[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
EXAMINING THE STATUS OF U.S. TRADE WITH CUBA AND ITS IMPACT ON ECONOMIC 
                                 GROWTH 

=======================================================================

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON COMMERCE, TRADE,
                        AND CONSUMER PROTECTION

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 27, 2009

                               __________

                           Serial No. 111-32


          Printed for the use of the Committee on Energy and 
                    Commerceenergycommerce.house.gov

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                    COMMITTEE ON ENERGY AND COMMERCE

                 HENRY A. WAXMAN, California, Chairman
JOHN D. DINGELL, Michigan            JOE BARTON, Texas
  Chairman Emeritus                    Ranking Member
EDWARD J. MARKEY, Massachusetts      RALPH M. HALL, Texas
RICK BOUCHER, Virginia               FRED UPTON, Michigan
FRANK PALLONE, Jr., New Jersey       CLIFF STEARNS, Florida
BART GORDON, Tennessee               NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois              ED WHITFIELD, Kentucky
ANNA G. ESHOO, California            JOHN SHIMKUS, Illinois
BART STUPAK, Michigan                JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York             ROY BLUNT, Missouri
GENE GREEN, Texas                    STEVE BUYER, Indiana
DIANA DeGETTE, Colorado              GEORGE RADANOVICH, California
  Vice Chairman                      JOSEPH R. PITTS, Pennsylvania
LOIS CAPPS, California               MARY BONO MACK, California
MICHAEL F. DOYLE, Pennsylvania       GREG WALDEN, Oregon
JANE HARMAN, California              LEE TERRY, Nebraska
TOM ALLEN, Maine                     MIKE ROGERS, Michigan
JAN SCHAKOWSKY, Illinois             SUE WILKINS MYRICK, North Carolina
HILDA L. SOLIS, California           JOHN SULLIVAN, Oklahoma
CHARLES A. GONZALEZ, Texas           TIM MURPHY, Pennsylvania
JAY INSLEE, Washington               MICHAEL C. BURGESS, Texas
TAMMY BALDWIN, Wisconsin             MARSHA BLACKBURN, Tennessee
MIKE ROSS, Arkansas                  PHIL GINGREY, Georgia
ANTHONY D. WEINER, New York          STEVE SCALISE, Louisiana
JIM MATHESON, Utah                   PARKER GRIFFITH, Alabama
G.K. BUTTERFIELD, North Carolina     ROBERT E. LATTA, Ohio
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
DORIS O. MATSUI, California
DONNA CHRISTENSEN, Virgin Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
BETTY SUTTON, Ohio
BRUCE BRALEY, Iowa
PETER WELCH, Vermont
        Subcommittee on Commerce, Trade, and Consumer Protection

                        BOBBY L. RUSH, Illinois
                                  Chairman
JAN SCHAKOWSKY, Illinois             CLIFF STEARNS, Florida
    Vice Chair                            Ranking Member
JOHN P. SARBANES, Maryland           RALPH M. HALL, Texas
BETTY SUTTON, Ohio                   DENNIS HASTERT, Illinois
FRANK PALLONE, Jr., New Jersey       ED WHITFIELD, Kentucky
BART GORDON, Tennessee               CHARLES W. ``CHIP'' PICKERING, 
BART STUPAK, Michigan                    Mississippi
GENE GREEN, Texas                    GEORGE RADANOVICH, California
CHARLES A. GONZALEZ, Texas           JOSEPH R. PITTS, Pennsylvania
ANTHONY D. WEINER, New York          MARY BONO MACK, California
JIM MATHESON, Utah                   LEE TERRY, Nebraska
G.K. BUTTERFIELD, North Carolina     MIKE ROGERS, Michigan
JOHN BARROW, Georgia                 SUE WILKINS MYRICK, North Carolina
DORIS O. MATSUI, California          MICHAEL C. BURGESS, Texas
KATHY CASTOR, Florida
ZACHARY T. SPACE, Ohio
BRUCE BRALEY, Iowa
DIANA DeGETTE, Colorado
JOHN D. DINGELL, Michigan (ex 
    officio)
  


























                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Bobby L. Rush, a Representative in Congress from the State 
  of Illinois, opening statement.................................     1
Hon. George Radanovich, a Representative in Congress from the 
  State of California, opening statement.........................     3
Hon. Phil Gingrey, a Representative in Congress from the State of 
  Georgia, opening statement.....................................     5
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, prepared statement........................    92
Hon. Jim Matheson, a Representative in Congress from the State of 
  Utah, prepared statement.......................................    94
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, prepared statement......................................    95

                               Witnesses

Walter Bastian, Deputy Assistant Secretary for the Western 
  Hemisphere, International Trade Administration, Department of 
  Commerce.......................................................     6
    Prepared statement...........................................     9
Matthew S. Borman, Acting Assistant Secretary for Export 
  Administration, U.S. Department of Commerce....................    11
    Prepared statement...........................................    13
Adrean Scheid Rothkopf, Vice President, Western Hemisphere 
  Affairs, U.S. Chamber of Commerce..............................    28
    Prepared statement...........................................    31
Geoff Thale, Program Director, Washington Office on Latin America    41
    Prepared statement...........................................    43
Kirby Jones, President, U.S.-Cuba Trade Association, and 
  President, Alamar Associates...................................    56
    Prepared statement...........................................    59
Ambassador James C. Cason, President, Center for a Free Cuba.....    72
    Prepared statement...........................................    75


EXAMINING THE STATUS OF U.S. TRADE WITH CUBA AND ITS IMPACT ON ECONOMIC 
                                 GROWTH

                              ----------                              


                         MONDAY, APRIL 27, 2009

              House of Representatives,    
           Subcommittee on Commerce, Trade,
                           and Consumer Protection,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 2:07 p.m., in 
Room 2123, Rayburn House Office Building, Hon. Bobby L. Rush 
[chairman of the subcommittee] Presiding.
    Present: Representatives Rush, Sarbanes, Castor, 
Radanovich, Gingrey and Scalise.
    Staff Present: Angelle Kwemo, Counsel; Christian Tamotsu 
Fjeld, Counsel; Michelle Ash, Counsel; Valerie Baron, Special 
Assistant; Shannon Weinberg, Minority Counsel; Brian 
McCullough, Minority Senior Professional Staff; and Chad Grant, 
Minority Policy Analyst.

 OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Rush. The subcommittee will come to order.
    This is a subcommittee hearing on examining the status of 
U.S. trade with Cuba and its impact on economic growth, and the 
Chair will recognize himself for 5 minutes for the purposes of 
an opening statement.
    I want to thank the members of the subcommittee for 
participating in the first trade hearing on Cuba in the 111th 
Congress. I recently visited Cuba with my colleagues in the 
Congressional Black Caucus. We met with President Raul Castro 
and Chairman Barbara Lee, and I personally met with former Cuba 
President Fidel Castro, along with Congresswoman Julia 
Richardson from California. A lot has been said and written 
about that trip to Cuba and about that meeting.
    Because of travel restrictions, many Americans don't know 
what Cuba has become, but I witnessed a very compelling need to 
call this hearing to assess U.S. trade policies towards Cuba. I 
believe our current policy with Cuba is a failure. We must 
reevaluate our trade policy's impact on both the Cuban and the 
American people.
    I strongly believe that expanding and diversifying our 
exports to Cuba will be beneficial for both countries. Some 
argue the current embargo should be maintained as a political 
tool that has proved to be effective, as was the case with 
South Africa. However, I must say that the current embargo on 
Cuba is not a multilateral embargo, and we are in a different 
political and economic environment today.
    Unilateral sanctions are usually problematic and 
ineffective. Cuba has opened its doors to the entire world, and 
the world has walked steadily in. All nations in the Americas 
except the U.S. have resumed diplomatic relationships with 
Cuba. All of our economic competitors, including China and 
Brazil and Mexico and Japan, Canada and the European Union, are 
currently trading with Cuba.
    Cuba has also made it clear that the same doors are open to 
the U.S., and our policy should not permit American companies 
from doing business with the Cuban people. We are looking for 
new markets to penetrate. Our companies want to compete 
normally, and our unemployed workers want jobs. Now is not the 
time to ignore all the opportunities that are presented to us, 
and I believe that Cuba should be treated like other trading 
partners with similar political and economic and conditions.
    Liberalizing trade with Cuba is not without precedent and 
has already proven beneficial to both the U.S. and the Cuban 
people. In 2000, when I and other Members of Congress voted to 
approve a modest opening of trade, the overall exports from 
Cuba rose from $7 million in 2001 to $404 million in 2004. 
However, I must add the so-called ``cash in advance'' rule 
initiated by the previous administration in 2005 has 
complicated an already difficult process and caused Cuba to cut 
back on its imports from the U.S. Nonetheless, the United 
States has been Cuba's largest supplier of food and 
agricultural products, with almost $2.7 million in total sales.
    Having said all this, I am not naive nor am I blind to 
Cuba's challenges. It is undeniable that Cuba has serious 
political, economic, financial and social problems. Like many 
developing countries, Cuba has many regulatory hurdles. To be 
sure, political and economic reform must be initiated by Havana 
inside Cuba's borders. However, it is also undeniable that some 
progress has been made, and that the embargo in many instances 
has actually increased the suffering of the very people we are 
trying to assist.
    Since the fall of the Berlin wall, approximately 28 nations 
have undergone transitions from Communist regimes. Countries 
that were less isolated from the West achieved more successful 
and prosperous democracies than those that were isolated. I 
believe that Cuba can make a similar transformation if we fully 
engage the island nation in the global economy.
    I commend our President for his leadership in easing the 
current restrictions on Cuba. This is the first step in the 
right direction. I support a more rapid move towards 
normalization of our trading relationships with Cuba. Today's 
hearing is just a beginning in a series of steps that I intend 
to take to do all I can to both open up markets for U.S. 
commerce, especially for small minority and women-owned 
businesses, while also at the same time to help bring liberty 
and prosperity to the Cuban people.
    And I yield back the balance of my time.
    And now I recognize the Ranking Member of this subcommittee 
Congressman Radanovich for 5 minutes for the purposes of 
opening statements.

