected to
increase by 2,864 jobs. Major gains in employment would occur for other
agriculture (857), business services (339), food, drink and retail
(326), health care (196), real estate (172), finance (131), wholesale
trade (143), and transportation (114). All other sectors would require
536 jobs to support additional exports to Cuba.
Summary and Conclusions
If H.R. 4645, the Travel Restriction Reform and Export Enhancement
Act, is implemented as proposed, it is estimated that it would have
substantial positive economic impacts on the U.S. economy. Exports to
Cuba would increase by $365 million/year and would support $739 million
in additional business activity for a total economic impact of $1.1
billion, requiring 6,000 new jobs. While there are major economic gains
for U.S. agriculture, there are also important economic gains for non-
agricultural sectors such as business services, financial institutions,
real estate, wholesale and retail trade, petroleum and health care
services.
If only the travel restrictions are removed, it is estimated that
U.S. exports would increase by $48.4 million/year in the short run and
by $336 million/year over the long run, requiring 5,456 new jobs.
Alternatively, if only the payment and financial restrictions are
modified, U.S. exports are estimated to increase by $271.2 million/
year, requiring an additional $561.9 million in business activity for a
total economic impact of $833.1 million and supporting 4,478 new jobs.
The results of these analyses indicate that U.S. agricultural
producers, input suppliers, agribusiness firms, food processors,
business services suppliers, the financial sector, real estate, health
care, oil, gas and petroleum suppliers, transportation companies, trade
facilitators, and port authorities in many parts of the United States
can expect additional economic gains if H.R. 4645 is implemented and
U.S. exports to Cuba expand. Improved access to the Cuban market is
more important now that new competition has emerged and the U.S. market
share is threatened, especially for dominant U.S. products such as
soybean meal, corn, wheat, rice, poultry and dry milk. Increased access
for U.S. travelers is also important for stimulating demand for U.S.
foods in Cuba over the next few years as economic recovery occurs and
U.S. firms become better positioned to respond to global market
opportunities.
For further information, please contact Parr Rosson, Extension
Economist and Director, Center for North American Studies, Department
of Agricultural Economics, Texas A&M University, College Station,
Texas. Tel: [Redacted] or E-mail: [Redacted]. http://cnas.tamu.edu.
______
Submitted Report by AgriLIFE Research, Texas A&M University
Tourism and Agriculture in Cuba
March 22, 2010
Introduction
The economic impacts of increased travel and spending by U.S.
visitors to Cuba are documented in Estimated Economic Impacts of the
Travel Restriction Reform and Export Enhancement Act of 2010 by the
Center for North American Studies, Texas AgriLife Research, Texas A&M
University, which was submitted for the record to the House Committee
on Agriculture, United States House of Representatives, March 11, 2010
on H.R. 4645, the Travel Restriction Reform and Export Enhancement Act.
The following comments are submitted as a supplement to that report.
Travel and Tourism in Cuba
A record 2.4 million tourists visited Cuba in 2009, spending about
$2.1 billion (ONE). While the potential increases in U.S. food and
agricultural exports to Cuba attributed to open travel were estimated
to range from $48 million (short run) to $336 million/year (long run),
requiring $1.1 billion in total business activity and creating up to
5,500 new jobs, these estimates included only the additional spending
incident to travel by new U.S. visitors to Cuba. What is not included,
and what is more difficult to quantify and estimate, is how much of
these new tourism earnings may be spent by the Cuban Government to
purchase additional U.S. bulk commodities and intermediate agricultural
products intended for local consumption. Such an increase in additional
spending on bulk products would be anticipated not only because Cubans
would increase consumption with additional resources, but because U.S.
suppliers could regain market share lost in 2009-2010 to competitors
who offer credit and extended payment terms to Cuba.
Cuban revenue from tourism was reported to be $2.1 billion in 2009
and was a major source of foreign exchange. It was equivalent to 57
percent of all Cuban merchandise exports in 2009 and 28 percent of the
balance of all services trade for 2007. Further, as Cuban tourism
earnings increased by twenty-eight percent from 2003 to 2008, U.S.
exports grew by 181 percent. As Cuba's earnings from tourism declined
11 percent in 2009, U.S. exports fell by 25 percent. While numerous
other factors also influenced U.S. exports, tourism in Cuba appears to
be one important factor in maintaining a viable export market for U.S.
products.