 OPENING STATEMENT OF HON. GEORGE RADANOVICH, A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Radanovich. Thank you, Mr. Chairman, for calling this 
important hearing to examine our trade relations with Cuba. I 
appreciate it.
    This subcommittee's jurisdiction includes nontariff 
barriers to trade. As we saw in an earlier hearing in the 
subcommittee that examined ways to promote our exports to help 
our economy, increasing our trade exports to revive our economy 
is a path that we should pursue. We manufacture many world-
class goods and services the world will buy if given a chance.
    Today we examine quite a different topic: Cuba and our 
special situation with that country. Our embargo on trade with 
Cuba, except for food and medicine, is a longstanding policy I 
support due to the Castro regime that has been in power for 
over 50 years. President Obama has indicated a desire to go 
down a path to change that policy, including incremental 
changes to permit remittances and travel by Cuban Americans 
back to Cuba to visit their family. Other pundits have 
suggested that we go further to normalize relations.
    I believe that that would be a mistake until the people of 
Cuba are free. If that time comes, I would fully support a 
change in the policy. Our agricultural exports would find a 
receptive market particularly in Cuba where about 80 percent of 
its food supply is imported, and the country would be a natural 
destination for our fruits and vegetables, among other 
products.
    Unfortunately, the tyrannical oppression continues, and to 
pursue trade with Cuba is a major affront to those who have 
given their lives for the freedom of this Caribbean nation. I 
cannot justify in good conscience a change in policy that may 
produce marginal increases at best to our economy, and those 
benefits are quite questionable.
    It is true that the embargo has not yet affected the 
bipartisan policy goal of regime change, but it is equally true 
that foreign investment and normal trade relations with Cuba by 
other developed nations has not produced any change. If we turn 
the blind eye and set aside our leadership as the world's 
promoter of democracy and freedom to follow in the footsteps of 
others, what do we expect will occur?
    Thus far, the Castros have been able to use trade with 
other countries to further their own goals and enrich 
themselves without benefit to the people that they proclaim to 
care so much about. The Castros care so much, they do not 
tolerate political dissident, they suppress free speech and 
limit religious expression, including the establishment of 
religion-based schools. Since they assumed power, religion has 
been suppressed because it was counterrevolutionary. In short, 
a Cuban citizen has limited control over his own being because 
that right has been taken by the Castro brothers.
    In one of the truly humanitarian exchanges after Raul 
Castro took over, Cuban citizens were permitted greater freedom 
to move within their own country. Can anyone here imagine not 
being able to travel freely without borders or send your child 
to a school of your choice? Well, maybe we can imagine that, 
given the administration's recent decision to eliminate school 
vouchers for children in D.C. If you have the money to send 
your children to an elite private school, I guess that you 
don't have to worry about vouchers for others.
    Many would like to see the travel ban to Cuba lifted 
completely from a purely substantive point regarding its effect 
on our economy that will provide little or--would provide 
little to our GDP and may even hurt our own domestic travel 
industry. Let us remember travel and tourism to the United 
States is one of our better exports that generates many jobs. 
Taking steps that would permit a one-way street permitting 
travel to Cuba without reciprocity would adversely hinder our 
balance of trade as we import more tourism. Add to that the 
substitution effect of diverting travel to Cuba that might 
otherwise have flowed to Florida or other domestic 
destinations, and I can only see us losing economically. In 
short, increased travel and tourism may not only hurt our 
domestic tourism industry without benefit to the Cuban people, 
while simultaneously filling the coffers of the Castros.
    Telecommunications is also viewed as a possible avenue to 
export more products, but doing business in Cuba requires a 
joint venture with the Castro government. Whether the net 
effect would be positive is debatable. Certainly other 
countries that do not maintain a trade embargo with Cuba have 
been free to expand their markets in Cuba; however, democracy 
advocates have yet to see the benefits of those ventures. This 
may be due in part to the very limited financial resources of 
the average Cuban citizen and the affordability of 
telecommunication services. Why anyone thinks that this will 
change if a company providing the service as a U.S. company 
rather than their current provider escapes me.
    As long as the Castros maintain a regime which oppresses 
individual freedom, oppresses dissenting political views, and 
expresses hostility towards religious expression, while at the 
same time maintaining a state-controlled economy to the benefit 
of the Castro family and their adherents, further trade 
relations beyond humanitarian aid in the name of making a buck 
is an injustice to the Cuban people and their brave freedom 
advocates.
    Thank you, Mr. Chairman. I yield back.
    Mr. Rush. The Chair now recognizes the fine gentleman from 
Maryland Mr. Sarbanes for 5 minutes for purposes of an opening 
statement.
    Mr. Sarbanes. Thank you, Mr. Chairman. I certainly don't 
need 5 minutes. I am in a learning mode today. I am looking 
forward to the hearing. I appreciate your convening it.
    Obviously the economic embargo on Cuba is a delicate topic. 
It seems to become more delicate every day, and more people are 
coming to the discussion. You have rightly acknowledged the 
human rights concerns that exist, but you also noted the 
arguments for modifying or even eliminating that embargo, and I 
am looking forward to hearing the discussion today.
    I yield back my time. Thank you.
    Mr. Rush. The Chair now recognizes my friend and gentleman 
from Georgia Dr. Gingrey for 5 minutes.

  OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF GEORGIA

    Dr. Gingrey. Mr. Chairman, thank you. I want to thank you 
for calling the hearing today on this important issue of the 
current trade embargo with Cuba and its economic impact on our 
country.
    In the face of our current economic struggles, our 
responsibility is to bolster the United States economy by 
expanding trade in a fair and open way that creates jobs 
domestically. And, of course, we look for every opportunity to 
do that. However, trade policy is not just economic, as we all 
know, but, of course, it is also foreign policy.
    In the case of Cuba, the lure of trade with the United 
States must be heavily conditioned on the improvement of human 
rights in that country. In fact, the oppressive Communist 
Castro regime has a widespread history of human rights 
violations and is currently listed as a state sponsor of 
terrorism by our State Department. Therefore, I have supported, 
and I will continue to support, the embargo. And I do not 
believe that the United States should lift this embargo until, 
until Cuba makes significant reforms that expand freedom and 
civil liberties for its citizens.
    Over the past decade, there have been some concessions that 
have been made for humanitarian purposes, including remittances 
for family members of Cuban Americans as well as restricted 
travel for immediate family. Most recently the Fiscal Year 2009 
Omnibus Appropriations Act made some more modifications to 
existing travel restrictions, and the Obama administration has 
called for additional changes to remittances. But these need to 
be closely monitored so that they benefit the people of Cuba 
and not just the Castros and the Castro government.
    In the nearly 50 years that this embargo has been in place, 
there is one question that remains: Will Cuba trade with the 
United States improve political and economic conditions for the 
Cuban citizens, or will it simply reward and endorse the 
oppressive Communist government run by both Fidel and Raul 
Castro?
    In the intervening time, we have seen a number of our 
allies in the Western Hemisphere--this has been said by the 
Chairman and Ranking Member--and Europe as well openly trade 
with Cuba, yet Cuba has made very little improvement in human 
rights conditions despite this open trade. For these reasons, I 
believe the Federal Government, and this subcommittee in 
particular, needs to proceed very cautiously as we hear 
testimony today and we debate future ramifications of trade 
with Cuba.
    I look forward to hearing from both panel of witnesses, and 
at this time I yield back the balance of my time, Mr. Chairman, 
and I look forward to having an opportunity to question the 
witnesses.
    Mr. Rush. The Chair certainly thanks the gentleman from 
Georgia.
    And now it is my pleasure and honor to welcome to this 
committee's hearing two fine public servants, both who are 
employees of the Department of Commerce. The one, Mr. Walter 
Bastian, is a Deputy Assistant Secretary for the Western 
Hemisphere, International Trade Administration.
    Mr. Bastian, I want to welcome you, and I want to thank you 
for appearing before this subcommittee and taking time out from 
your busy schedule to share your thoughts with us.
    Our next witness on this first panel is Mr. Matthew Borman, 
a fine gentleman from the Department of Commerce Bureau of 
Industry and Security. His former title is the Acting Assistant 
Secretary for Export Administration.
    Mr. Borman, again, my thoughts are certainly gracious, and 
we want to thank you so much for being here and participating 
in this hearing.
    We would ask, if you will--it has been a new policy on this 
subcommittee that you be sworn in for the purposes of giving an 
opening statement and participating in the hearing. So would 
you please raise your right hand--stand and raise your right 
hand.
    [Witnesses sworn.]
    Mr. Rush. Please take your seats.
    Please let the record reflect that all of the witnesses 
there answered in the affirmative.
    Mr. Bastian, we would ask that you provide us with an 
opening statement, and you can restrict your statement, if you 
will, to 5 minutes. I would say more or less 5 minutes. Thank 
you.

TESTIMONY OF WALTER BASTIAN, DEPUTY ASSISTANT SECRETARY FOR THE 
    WESTERN HEMISPHERE, INTERNATIONAL TRADE ADMINISTRATION, 
DEPARTMENT OF COMMERCE; AND MATTHEW S. BORMAN, ACTING ASSISTANT 
    SECRETARY FOR EXPORT ADMINISTRATION, U.S. DEPARTMENT OF 
                            COMMERCE

                  TESTIMONY OF WALTER BASTIAN

    Mr. Bastian. Thank you, Mr. Chairman.
    Chairman Rush, Ranking Member Radanovich----
    Mr. Rush. And please pull the mic towards you, if you will, 
and----
    Mr. Bastian. Sorry. There we go.
    Chairman Rush, Ranking Member Radanovich and distinguished 
members of the committee, thank you for the opportunity to 
speak with you today concerning recent events in our 
relationship with Cuba. I welcome your interest in this topic.
    Today's hearing is entitled ``Examining the Status of U.S. 
Trade with Cuba and Its Impact on Economic Growth,'' but I can 
imagine that the interests of committee members extend not only 
to that subject, but also the President's recent statements 
regarding his beliefs that we can move the U.S.-Cuba relations 
in a new direction. It is my hope that Members will take no 
offense if I do not take this opportunity to expand upon nor to 
interpret the words and messages that the President so capably 
laid out during the successful Summit of the Americas in 
Trinidad and Tobago.
    We meet at a fluid moment in U.S. policy, and, as members 
of this committee know, setting U.S. policy towards Cuba is not 
within the province of the Department of Commerce.
    On April 13th of this year, the President directed the 
Secretaries of Commerce, Treasury and State to take actions 
necessary to lift restrictions on family visits to Cuba, remove 
restrictions on remittances to family members, authorize 
greater telecommunications links with Cuba, and expand the 
scope of humanitarian donations eligible for export. These 
changes in our Cuba policy are designed to encourage greater 
contact between family members, ease the flow of remittances to 
Cuban families, and promote the flow of information to the 
Cuban people.
    The Bureau of Industry and Security, BIS, at the Department 
of Commerce and Treasury's Office of Foreign Assets Control, 
OFAC, are hard at work implementing these policy changes. My 
colleague from the Bureau of Industry and Security will discuss 
these changes in more detail in his testimony.
    Reaching out to the Cuban people in this way is a 
demonstration of our interest in sending our relations with 
Cuba on a more productive and positive course. The actions we 
are taking will directly benefit the well-being of Cuban 
citizens and will remove barriers between families in both 
countries.
    Mr. Chairman, I understand that you recently returned from 
a visit to the island, and that you, as well as a number of 
your colleagues, are interested in greater commercial 
interchange with Cuba. As you know, the United States maintains 
extensive legal restrictions on the ability of U.S. firms to 
trade with Cuba. The President has indicated his belief that 
the embargo should remain in place as a source of leverage for 
positive change in Cuba.
    I will very briefly delineate the mix of legislation that 
governs our trade relations with Cuba. The United States 
maintains a comprehensive trade embargo with respect to Cuba 
under numerous laws. That embargo was first announced by 
President Kennedy in Presidential Proclamation 3447 in 1962, 
under the authority of the Foreign Assistance Act of 1961. 
Implementing regulations issued by the Department of Commerce 
and the Department of Treasury to carry out the trade embargo 
on Cuba relied on general authorities of the Export Control Act 
of 1949 and the Trading With the Enemy Act. The trade embargo 
in Cuba has been further shaped over the years by various 
pieces of legislation, including the Export Administration Act 
of 1979; the Cuban Democracy Act of 1992; and the Cuban Liberty 
and Democratic Solidarity, otherwise Libertad, Act of 1996; and 
the Trade Sanctions Reform and Export Enhancement Act, TSRA, of 
2000.
    TSRA limits Congress' ability to promote and support U.S.-
Cuba trade. Under TSRA, the Department is prohibited from 
providing the routine export assistance to U.S. exporters to 
Cuba that our U.S. and Foreign Commercial Service regularly 
provides to other U.S. firms. Despite the broad restrictions on 
trade with Cuba, U.S. producers exported more than $700 million 
in agricultural goods to Cuba in 2008, making the U.S. the 
largest source of food to Cuba, and making us Cuba's fifth 
largest trading partner.
    Conclusion. President Obama indicated at the Summit of the 
Americas that the United States seeks a new beginning in its 
relations with Cuba. The measures announced on April 13th were 
intended as a signal to the people of Cuba and to the 
Government of Cuba that the United States is prepared to pursue 
policies that will strengthen the ties between the people in 
our countries and bolster progress towards a free and 
democratic Cuba.
    Thank you, Mr. Chairman. I am pleased to answer any 
questions that you or the other members of the committee may 
have.
    Mr. Rush. Thank you, Mr. Bastian.
    [The prepared statement of Mr. Bastian follows:]
  
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Rush. And now I'll recognize Mr. Borman for 5 minutes, 
more or less.