The following is submitted in response to comments by Members
regarding Cuba's policy allowing Cuban citizens to utilize local
hotels, resorts and other tourist facilities.
Changes implemented by Raul Castro in April 2008 allow Cubans to
stay at local tourist hotels and resorts for the first time since the
early 1990s (Dominican Today and The Washington Post). Most of the four
and five star facilities are out of the price range of many locals who
earn the equivalent of about $20/month. During the low season of 2009
(August), however, many of the two and three star hotels in Varadero,
Cuba's major tourist beach resort area, booked 1 week stays for locals
for a fixed, all inclusive price of $200/week (Global Post).
With about 60 percent of Cubans having access to hard currency,
either from remittances, factory and farm bonuses, or tips, these `new'
tourists are creating additional demand for U.S. food products (Calgary
Herald). Remittances are likely to increase in 2010 as more Cuban-
Americans are allowed to make an unlimited number to visits to
relatives in Cuba, thereby increasing funds available to locals. As
Cubans obtain more hard currency, it is highly likely that the
Government of Cuba will purchase additional high value products from
U.S. exporters to supply the state operated stores that serve the needs
of Cuban consumers. This would assist U.S. exporters to regain market
share lost in 2009-2010.
While many other forces also influence U.S. exports, and cause-
effect may be debatable, there does appear to be an established linkage
between the amount of money Cuba earns from tourists who visit the
island and the amount of food it can afford to import from the United
States and other potential suppliers.
Other economic and non-economic factors influence Cuban food import
purchasing decisions as well. One is foreign exchange earnings from
nickel exports, which declined 58 percent from 2007 to 2010. Nickel
represented about 40 percent of total Cuban merchandise exports in
2008, down from 57 percent in 2007. A second factor is the price
competitiveness of U.S. products, which is affected by the exchange
rate of the U.S. dollar, commodity/supply demand balance and payment/
financing regulations imposed by U.S. law (see above referenced
report). Finally, Cuba may decide that despite the availability of
competitively priced U.S. products, it may be in their best long term
interests to diversify sources of supply.
Agriculture in Cuba
The following is in response to Member questions about soil quality
and the productive capacity of Cuban agriculture.
Cuba has a tropical climate characterized by a dry season
(November-April) and a rainy season (May-October). The annual average
temperature ranges from 75 degrees in the West to 80 degrees in the
East. Humidity averages about 80 percent and average annual rainfall is
52 inches, with about 39 inches falling during the rainy season (Cuba
Weather).
About 50 percent of Cuba's land is classified as agricultural, with
75 percent of that land area in relatively flat to gently rolling
terrain and suitable for tropical and subtropical agricultural
production (USDA). About 76 percent of Cuba's population lives in urban
areas (CIA). According to the Food and Agriculture Organization, about
70 percent of Cuba's arable land has low organic matter content, while
45 percent is characterized by low fertility, 42 percent is eroded and
40 is poorly drained. These soil conditions are attributed to poor land
management, including continuous tillage, overgrazing, lack of
fertilization, and inadequate or improper use of irrigation and
drainage systems.
Cuba's agricultural land is about evenly split between cropland (46
percent) and pasture (54 percent) (USDA). Recently, a large, but so far
undocumented, amount of Cuba's cropland was taken out of permanent crop
production and placed in native, unimproved pasture (USDA). It is
suspected that this was done in an attempt to increase milk production,
which has declined about ten percent since 2003. This occurred as milk
output per cow actually increased 25 percent over the same period
(ONE).
Sugarcane, coffee, tropical fruits (plantains, bananas and
mangoes), roots/tubers, and vegetables/melons accounted for 80 percent
of harvested area in 2008 (ONE). Cereals, primarily rice and corn,
accounted for most of the balance of harvested area. Production of
these cereal crops has declined from about 1.1 million metric tons (mt)
in 2003 to 762,000 mt in 2008 (ONE). Cuba's corn yields averaged about
41 bushels/acre from 2003-2008, about \1/4\ of those obtained by U.S.
corn producers. Cuban rice yields have averaged 2,750 pounds/acre since
2003, less than half the yields obtained in the United States. Soybean
and other oilseeds production are very limited.
Because of poor soil conditions, high humidity, timing and amounts
of rainfall, high insect infestation and lack of pesticide or
biological controls, Cuba's ability to produce grain and oilseed crops
is limited and likely to remain so over the long term. As a result,
Cuba will remain one of the top grain and oilseed product markets in
the Caribbean region provided the economic conditions there are
conducive to market growth and the utilization of imported products.