                 TESTIMONY OF MATTHEW S. BORMAN

    Mr. Borman. Thank you, Mr. Chairman.
    Mr. Chairman, Ranking Member Radanovich and distinguished 
members of the subcommittee, I would also appreciate the 
opportunity to appear before the subcommittee today to discuss 
the Bureau of Industry and Security's role in implementing the 
U.S. Trade embargo on Cuba. I also ask that my written 
statement be included in the record.
    Mr. Rush. So ordered.
    Mr. Borman. As my colleague Mr. Bastian has already 
outlined, there are a welter of laws and regulations that 
govern our trade with Cuba, and I won't enumerate them again. I 
would point out in particular the Libertad Act, among other 
things, codifies the trade embargo on Cuba, and it requires 
that the embargo would remain in effect unless certain 
conditions are met, most notably either there is a transition 
government in place, or there has already been a democratically 
elected government. So the Libertad Act codifies much of the 
current embargo.
    Having said that, of course, though, the President and all 
Presidents retain some discretion to make exceptions to the 
embargo. And as a result of that, that discretionary authority, 
the Commerce Department has the authority to issue licenses for 
particular transactions or general authorizations for 
particular types of transactions under certain conditions. And 
as Mr. Bastian has already noted, the Bureau of Industry and 
Security regulates the export of commodities, software and 
technology to Cuba, while the Office of Foreign Assets Control, 
Department of Treasury, regulates all transactions with Cuba, 
including the financing related to exports. So we at BIS handle 
things going to Cuba, and Treasury handles essentially 
everything else, all other interactions between the U.S. and 
Cuba. We do ours through the Export Administration regulations. 
Treasury has a separate set of their own regulations.
    Now, pursuant to the laws and regulations, almost 
everything in the U.S. economy needs a license and individual 
authorization to go to Cuba, and there is currently a general 
policy of denial for most items going to Cuba under the 
existing embargo. Notwithstanding the general policy of denial, 
however, in 2008, we at BIS processed 358 applications for 
licenses to export to Cuba. And of those 358 applications, 235 
were approved, 114 were returned without action, and 8-9 were 
denied. The total dollar value of those approved licenses was 
about $1\1/2\ billion.
    And in addition to those individual licenses, we also 
processed 151 notices of agricultural exports to Cuba. This is 
a particular license exception we have implemented pursuant to 
the Trade Sanctions Reform Act, or TSRA, as we call it. Of 
those 151 that we processed last year, 143 were approved, and 
they were worth about $3.2 billion, and the remaining 8 were 
returned without action. So those were the authorizations that 
we at BIS authorized individually and under the TSRA exemption.
    One other thing I would point out is that these 
authorizations include about $95 million of exports that we 
authorized in the last quarter of 2008 for hurricane relief 
specifically, and we did those in an average processing time of 
5 days, which, as you can imagine in a government bureaucracy, 
is quite fast.
    Mr. Rush. I am quite impressed.
    Mr. Borman. Now we are worried about the pending revisions 
to our regulations at BIS, based on the President's 
announcement. As Mr. Bastian noted, the President directed the 
Secretary of Commerce in particular to further expand the scope 
of the license exception; that is, the general authorization 
regarding gifts, gift parcels to Cuba. A wider variety of items 
will become available to be included in the gift parcels. The 
dollar value for the gift parcels will go up from $400 to $800. 
And the universe of recipients will be expanded, although there 
will still be no gift parcels permitted to either high 
government officials, Communist Party members, or institutions 
or organizations controlled by either the government or the 
party.
    We will also establish a new license exception for consumer 
communications devices, cell phones, satellite phones, personal 
digital assistance, digital camera, again to further the free 
flow of information between the United States and the Cuban 
people and among the Cuban people.
    And the last change that we will implement as a result of 
the President's decision is to lift the personal baggage 
limitation. Currently there is a limit of 44 pounds per person 
to take with them to Cuba. When we finalize our regulation 
implementing the President's directive, that limitation will be 
removed. So that is what we are doing to implement the 
President's directive.
    In conclusion, I would just say again that what we do is 
largely governed by statute as well as regulations, and we 
continue to work with our interagency partners, principally the 
State Department, in this area to implement the President's 
directive to meet the basic human needs of the Cuban people and 
facilitate contacts between the American people and the Cuban 
people.
    And with that I conclude my oral statement, and also I am 
happy to answer questions.
    [The prepared statement of Mr. Borman follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Rush. The Chair thanks the gentleman, and indeed the 
Chair thanks both of the witnesses for their fine statements.
    The Chair now recognizes himself for 5 minutes for the 
purposes of questioning these witnesses.
    Because of Cuba's--let me restart that. Because of the 
U.S.'s unilateral embargo, we sometimes assume Cuba's economy 
is cut off from the world. That has certainly not been the 
case, from my understanding. Investors from all over the world 
are offering joint ventures in Cuba. Countries like Venezuela, 
Brazil, China, Vietnam extend credit to Cuba. And indeed, a 
Spanish company is leading an effort to drill for oil in Cuba's 
territorial waters this year, if I am not mistaken. And I 
believe that the American companies should be afforded the same 
investment opportunities in Cuba.
    Let me ask both of the witnesses, what do you foresee 
happening if the U.S. normalizes its trade relations with Cuba? 
Can you indicate what markets would be ripe for entry in the 
U.S.--for the U.S.? What markets are there that American 
companies might be able to penetrate most readily and most 
thoroughly if, in fact, we were to normalize trade 
relationships?
    Mr. Bastian, would you please begin?
    Mr. Bastian. Thank you, Mr. Chairman.
    As you might imagine, we don't have an awful lot of 
information on the specific needs of Cuba insofar as business 
is concerned. We don't share information with our trading 
partners, other trading partners, principally because we don't 
trade with Cuba to begin with. But I think it is a pretty safe 
assumption to say that in the areas of infrastructure, I think 
we have already covered as an example briefly 
telecommunication. But I think if you took a look at general 
infrastructure, transportation equipment, port-handling 
equipment, things of that nature, ports, railroads, airplanes, 
things of that nature, they could offer some significant, 
probably, opportunity to U.S. business, certainly things that 
we would be taking a look at.
    But keep in mind also that at the moment we do--we are the 
fifth largest supplier to Cuba of product; not manufactured 
goods necessarily, except maybe some in the medical field, but 
basically agricultural goods. But I think if we took a look 
initially at those sectors, how do you move goods across the 
island to reach the Cuban people, I think those would be 
essential to look at.
    Mr. Rush. Mr. Borman.
    Mr. Borman. In addition to what Mr. Bastian said, I think 
based on the data available to us, some of the other areas that 
would have some potential would be food processing, handling 
distribution. And as he said, in the medical area last year we 
licensed about 47 individual transactions for medical sales to 
Cuba worth about $64 million. So I think that would be another 
area.
    Mr. Rush. Do you have an estimate for the lost business 
opportunities that have occurred as a result of the embargo? 
How many U.S.--how many business opportunities has U.S. 
companies lost as a result of the embargo? Have you got an 
estimate?
    Mr. Bastian. Mr. Chairman, I think the really short answer 
is no, we don't. Again, we clearly are not approached by U.S. 
companies that are--you know, that said, I could have sold so 
much to Cuba that we have not gotten. So I think you could 
probably take a look at maybe--there was a really old study 
done, I think, by the ITC back in about--I think around 2001, 
in that timeframe there. But the data, of course, in that case 
is 8 years old, but it might give you an indication. But beyond 
that, I am not aware of any information that is out there that 
talks about sales foregone.
    Mr. Rush. OK. Mr. Borman.
    Mr. Borman. I don't have any other information on that, Mr. 
Chairman.
    Mr. Rush. All right. If the embargo were lifted, what do 
you believe would be the impact in Cuba when the Cuban people 
see a difference in their daily lives if the Cuban Government 
still controls the distribution of goods? And secondly, how can 
we be assured that the Cuban Government will grant the 
appropriate licenses and other authorizations to American 
companies to do business? Do you have any information? Can you 
help us along with--in answering those questions? Mr. Bastian?
    Mr. Bastian. Thank you, Mr. Chairman.
    Speculation is very difficult and sometimes a pretty 
dangerous thing to get into, but I think it did mention 
something that is absolutely key, and that is this is a two-way 
street. The President, as an example, has announced some 
measures, is interested in pursuing those, and what we need to 
do is find basically a partner for that dance that will make--
show a willingness to continue this course of action. I think 
that would probably be my response.
    Mr. Borman. The only thing I would add to that, obviously a 
lot of the impact would be dependent upon the funds available 
to the Cuban people to actually purchase U.S. goods on a 
commercial basis. So that is a bit unknown at this point.
    Mr. Rush. OK. My time is up. And now I will yield for the 
purposes of questioning 5 minutes to the Ranking Member.
    Mr. Radanovich. Thank you, Mr. Chairman.
    And again, welcome to the subcommittee.
    Mr. Bastian, I wanted to--I just noticed in your testimony 
on the amount of agricultural exports that occurred in trade 
between the U.S. and Cuba in 2008 was $700 million. Can you 
give me an idea how much that might be--that amount might be 
due to an increase in commodity prices? As you will recall, 
last year some of those export prices were rather high.
    Mr. Bastian. I don't have the exact number off the top of 
my head. I will get it for you. But I think that you are 
absolutely right, because it was a significant jump in dollar 
amount over the last couple of years, due in large measure to 
commodity prices.
    Mr. Radanovich. If there were a way to get the information 
to the committee to measure increase in exports in something 
other than dollars----
    Mr. Bastian. I understand, sir. We will get that back to 
you.
    Mr. Radanovich. All right. Thank you.
    Also, the Castro regime confiscated many businesses and 
took intellectual properties such as trademarks when they took 
over power, and claim they now--claim that they now own those 
properties. How does the U.S. address trade policy with 
countries that don't honor property rights?
    Mr. Bastian. I do believe that that is a question that 
really does need to be directed to State Department on that.
    If I might, you do bring an interesting point, which is 
lifting the restrictions on Cuba on trade is part of what needs 
to be done. I think the other part of the things you referred 
to, I think you mentioned in the beginning an interest in 
nontariff barriers, and I think there is a whole host of issues 
that we need to take a look at if we are going to get the 
maximum benefit for U.S. companies.
    Mr. Radanovich. Perhaps you can ask this. I would like to 
ask it. How should we deal with Cuba regarding our companies' 
intellectual property, given the profits Cuba has made selling 
confiscated property of former Cuban companies, usually in the 
form of rum or cigars?
    Mr. Bastian. I think we would have to take a real hard look 
at that. And these are some of the issues, among others, that 
we would have to take a look at and get resolution to it, I 
think, before we can move forward.
    It also brings up the whole question of intellectual 
property, about the security for, you know, potential future 
investors in the island. There are a host of issues that we 
need to take a look at, the ones that you deal with.
    Mr. Radanovich. Thank you, Mr. Bastian.
    Mr. Borman, the BIS is working on a regulatory change to 
implement the directive to permit license exemptions for 
donations of personal communications devices to Cuban citizens, 
but not to the Cuban Government. How can we ensure that the 
donations are not confiscated or redirected to the government?
    Mr. Borman. Well, that really will depend on the knowledge 
people have of the individuals getting it and then various ways 
of feedback we have. You know, we don't have a way to go and 
necessarily check on the individual items once they are there, 
but there are a variety of other information sources we have 
that will help us assess that.
    Mr. Radanovich. OK. Have you defined what a personal 
communications device is?
    Mr. Borman. Yes. It is something that is really a retail 
sale. So, as I mentioned, it is things like personal digital 
assistance, mobile phone, satellite phones, laptop, desktop 
computers, digital cameras. Certainly nothing above a personal 
consumer level, nothing that businesses or governments would 
really use in any significant way.
    Mr. Radanovich. OK. About one-third of license applications 
that you received in 2008 were returned without action. Why 
were the applications returned?
    Mr. Borman. For one of two reasons. In some cases the 
licenses were not actually needed. There is a narrow strata of 
items like agricultural exports that we don't need an 
individual license. And the other group would be ones that 
there are simply not enough information on. So, for example, 
the license application, there is just not enough information 
on the proposed end user in Cuba for the U.S. Government to 
make an informed decision. And so we return that saying 
essentially you can't ship unless you come in and give us more 
information.
    Mr. Radanovich. Mr. Bastian, one last question. As long as 
the embargo is the official U.S. policy, where do the companies 
that are permitted to export agriculture and medical products 
receive export assistance?
    Mr. Bastian. They don't. We are talking about sales of 
agricultural commodities, which is basically cash in advance 
from Cuba.
    Mr. Radanovich. Thank you very much.
    I yield back the balance of my time.
    Mr. Rush. The Chair thanks the gentleman.
    The Chair now recognizes the gentleman from Maryland Mr. 
Sarbanes for 5 minutes.
    Mr. Sarbanes. Thank you, Mr. Chairman.
    Mr. Rush. We will allow you 5 minutes.
    Mr. Sarbanes. Thank you.
    I guess the U.S. embargo is the most restrictive trade 
embargo on Cuba in the world, right?
    Mr. Borman. Well, we do have fairly restrictive trade 
policies in some other countries, Iran, Syria, North Korea.
    Mr. Sarbanes. No, but, I mean, there is no other country in 
terms of imposing an embargo against Cuba that comes near to 
what----
    Mr. Borman. Compared to other countries.
    Mr. Sarbanes. Right.
    What is the next most restrictive trade policy imposed on 
Cuba by another country that you would--is there any----
    Mr. Bastian. I don't know.
    Mr. Sarbanes. OK.
    Mr. Borman. Yes, I am not aware of what other countries' 
policies are.
    Mr. Sarbanes. We have talked about this distinction between 
the government and the people and steps that can be taken to 
try to ease some of the--or promote more interaction with the 
people of Cuba as opposed to with the government, which is 
tricky. It is tricky when we try to make that distinction in a 
lot of places, and I can think of a number of other examples. 
But are there--and some of this has to do with just allowing 
dollars and resources to flow straight to residents of Cuba. 
But are there--is there any kind of NGO infrastructure or other 
ways of getting resources to the people as opposed to the 
government? And after you comment on that, could you describe 
the impediments that the government might present to having 
that happen?
    Mr. Borman. Well, certainly on the NGO side there are some 
NGOs that have a fairly established track record of operating 
with Cuba. In fact, particularly on the medical side, the 
medical donations we authorize are really through those 
organizations.
    And I suppose there is always a possibility that the 
government will decide to do things differently, but I think 
there is enough information flow in and out of Cuba that it 
will be fairly apparent if the government decides to do things 
in a more restrictive way than they are currently doing in 
terms of letting those NGOs receive things from donors in the 
U.S. and distribute them directly to the people.
    Mr. Sarbanes. Are there restrictions on the NGO activity 
that you know of now that exists, that where if they ease 
those, that would be kind of the leading indicator that the 
government is dealing in a different way with that kind of 
humanitarian assistance and other assistance?
    Mr. Borman. That I don't have an answer to, but we can 
check on that and get back to you on that.
    Mr. Sarbanes. OK. I appreciate it.
    And the steps that the President took or asked people to 
take just recently in terms of lifting certain restrictions, 
are any of those ones that had been eased in the past and then 
tightened again, or would you view them all as new in either 
kind or degree?
    Mr. Borman. On the gift parcels and the baggage, those were 
effectively changes to tightenings that were made in the 
previous administration. The donations of consumer 
communication devices, that is a new license exception.
    Mr. Sarbanes. OK. Thank you.
    I yield back my time.
    Mr. Rush. The Chair thanks the gentleman.
    Now the Chair recognizes the gentleman from Georgia Dr. 
Gingrey for 5 minutes.
    Dr. Gingrey. Mr. Chairman, I thank you.
    You know, we are going to hear from the second panel in a 
few minutes, and I was just reading the testimony from the 
United States Chamber of Commerce, and a statement is made, and 
their conclusion, regarding the embargo that has been going on 
for the past 50 years: Instead of isolating Cuba from the rest 
of the world, it has isolated the United States from our 
allies. The Cuban dictatorship could never have withstood five 
decades of free trade, free markets and free enterprise. That 
is a conjecture and stated pretty strongly.
    I also want, Mr. Chairman, to read a recent--or from a 
recent press release that the Diaz-Balart brothers, Lincoln and 
Mario, who represent the Cuban American community mainly in and 
around Miami. And they were talking about something that 
President Obama said during his inaugural address on January 
20th. And let me quote from President Obama: To those who cling 
to power through corruption and deceit and the silencing of 
dissent, know that you are on the wrong side of history, but 
that we will extend a hand if you are willing to unclench the 
fist. And that ends the quote.
    The United States policy of state says, the liberation of 
all political prisoners, the legalization of all political 
parties, independent labor unions and the press, and the 
scheduling of free internationally supervised elections is what 
we treasure in the United States law in regard to dealing with 
a country like Cuba.
    Let me ask Mr. Bastian first. The Castro regime confiscated 
many businesses and their intellectual properties, such as 
trademarks, when they took over power and claim they now own 
those properties. Now, for those who would say, well, we are 
trading with China, and this is a Communist regime, I don't 
know that China has ever taken over or confiscated any American 
property, U.S. property, and done what Cuba did shortly after 
the Castros took over.
    How does the United States address trade policy with 
countries that do not honor property rights? How should we deal 
with Cuba regarding our companies' intellectual property given 
the profits Cuba has made selling confiscated property of 
former Cuban companies?
    Mr. Bastian.
    Mr. Bastian. Thank you, Congressman.
    I think this is something that we tried to refer to 
earlier, and these are some of the issues that we absolutely 
need to get resolved. And we are familiar with the issues or 
the specific examples, I think, that you were alluding to. So 
these are the type of issues--I think this is what--it is quite 
a step. It is a long step from saying, OK, we are going to do 
this, we are going to establish these commercial relations with 
Cuba and make it reciprocal, and then clean up a lot of these 
issues we have to deal with and a lot of pressure to do that.
    Dr. Gingrey. Obviously it is complicated.
    Let me quickly ask Mr. Borman, BIS is working on a 
regulatory change to implement the directive to permit license 
exceptions for donations of personal communication devices to 
Cuban citizens, but not to the Cuban Government. How do we 
ensure that those donations are not confiscated or redirected 
to the government? Why do they fall under the personal 
communication device definition?
    Mr. Borman. Well, again, because these will be donated 
often by relatives, I think. It will become very quickly 
apparent if the Cuban Government changes its current policy and 
starts confiscating these types of things from individuals, and 
we have the flexibility in our regulatory scheme to change that 
if it turned out that was the case.
    Dr. Gingrey. Well, I am about to run out of my time, Mr. 
Chairman, but I would just say that I agree with President 
Obama and the statement that he made at his inauguration. We 
need to see an unclenched fist, and I don't think that we are 
seeing that. And this business of saying, well, we are the only 
country; all the other Western Hemispheric countries are 
trading and getting this economic advantage by trading with 
Cuba. That is trying to say, well, the end justifies the means. 
And, you know, I think we have got a matter of principle here, 
and I do agree with the Diaz-Balart brothers and Ileana Ros-
Lehtinen and others who represent Cuban Americans who suffered 
and their families who continue to suffer under this brutal 
Communist dictatorship 90 miles from our shore.
    Mr. Rush. The Chair thanks the gentleman.
    And the Chair now recognizes the gentlelady from Florida 
Ms. Castor for 5 minutes of questioning of the witness.
    Ms. Castor. Thank you, Mr. Chairman. Thank you very much 
for holding this very timely hearing, and thanks for--thanks to 
our witnessing for appearing today.
    I represent the Tampa Bay area in Florida. My hometown of 
Tampa has extensive historic family and economic ties to Cuba. 
Prior to the revolution, there was very robust trade and 
travel. There were ferries that ran from the port of Tampa to 
Cuba. Cattle shipments left the port of Tampa, and many other 
agricultural products. So the Tampa area has a great interest 
in modernizing the relationship, and President Obama's 
announcement was greeted with great enthusiasm by Cuban 
American families in my hometown and across the State.
    Travel agents now are absolutely overwhelmed. They don't 
know--they can't keep up with the requests from family members 
to travel, and the bureaucratic barrier that was previously in 
place was really a shame. My office deals with these--the 
family travel requests on a routine basis, and the stories of 
dying grandparents, where family members now would like to go 
see them--I had one case of a bone marrow transplant. The 
only--the sister was in the United States; the brother was 
there. She was the only match, and she had to go through all 
these bureaucratic hurdles to get there.
    But there is another bureaucratic hurdle in place now, and 
I hope that you all can help. Currently there are only three 
airports in the United States that can--that are permitted to 
service charter flights or any air flight--any air travel: 
Miami, New York and L.A. Meanwhile, central Florida probably 
has the highest population of Cuban Americans outside Miami. 
And we have requested the Treasury and Commerce to help us 
quickly with getting another airport, Tampa International or 
some of the others, approved on an expeditious basis. Can you 
help?
    I know this is an OFAC issue, but it seems to be directly 
consistent with President Obama's direction. The problem is 
that these families really shouldn't be subjected to a longer 
waiting period or additional cost having to travel to Miami 
just to get to the island.
    Mr. Borman. We are in receipt of your letter to Secretary 
Locke. And after looking at it, it has become apparent to us 
that it is really the Department of Homeland Security Customs 
and Border Protection Unit that has the principal 
responsibilities. So we have already reached out to them and 
made them aware.
    Ms. Castor. That is very interesting, because we have 
talked to the Department of Homeland Security, and they said, 
no, this is Treasury. And they--you know, this is--the people 
hate this about government, you know, passing the buck. Where 
do we need to--where do we need to go to get this taken care 
of? I am asking for your help as these families wait in line to 
try to see their family members.
    Mr. Borman. As I said, in looking at the response that we 
have developed to the letter, it has become clear to us it is 
DHS. But we will take the responsibility of making sure the 
right agency comes back to you with that question and deals 
with that issue.
    Ms. Castor. Don't you agree, this is consistent with 
President Obama's direction, and it doesn't make a lot of sense 
to just have L.A., New York and Miami where--when we have other 
cities across the country that are ready, willing and able to 
handle travel. Yes, I will take the nodding.
    Mr. Bastian. Yes. Let me just--we will take a look at it. 
Keep in mind particularly that we have one of your Tampa sons, 
assuming everything goes well up here, will be Under Secretary, 
who will show you fervor and zeal in getting this resolved.