References
Food and Agriculture Organization of the United Nations. Land
Resources Information Systems in the Caribbean. 2000.
Office of Global Analysis, Foreign Agricultural Service, USDA.
Cuba's Food and Agriculture Situation Report, March 2008.
Oficina Nacional de Estadisticas (ONE). Republic of Cuba, 2008
Series. Located at www.one.cu.
Cuba Weather.org--Weather in Cuba. www.cubaweather.org.
Calgary Herald. Cubans Allowed to Stay at Tourist Hotels. March 31,
2008. www.canada.com/calgaryherald.
Central Intelligence Agency. World Factbook, Cuba. www.cia.gov.
Dominican Today. Cubans Can Stay in Hotels. April 1, 2008.
www.dominicantoday.com.
Global Post. At Cuban Resorts, the End of Tourism Apartheid. August
10, 2009. www.globalpost.com.
The Washington Post. Cuba Repeals Ban on Its Citizens Staying in
Hotels on Island. April 1, 2008.
For further information, please contact Parr Rosson, Extension
Economist and Director, Center for North American Studies, Department
of Agricultural Economics, Texas A&M University, College Station,
Texas. Tel: [Redacted] or E-mail: [Redacted] http://cnas.tamu.edu.
______
Supplementary Material Submitted by Mike Wagner, Owner/Operator, Two
Brooks Farm; Member, Board of Directors, U.S. Rice Producers
Association; on Behalf of USA Rice Federation
March 22, 2010
Hon. Collin C. Peterson, Hon. Frank D. Lucas,
Chairman, Ranking Minority Member,
Committee on Agriculture, Committee on Agriculture,
House of Representatives, House of Representatives,
Washington, D.C.; Washington, D.C.
Dear Chairman Peterson and Ranking Member Lucas,
On behalf of the U.S. Rice Producers Association and USA Rice
Federation, I would like to take this opportunity to clarify and
supplement our responses to a few of the matters discussed at the
hearing to review U.S. agricultural sales to Cuba held on March 11,
2010. The hearing once again reaffirmed the irrationality of our
foreign policy with regard to Cuba.
It was certainly interesting to respond to questions about pending
Free Trade Agreements. One of the major purposes of these agreements is
to eliminate any non-tariff trade barriers enacted by other countries.
Yet the U.S.'s misguided Cuba policy does exactly that against our
own producers. Through the implementation of onerous bureaucratic
requirements we have essentially unilaterally eliminated all U.S. rice
sales to Cuba. We heartily agree with Congressman Moran's point that
this is not an issue regarding trade. Trade is bilateral. This is an
issue about SALES, and our inability to make them because of U.S.
policies.
We disagree with the argument that the several pending Free Trade
Agreements should somehow ``go first'' before rationalizing U.S.
agriculture sales and travel to Cuba. This suggests a false choice
between two desirable policy changes. If anything, changing our trade
and travel policies toward Cuba is EASIER than negotiating and enacting
Free Trade Agreements, since changing our policy toward Cuba requires
only unilateral changes in U.S. policy.
There are a few pertinent points that we would like to further
elucidate. Cuba is a major player in our hemispheric rice trade. In
2004, when Cubans were able to pay for agricultural goods before the
change of title at the Cuban port, the U.S. exported 176,631 metric
tons of rice to Cuba, valued at over $64 million. This amounted to
almost 10% of the total U.S. rice exports in the Western Hemisphere for
that year. Since 2004, U.S. rice sales to Cuba have diminished with the
addition of onerous restrictions on payment. In 2007 and 2008, Cuba
bought more than 650,000 tons of rice annually, less than 2% of which
came from the United States. Cuba is buying an increasing volume of
farm goods from Canada and other U.S. competitors, who offer a high
quality product free of bureaucratic red tape. The U.S. used to be the
principal supplier of rice to Cuba, and our sales have now plummeted to
zero because of self-inflicted wounds to our export sales.