    Ms. Castor. That is right. Mr. Chairman, a native son of 
Tampa has been nominated to serve as the Under Secretary of 
Commerce for International Trade, Frank Sanchez. He is 
outstanding. And I look forward to an opportunity for you two 
to get together.
    Mr. Rush. Thank you very much. I look forward to the same 
opportunity.
    Ms. Castor. Thank you very much.
    I will yield back.
    Mr. Rush. The Chair now entertains--well, the Chair will 
now--if our witnesses will continue to be with us, the Chair 
will recognize a second round of questioning. We will give each 
Member an additional 3 minutes to ask a question. So in that 
regard, the Chair recognizes himself for 3 minutes.
    Are either of you familiar with the report that was issued 
by the Ranking Member of the Committee on Foreign Relations, 
Senator Lugar, Richard Lugar, the Ranking Republican Member? 
Are any of you familiar with that report?
    Mr. Borman. I read it.
    Mr. Rush. You read it? OK. And are you familiar with his 
comments and conclusions on this report on page 11? Now, I am 
going to read it just for reference here: In hindsight, the 
U.S. embargo has not served our national security agenda since 
Cuba seems to be an effective threat to the security of the 
United States. In the immediate post-Cold War era, the cost of 
maintaining this policy was negligible compared to the domestic 
political benefit derived from satisfying Cuban American groups 
in the U.S. The U.S. justified the embargo policy as an 
incentive or inducement for negotiation with the Cuban 
Government, the rationale being that the U.S. would lift the 
embargo or parts of it in response to reform on human rights 
and democracy. This narrow approach, however, will not 
further--has not furthered progress in human rights or 
democracy in Cuba, and it has come at the expense of other 
direct and regional strategic U.S. interests.
    Today it is clear that a reform of our policy would serve 
security and economic interests in managing migration 
effectively, in combating the illegal drug trade, among other 
issues. And it goes on and on and on. And I want to ask 
unanimous consent that Senator Lugar's report of February 23, 
2009, be entered into the record.
    Without objection, so ordered.
    [The information was unavailable at the time of printing.]
    Mr. Rush. Do you have any response to the Lugar report, Mr. 
Borman? Have you had a chance to see it? What are some of your 
commentary, your reactions to that report?
    Mr. Borman. Well, I have read it. I have to say that I 
don't have any commentary on it. I think this is something that 
the folks in the administration that are looking at Cuba policy 
at large would be looking at in conjunction with a variety of 
other inputs on the Cuba policy. But we at the Department of 
Commerce have not been specifically tasked to review that and 
come up with a response.
    Mr. Rush. Mr. Bastian, the ITC Administrator is an advocate 
for U.S. businesses all over the world. In your experience, 
what sort of protections and assurances do people expect from 
the U.S. Government while operating overseas? And should 
American companies expect the same sort of support if and when 
they do business with Cuba?
    Mr. Bastian. Mr. Chairman, the International Trade 
Administration, particularly through our U.S. and Foreign 
Commercial Service where we have a network of over 100 offices 
across the United States and about that same number, I think, 
overseas, abroad, provides a number of services for the 
information gathering, putting buyers and sellers together, 
finding agents and representatives for U.S. firms. These are 
all services which we would certainly have--would make 
available to U.S. companies, you know, should the situation 
change, keeping in mind that at the moment the embargo 
precludes us from doing anything with the U.S. business 
community insofar as Cuba is concerned. But we do have the 
ability to react and react quickly to changing situations, 
whether it is something that comes about as a change in an 
economic situation or political situation, or a natural 
disaster, reacting to hurricane destruction and things of that 
nature. Yes, we can do that pretty quickly.
    Mr. Rush. The Chair has run out of time. The Chair now 
recognizes the ranking member, Mr. Radanovich, for 3 minutes.
    Mr. Radanovich. Thank you, Mr. Chairman. I've got one 
question for either member of the panel regarding business in 
Cuba.
    There was testimony that will be given during this 
committee hearing of 500 international companies represented in 
Cuba, and many with substantial investment there. However, 
according to the State Department, the business environment is 
so unfriendly that the number of joint ventures dropped from 
540 in 1982 to 287 in 2005. Because of the government's 
recentralization efforts, it is estimated that one joint 
venture and two small cooperative production ventures have 
closed each week since the year 2000; and foreign domestic 
investment dropped from 448 million in the year 2000 to 39 
million in 2001 and to zero in 2002.
    Are these 500 international companies independently owned 
or are they joint ventures? If they are joint ventures, why the 
difference between the State Department figures and your 
testimony--not your testimony, but the testimony that we've 
heard before the committee?
    Maybe you can comment on, does the business climate work in 
Cuba for companies, international companies, that are doing 
business there?
    Mr. Bastian. A lot of the information that we have is 
anecdotal, as I mentioned before, because we don't go out and 
collect information on Cuba, and we don't spend terribly much 
time talking to colleagues in other governments about their 
companies' experiences. We usually have other things we want to 
talk to them about.
    But anecdotally, I think the answer is, it's not the 
easiest place in the world to do business. And we are aware of 
whether the joint ventures are a direct investment--but 
everything is a joint venture of some sort--that have failed, 
where the foreign partner certainly--what you got going in is 
not what you expected to find. So there is a lot of that.
    Again, not to beat that horse to death, but it goes back to 
the kinds of issues that you're interested in, the nontariff 
types of obstacles that exist.
    Mr. Radanovich. Thank you, Mr. Bastian.
    Mr. Borman, anything to add?
    Mr. Borman. No, I don't have anything to add.
    Mr. Radanovich. All right. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Rush. The Chair now recognizes Ms. Castor for 3 
minutes.
    Ms. Castor. Thank you, Mr. Chairman.
    Gentlemen, President Obama's announcement and the White 
House document that followed were very specific when it came to 
telecom companies, any telecom company in this country. What 
should they be doing now to investigate economic opportunities?
    Mr. Bastian. We haven't had any reaction from the Cuban 
Government yet on what's happening. I'll tell you, quite 
honestly, I've had--if you had asked me this question Friday at 
3:00, I would have said, no company has called me on this yet.
    To give you an indication, at about 3:05 I did get my first 
phone call. And they weren't as interested in the specific 
opportunity or condition of the market as they were in what's 
just the general likelihood that this will happen at some point 
in time. And I think you will probably find that there are a 
number of companies that have already got some market research 
that they've collected through other sources, most of them 
outside the United States.
    Ms. Castor. I've been contacted as well, and just, people 
want to understand the process.
    Mr. Bastian. That's absolutely right.
    Ms. Castor. So right now we're waiting to see what the next 
step from the Cuban Government is; is that correct?
    Mr. Bastian. Yes, ma'am.
    Ms. Castor. There's no organized effort at commerce. There 
might be, maybe our next panel would have some information on 
that, but as of right now, Commerce doesn't have a strategy, 
but telecom companies should stay tuned.
    Mr. Borman. Well, no, they can contact us on our part 
because we can tell them about what specific licensing 
requirements would be and how to coordinate that with Treasury. 
Because, again, for us, if they are looking at opportunities 
that would involve the export of hardware or software or 
technology, that's what's covered by us. The financial 
arrangement part of it would be covered by Treasury.
    But that's what we can tell them about, how we would deal 
with an application for some kind of transaction. As Mr. 
Bastian said, the other part is what the Cuban Government will 
do, because somehow all the telecom providers will have to deal 
in some way with the Cuban Government.
    But they should contact us.
    Ms. Castor. Thank you very much.
    I yield back.
    Mr. Rush. Dr. Gingrey is recognized for 3 minutes.
    Dr. Gingrey. Thank you, Mr. Chairman. As we've heard in the 
testimony and some of the questioning in regard to opening up 
trade to Cuba, more so than we currently have done and that it 
would maybe increase human rights and be more effective than 
the embargo has been, and yet we have negotiated a trade 
agreement with Colombia, a country not too terribly far from 
Cuba, that is working very closely with us.
    I think it's a fair statement to say that President Uribe 
is a friend of the United States and has done an outstanding 
job in dealing with the FARC, trying to abide by every request 
that our Congress has made regarding labor relations; and I 
think they've made great progress.
    And yet here we've been sitting on a trade agreement, 
bilateral trade agreement with Colombia for over 2 years. And 
it's not just about trade and the importance of having that 
bilateral relationship and open our markets to them and theirs 
to us, but it's a huge security issue. And why we would take 
our eye off that ball and all of a sudden focus it on Cuba, 
where we don't have a friend in the Castros and the amount of 
trade we're talking about I don't think compares to Colombia?
    I would love to hear both of your thoughts in regard to 
that. Why take our eye off the main issue in regard to dealing 
and ratifying that bilateral trade agreement with Colombia and 
focus on Cuba? Maybe we can walk and chew gum at the same time, 
but go ahead and comment on that. I would appreciate it.
    Mr. Bastian. I think the issues are--maybe at first blush 
they appear to be somewhat similar, but I don't think they are. 
I think there are huge emotional issues, political issues and 
social issues, when you come to deal with Cuba. In particular, 
I think, on the emotional and political side the issues are 
different than they are with Colombia.
    I do agree with you that President Uribe has made excellent 
strides and tried to get that agreement through and to try to 
accommodate the United States. I think it's clearly a 
discussion, though, that will be held between Uribe's 
administration, the President himself, because he does get 
involved--by that, I mean President Uribe because he does 
personally get involved in these--and Ambassador Kirk at the 
U.S. Trade Representative's Office to move this ahead.
    Dr. Gingrey. Mr. Borman?
    Mr. Borman. Trade agreements are really in Mr. Bastian's 
bailiwick, so I have nothing to add to his comments.
    Dr. Gingrey. Thank you, Mr. Borman.
    Mr. Chairman, I yield back. Thank you.
    Mr. Rush. The Chair thanks the gentleman.
    The Chair now wants to again thank the witnesses for 
appearing before us today. You have, with your narrow 
perspective--and I do respect the fact that your perspective 
had to be narrow because it could not enter into policy areas, 
which are not your purview and have not been clearly defined by 
the Obama administration as yet.
    So I certainly appreciate your being with us to give us 
this narrow perspective as it relates to your jurisdiction.
    We want to again thank you so much for being a part of this 
subcommittee hearing; and we ask now that the panel, first 
panel, be dismissed. And thank you so very much.
    Mr. Borman. Thank you, Mr. Chairman.
    Mr. Rush. The Chair now calls the second panel to the desk. 
It is my pleasure to introduce the outstanding witnesses on 
this second panel. And to my left, your right, we have with us 
Ms. Adrean Scheid, is that correct, Rothkopf. Ms. Rothkopf is 
the Vice President of the Western Hemisphere Affairs Division 
of the U.S. Chamber of Commerce.
    And next to Ms. Rothkopf we have with us Mr. Geoff Thale, 
who is the Program Director for the Washington Office on Latin 
America.
    And next to Mr. Thale is Mr. Kirby Jones. Mr. Jones is the 
President of the U.S.-Cuba Trade Association.
    And next to Mr. Jones, to his right--left, rather--would be 
Ambassador James Cason. Ambassador Cason is the President of 
the Center for a Free Cuba, and he's the former Principal of 
the Chief of Mission for the U.S. Interests Section in Havana. 
I want to welcome all of you witnesses. And it is the practice 
of this subcommittee, a new practice I might add, to swear in 
the witnesses, so I would ask that you stand and raise your 
right hand.
    [Witnesses sworn.]
    Mr. Rush. Please let the record reflect that all witnesses 
have answered in the affirmative and have taken their seats.

 STATEMENTS OF ADREAN SCHEID ROTHKOPF, VICE PRESIDENT, WESTERN 
  HEMISPHERE AFFAIRS, U.S. CHAMBER OF COMMERCE; GEOFF THALE, 
  PROGRAM DIRECTOR, WASHINGTON OFFICE ON LATIN AMERICA; KIRBY 
 JONES, PRESIDENT, U.S.-CUBA TRADE ASSOCIATION, AND PRESIDENT, 
 ALAMAR ASSOCIATES; AND AMBASSADOR JAMES C. CASON, PRESIDENT, 
                     CENTER FOR A FREE CUBA

    Mr. Rush. We will allow you 5 minutes for the purposes of 
opening statements, and we'll begin with you, Mrs. Rothkopf.

              STATEMENT OF ADREAN SCHEID ROTHKOPF

    Ms. Rothkopf. Thank you, Chairman Rush, Ranking Member 
Radanovich and members of the subcommittee. I greatly 
appreciate the opportunity to speak to you today. My name is 
Adrean Rothkopf, and I am Vice President for Western Hemisphere 
Affairs.
    We applaud the recent moves by both Congress and the Obama 
administration to ease the embargo on Cuba. The Chamber sees 
recent bipartisan legislation and statements by the 
administration as important first steps toward a policy more 
likely to promote a transition to democracy and full civil 
liberties in Cuba and to bring significant economic 
opportunities to American farmers, businesses and workers.
    While ultimately what we would like to see is an end to the 
embargo, which we view as one of the biggest foreign policy 
failures of the past half century, rather than encouraging Cuba 
to democratize, the embargo has helped prop up the Communist 
regime. Instead of isolating Cuba from the rest of the world, 
it has isolated the United States from our allies.
    Our two countries are natural trading partners, and prior 
to the embargo the United States accounted for nearly 70 
percent of Cuba's international trade. Cuba was the seventh 
largest market for U.S. exporters, particularly for American 
farm producers, but the embargo forced Cuba to seek out new 
sources for its domestic consumption.
    Under the Trade Sanctions Reform and Export Enhancement Act 
of 2000, the sale of commercial agricultural exports was 
permitted, but with a variety of restrictions and licensing 
requirements, including cash-in-advance payments via third-
country banks. Despite heavy regulation, by 2004, U.S. 
agricultural exports to Cuba rose from less than 1 million to 
392 million, 42 percent of the Cuban market.
    In 2008, U.S. exports to Cuba reached 718 million, yet the 
majority of agricultural trade with Cuba is done by large 
multinational companies as small- and medium-size exporters are 
deterred by the complexity of regulations. Other negative 
impacts on food and agricultural exports include restrictions 
on the ability to travel for the purpose of establishing 
commercial relationships and restrictions on visits from Cuban 
officials to confer with U.S. suppliers, inspect facilities and 
discuss sanitary and phytosanitary issues.
    In 2001, the International Trade Commission estimated that 
the embargo costs U.S. exporters up to $1.2 billion annually in 
lost sales. While the U.S. Chamber recommends that an updated 
study be conducted to fully evaluate the missed opportunities, 
it is clear that these include agriculture. The ICC estimates 
that if all restrictions on trade and travel are lifted, sales 
of poultry, beef and pork could rise by 25.7 to 37.8 million.
    Additionally, Cuba has the potential to become the top 
foreign market for U.S. rice. A Congressional Research Service 
study estimates that removing restrictions on trade would 
increase rice exports by 14 to 43 million.
    Tourism: Lifting the travel ban will create jobs in the 
U.S. and Cuban tourism industries and will have an impact on 
direct investment in tourism infrastructure, such as hotels, 
shops, cruise ship ports, airports. The ICC estimates that 
lifting the travel ban would increase U.S. Visitors to Cuba 
from 171,000 in 2005 to between 554,000 and 1.1 million. 
Additional tourist arrivals would increase U.S. Sales of 
agricultural goods to the island because of the increased 
tourist demand for food and because of higher Cuban economic 
growth, boosting domestic demand for high-quality U.S. food 
products.
    Machinery: As Cuba rebuilds after widespread hurricane and 
tropical storm damage in 2008, the island is an important 
potential market for construction equipment and agricultural 
machinery. Additionally, Cuba has a dilapidated infrastructure 
system. An eventual opening or reform of the Cuban economy will 
create opportunities for U.S.-made equipment to rebuild the 
island's infrastructure.
    Oil: There is a natural need for U.S. oil companies to 
participate in the exploration of Cuban offshore oil fields. 
Subsurface similarities with existing oil fields in the U.S. 
Gulf of Mexico would allow U.S. companies that have experience 
in the Gulf to mitigate complicated technical challenges in 
local deepwater development, leading to cost, environmental and 
safety efficiencies.
    Additionally, Cuba's proximity to the U.S. allows for a 
transportation cost premium for the U.S. market that would 
serve to moderate energy prices to the United States. At the 
same time, with Cuba's maritime boundary just 45 miles away 
from the U.S. coastline, we ought to be concerned about who and 
how Cuba's oil fields are being developed from an environmental 
standpoint, as an oil spill could mean significant 
environmental damage for the United States.
    We believe that opening trade with Cuba will bring 
political and economic change to the island, but establishing a 
commercial relationship will certainly raise legitimate 
business concerns on the part of U.S. companies. The Cuban 
Government will have to provide certain guarantees and 
safeguards in the areas of rule of law, environmental 
protection, infrastructure for travel requirements, the safety 
environment, intellectual property protection and incentives 
for innovation and labor rights.
    Additionally, there are important considerations regarding 
financing. However, these concerns should not impede a lifting 
of trade restrictions with Cuba. U.S. businesses can quickly 
and easily benefit from open trade.
    Thank you very much.
    Mr. Rush. Thank you very much.
    [The prepared statement of Ms. Rothkopf follows:]

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    Mr. Rush. Now the Chair recognizes Mr. Thale for 5 minutes.

                    STATEMENT OF GEOFF THALE

    Mr. Thale. Thank you, Mr. Chairman. I'm Geoff Thale, the 
Program Director of the Washington Office in Latin America. 
WOLA is a human rights organization, and we look at Latin 
American policy and the Cuba policy from the perspective of 
human rights. I've submitted written testimony, but here I 
would just like to briefly summarize it.
    What I would like to do is talk a little bit about whether, 
from our point of view, trade can contribute to improving the 
human rights situation in Cuba, and if so, how. And I would 
like to end by reiterating what I think you will hear from some 
of my other colleagues here about the trade opportunities and 
investment opportunities we're losing.
    As an organization, as an institution, we don't believe 
that trade by itself in Cuba or anywhere else automatically 
brings gains and increases in democracy and human rights. But 
when trade is part of a broader strategy that includes 
diplomatic and political engagement on human rights issues and 
when they are internal and domestic pressures for the respect 
of human rights, then there are possibilities to see 
improvements in the human rights situation.
    In the case of Cuba, we believe strongly that increased 
trade, increased travel and engagement can only benefit the 
human rights situation in Cuba and bring benefits to the United 
States as well.
    Let me just say a word about the human rights situation 
itself. It's easy--it's very tempting to view the human rights 
situation in Cuba from sort of stereotypical points of view. 
It's extremely important not to whitewash the very serious and 
very real problems. It's important not to exaggerate them as 
well. I think it's really clear, if you look at the State 
Department's human rights reports, there are real restrictions 
on the freedom of association, on freedom of speech. It's very 
clear that Cuba holds between 100 and 200 political prisoners, 
depending on how you count it.
    These are all clearly unacceptable violations of 
internationally recognized norms. The U.S. Government should 
call on the Cubans to end that, the human rights community 
should, the international community should generally.
    At the same time, we look at human rights in the rest of 
Latin America. And if you look further at those same State 
Department reports, you won't see reports of political killings 
in Cuba or political disappearances or extrajudicial 
executions, which we see elsewhere in the region; and you won't 
see systematic accusations of torture, which is obviously an 
issue we have looked at in the Guantanamo context here. So I 
think, from our point of view, it's important to see the mixed 
bag you see in Cuba on human rights situations.
    If you ask about the United States' ability to influence 
the human rights situation in Cuba itself, I think, from our 
point of view, our ability is nonexistent. We've had 50 years 
of an embargo--almost 50 years of an embargo--little trade with 
some narrow exceptions, limited contact, limited diplomacy; and 
the result is, we have very little influence and very little 
leverage.
    Cuba is free to ignore our views on human rights because we 
don't make much significant difference to the government or its 
economy or its politics or its diplomacy. And so our view is, 
an engagement would change that.
    By engaging through trade, by engaging through travel, by 
engaging through diplomacy, we'll develop relationships in Cuba 
over time and we'll develop tools over time that can be used to 
dialogue with and to encourage greater respect from the Cuban 
Government for human rights and democratic practices.
    And I don't think that's a magical formula. We're not going 
to see change overnight; we're not going to see dramatic steps 
from today to tomorrow, but it's clearly a better strategy to 
pursue engagement including trade, travel and diplomacy than it 
is to continue the current embargo.
    And I think it's important to underscore, that's a point of 
view that most of the world believes. Latin America, Europe, 
Asia, Africa, most of the Middle Eastern countries all engage 
with Cuba. Some key allies and partners of ours, especially 
Brazil and the Spanish Government, systematically engage with 
the Cuban Government on trade issues and link that to dialogue 
on human rights, democracy issues, political prisoners.
    And, again, I don't think they expect dramatic change 
overnight. They see themselves as laying the groundwork, as 
preparing for the future and as developing relationships there. 
And the truth is, the United States is standing on the 
sidelines. And we're standing on the sidelines at a time when 
we have economic reasons to engage with Cuba.
    As Ms. Rothkopf noticed--mentioned, as I assume Mr. Jones 
will mention as well, there are agricultural interests and 
agricultural possibilities in Cuba, there are interests from 
our ports on the Gulf Coast, there are tourism and travel 
interests, there are medical interests and medical 
opportunities, there are political energy interests. There's a 
whole set of economic opportunities that we're forgoing for the 
sake of a policy that's not bringing us any real benefit in 
terms of human rights and democracy.
    So I think our view is that we ought to move toward a 
policy of engagement, that that policy ought to include moving 
toward ending our embargo on trade and taking advantage of the 
opportunity that brings us there. We're pleased to see that 
President Obama has taken the first initial steps in that 
process.
    We're pleased, Mr. Chairman, to see that you traveled to 
Cuba recently, engaged in the beginnings of dialogue and 
diplomacy here. We hope we'll move forward in that way because 
we think it's good for human rights in Cuba as well as good for 
the United States.
    Mr. Rush. Thank you.
    [The prepared statement of Mr. Thale follows:]

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    Mr. Rush. The Chair now recognizes Mr. Jones for 5 minutes.