Cuba spent more than $2.5 billion on purchases of agricultural
products in 2008, which represents an increase of more than 50% with
respect to the $1.6 billion of agricultural imports from 2007. Only 16%
of Cuba's imports in 2007 and 2008 were U.S. bulk commodities. Our
inability to provide credit or be a reliable supplier has
disproportionally affected rice as seen in our current non-existent
exports. As rice is a key staple in the Cuban diet, Vietnam has stepped
in and provided credit and reliable rice supplies to the Cuban people,
who number over 11.2 million. As in the earlier grain embargoes, our
competitors benefit most from our unilateral sanctions. The cost of
these sanctions is borne by U.S. farmers and the Cuban people.
Not only does this hurt us economically, but in today's current
worry of climate change many have adapted the mantra of eating locally
produced food. In rice trade with Cuba, we are the locals. Gulf Coast
ports can have rice shipped to Cuba in 3 days, while our competitor
Vietnam takes several weeks. The magnitude of difference in the carbon
footprint of these transactions is vastly different.
I would also note that the 500,000 tons of rice required by Cuba
(or more), represents all of Mississippi's annual rice production-
supporting thousands of Mississippi farm and related jobs.
We would also note the Administration's recently announced trade
strategy to increase exports. Rice could substantially contribute to
this effort, at no cost to the government. A simple change in our
bureaucratic processes could immediately result in millions of dollars
in increased rice and other agricultural sales to Cuba.
ALIMPORT, Cuba's leading food importing agency, has estimated that
Cuba could buy agricultural products from the U.S. valuing upwards of
$21 billion over 5 years if normal trade and no economic embargo
restrictions were in place. This of course would be most significant to
U.S. farmers, processors, exporters, and those in related industries.
It was also raised several times in the hearing that Cuba imports
food and agriculture products through a single desk trading entity--
ALIMPORT. Trading with State Trading Entities is not new. The U.S.
traded agriculture goods with STEs in many other countries in the past,
including Australia, Mexico, the Soviet Union, Vietnam, and many
others. Arguably that engagement helped to drive some centrally
controlled economies toward more open markets, and to encourage the
more open economies to move toward entering into Free Trade Agreements
with the United States. We expect that trading with Cuba can move
toward the same desirable result.
Similarly, we believe that granting American citizens the right to
more freely travel to Cuba will yield positive economic benefits, as
well documented by the U.S. International Trade Commission and more
recent work by Texas A&M University. Enhancing the engagement between
our peoples can have other salutary benefits, as we believe was the
case in the former Soviet Union, its several satellite states, and
other formerly closed countries.
For all of these reasons and those spelled out in our testimony
before the Committee, we continue to strongly support the enactment of
the H.R. 4645 Travel Restriction Reform and Export Enhancement Act.
Thank you again for holding the very timely hearing and for
accepting these comments to supplement the testimony that we provided
at the hearing.
Respectfully Submitted,
______
Supplementary Material Submitted by Jerry McReynolds, President,
National Association of Wheat Growers; Wheat Producer, Woodston, KS
April 8, 2010
Hon. Collin C. Peterson, Hon. Frank D. Lucas,
Chairman, Ranking Minority Member,
Committee on Agriculture, Committee on Agriculture,
House of Representatives, House of Representatives,
Washington, D.C.; Washington, D.C.
Dear Chairman Peterson and Ranking Member Lucas:
Thank you for your interest in the issue of agricultural trade and
travel with Cuba as discussed in the House Agriculture Committee
hearing on March 11, 2010. I appreciated the opportunity to testify on
behalf of the National Association of Wheat Growers (NAWG) regarding
the importance of this issue to growers across the country and would
ask that this additional information be included in the record for the
March 11 hearing.
This letter specifically addresses the question regarding freight
rate differentials on shipments to Cuba from different wheat origins.
As requested, below are some general freight indications that U.S.
Wheat Associates has compiled based on current values and sailing time
for Cuba. Note that values change routinely based on market conditions
such as ship availability and back-haul options. We believe these
numbers speak very clearly as to the competitive advantage of U.S.
wheat growers in shipping to the Cuban market.
------------------------------------------------------------------------
Origin Freight Rate Sailing Time
------------------------------------------------------------------------
Canada/St. Lawrence $48/metric ton 7 days
Argentina $46/metric ton 17 days
U.S. Gulf $26/metric ton 2 days
------------------------------------------------------------------------
I hope this information is helpful and please don't hesitate to
contact me or the staff of NAWG if you have any additional questions
regarding this vital subject.
Thank you again for your work on behalf of U.S. agriculture and we
look forward to continuing the dialogue about this and other issues of
importance to our industry.
Sincerely,