                    STATEMENT OF KIRBY JONES

    Mr. Jones. Mr. Chairman, members of the committee, thank 
you. I appreciate the opportunity to be here, as well.
    The last 47 years the cornerstone of U.S. policy toward 
Cuba has been the embargo. But if one looks at the original and 
subsequent reasons for this policy, it is hard, if not 
impossible, to point to a single success that this policy has 
had in achieving any of its objectives.
    The embargo has achieved, in fact, the exact opposite of 
what was originally intended and is not serving the interest of 
the United States Government nor of United States citizens. No 
other country in the world has an embargo on Cuba.
    I have been traveling back and forth to Cuba for 35 years, 
and I have seen a lot of changes in those years. It may be that 
the U.S. policy has been stuck for 47 years, but Cuba has not. 
A new trade and investment economy has emerged in Cuba in the 
last 15 years, a mix of capitalism and socialism, and not just 
a little dose of capitalism. Every sector in Cuba now has a 
foreign private investor. This includes mining, energy, hotels, 
beer, bottled water, port management, cosmetics, biotechnology, 
real estate, agribusiness and telecommunications, just to name 
a few.
    Cuba has removed subsidies from almost all its former state 
enterprises and merged or eliminated ministries. To undertake 
its foreign business Cuba has created dozens of freestanding 
holding companies. Where once totally dependent on sugar, Cuba 
has greatly diversified its source of revenues now to include 
nickel exports, personal services, tourism, foreign 
remittances, citrus and seafood exports, worldwide sales of rum 
and cigars and exports of biotechnology products. Whatever 
adjectives serve those who continue to want us to believe that 
Cuba is on the brink of economic collapse, the reality is 
otherwise.
    Having said that, like all developing countries, Cuba does 
have many problems: major foreign debt obligations, foreign 
currency exchange regulations are shifting, domestic pricing 
policies for imported consumer food products have inhibited 
market growth, labor regulations need improvement, transparency 
regarding foreign investment is a longstanding concern and 
limits our place on entrepreneurial expansion.
    But Cuba is also the largest country in the Caribbean with 
a size comparable to Pennsylvania. According to both the CIA 
and the Economist Intelligence Unit, Cuba had growth rates of 
10.2 percent annually from 2005 to 2007. This has fallen to 4.4 
percent in 2008 due to the worldwide recession and devastating 
hurricanes. Largely unknown is that Cuba has the third largest 
deposits of nickel in the world and is the ninth largest 
tourist destination in the Americas without any Americans.
    I first met Fidel Castro in 1974. I have known him now for 
35 years. All of these changes in the way Cuba now does 
business were initiated under Fidel Castro, but are now not 
dependent on him or Raul Castro, for they have already 
implemented much of the very transition that some still say 
would come only after Castro no longer heads Cuba.
    To wait to lift the embargo for some so-called ``post-
Castro era,'' as if all will change and somehow be different, 
is not at all a productive business plan nor, quite frankly, is 
it a productive political strategy either.
    After 40 years of no trade and just over--a bit over 7 
years, the U.S. now supplies, as has been mentioned several 
times, more food to Cuba than any other country. In 2008, U.S. 
companies received $718 million from the sale of agricultural 
products to Cuba. In aggregates, since this trade began, 
contracts for more than 11 million metric tons worth over $3.6 
billion, including shipping and services, have been signed, 
comprising 300 different products including wheat, rice, corn, 
soybeans, tomato sauce, eggs, chicken, cookies, apples, wine, 
ground turkey, chewing gum, utility poles, live cattle, organic 
fertilizer and rice. These have been bought from 157 different 
companies from 37 States; 23 different ports have been used for 
more than 1,100 ship journeys of which 73.5 percent have been 
made with U.S.-owned or chartered vessels.
    But U.S. companies are forced to operate under a serious 
disadvantage in comparison to companies from other countries. 
The rulings in 2005 by the previous administration have caused 
Cuba to cut back on some imports from the United States. Most 
important in preventing U.S. companies from the full 
realization of their current trade has been and is the 
inability to offer private credits. There are some who argue 
that this restriction should be maintained because they feel 
Cuba is a bad credit risk; but whether or not to extend private 
credit to Cuba should be a decision taken by each company, not 
by the U.S. Government. If these restrictions, unique in 
international commerce, were lifted, Pedro Alvarez, Chairman 
and CEO of Alimport, which imports all U.S. Agricultural 
products to Cuba, has stated that U.S. firms could provide over 
50 percent of Cuba's food needs which annually reach almost $2 
billion, which would be an increase of several hundred million 
dollars a year over current levels. There have been studies 
that indicate that U.S. firms have lost over $100 billion since 
the early '60s because of the embargo and that the annual cost 
now could be as high as $4 billion a year.
    In my opinion, the key to starting a process of business 
with Cuba which will benefit American workers and the U.S. 
economy will be for Congress to pass and for the President to 
sign H.R. 874 and S. 428, which will allow all Americans to 
travel to Cuba. Two million Americans are projected to visit 
Cuba in the first 2 years of open travel. Studies have shown 
that this in turn will result in an injection of $1.6 billion 
into the U.S. travel and support service industry, and most of 
that helping the small- to medium-size travel agents, airlines, 
additional food exports to feed the U.S. visitors and 
advertising in promotional programs.
    Virtually anything that Cuba now purchases might very well 
be purchased from the United States. In this list of potential 
products, I am including fertilizers and pesticides, 
pharmaceutical products, textiles and apparel, steel, farm 
machinery and construction equipment, power generation 
machinery, electronics, plastics, tires and sporting goods; 
services such as air transportation, maritime transportation, 
construction service, telecommunications and travel and 
tourism, and of course, a growth in the importation of U.S. 
agriculture.
    Mr. Rush. Mr. Jones, would you please summarize your 
statement.
    Mr. Jones. U.S. Firms will be able to offer what companies 
from Europe, Canada and Latin America can never provide.
    And finally, in addition to sales, there will be several 
opportunities for investment: agribusiness, hotels, marinas, 
golf resorts, housing and building renovation, 
telecommunications and overall infrastructure. These are just 
some of the opportunities that will be open.
    I'll be glad to take any questions. Thank you, Mr. 
Chairman.
    Mr. Rush. Thank you very much.
    [The prepared statement of Mr. Jones follows:]

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    Mr. Rush. The Chair now recognizes Ambassador Cason.
    Ambassador Cason, you're recognized for 5 minutes more or 
less.

             STATEMENT OF AMBASSADOR JAMES C. CASON

    Mr. Cason. Mr. Chairman, members of the committee, thank 
you very much for the opportunity to appear before you today to 
discuss this topic of great importance. Until very recently I 
was a career Foreign Service officer with 38 years' experience, 
mostly in Latin America. One of my postings was to Cuba where I 
was Chief of Mission from late 2002 to late 2005.
    I am speaking here today as President of the Center for a 
Free Cuba, a nonpartisan NGO and a 501(c)(3) organization; and 
therefore, nothing I say here today supports or opposes any 
bill before Congress, and we administer a USAID grant.
    We at the Center for a Free Cuba provide humanitarian 
assistance to the people of Cuba and assist civil society and 
democratic activists there. We send uncensored information in 
shortwave radios, among other things, to Cuba. The Center 
favors licensing measures announced by the President that will 
allow U.S. firms to attempt to enter the Cuban 
telecommunications market. Havana limits its citizens access to 
the Internet, cell phones and other information or media out of 
its control. If Cuba expands the speed and availability of the 
Internet, lowers the exorbitant cost of Internet cafes, Cubans 
will communicate faster and more easily among each other and 
with the wider world. Greater access to and use of the Internet 
by average Cubans, especially the young, will promote civil 
society in a democratic process there.
    We support Cuban-American travel to the island on 
humanitarian grounds and travel by researchers, academics and 
others who make a serious effort to discover for themselves 
Cuba's reality. We are opposed to tourist travel by American 
citizens with no relatives on the island because such travel 
will only provide funds to the Cuban security apparatus which 
owns the tourist infrastructure. Such ``bathing suit tourism'' 
will do nothing for Cubans nor will it in any way help promote 
democracy.
    Mr. Chairman, I would like now to ask that a recent paper I 
wrote, entitled The Case Against Travel to Cuba, be entered 
into the record.
    Mr. Rush. Hearing no objection so ordered.
    [The information was unavailable at the time of printing.]
    Mr. Cason. Thank you very much.
    Just as we oppose unprincipled tourist travel to Cuba, we 
do not feel that a unilateral ending of what remains of the 
embargo now will promote greater economic or political freedom 
in Cuba or great benefit to American companies.
    Lech Walesa and Havel told the Center recently that nowhere 
in the world have authoritarian regimes changed their ways 
because of trade or tourism. It has been international 
solidarity, constant pressure and tangible and moral support 
for democratic freedom fighters that have made the difference.
    When the Castros are gone, the embargo will serve as 
leverage in helping the military owners of hotels realize it is 
in their interest to support a democratic opening, for if they 
do, we can provide millions of tourist dollars and trade 
opportunities. As the Washington Post has recently 
editorialized, giving away what little leverage we have for 
nothing now will gain us nothing and will harm those fighting 
for change on the island. Please note that all the rest of the 
world trades and allows travel to Cuba, but that has not made 
any difference in the totalitarian nature of the regime.
    As long as Cuba refuses to allow independent labor unions 
the right to exist, we oppose U.S. businesses entering into 
joint venture arrangements with the Cuban Government. Havana 
exploits workers and takes 95 percent of what joint venture 
partners pay the government for labor. Strikes are not 
permitted and many independent labor organizers have been given 
long prison sentences. To invest in Cuba today is to 
participate in the exploitation of defenseless Cuban workers; 
and I would not be surprised if, after freedom comes to Cuba, 
there is a backlash against Canadian, Spanish and other 
investors who have taken advantage of docile Cuban labor to 
make a fast buck.
    American farmers are privileged in their dealings with 
Cuba. They get cash and take no credit risk. As we've heard, we 
are the largest food provider to Cuba. Why would any 
agribusiness exporter want to give credit to Cuba? Why would 
American citizens support such a measure when Cuba is an 
international deadbeat? It has defaulted many times and owes 
foreign creditors over $25 billion, not to mention another $22 
billion of unpaid Cold War era debt. Its economy is moribund, 
and it is in arrears everywhere. Per capita, Cuba owes $4,000 
each; its debt equals 86 percent of GDP. It is the tenth most 
indebted country in the world, and its Moody's credit rating is 
Caa1, speculative grade, very poor. Dunn & Bradstreet rate Cuba 
as one of the riskiest economies in the world.
    I would note that Cuban's average monthly wage is around 
$20. The average Cuban lacks money for most necessities. U.S. 
food goes largely to the tourist industry or is marked up 256 
percent and sold to those who receive remittances in dollar 
stores. There is no consumer demand for our products and no 
prospects in sight for this to change until the regime begins 
to pursue free market economic policies.
    There are no Cuban entrepreneurs, no free market policies, 
no economic opportunity and no purchasing power. There is just 
the regime, which resists change in a panicky attempt to 
maintain total power for the nomenclature.
    Reuters reported last week that there is a severe cash 
crunch in Cuba and foreign businessmen feared Cuba could be 
near insolvency. The liquidity crisis has become critical. 
Small foreign businesses are reportedly desperate and are not 
being paid, state companies have been ordered to stop all 
imports, prices and demand for all Cuban exports are down and 
nothing suggests Cuba's economy will get any better soon.
    Now, recent polls conducted in Cuba reveal that only 6 
percent, there, of the citizens see the embargo as a problem. 
What they most want is for the government to give them a better 
life, a decent job, hope for the future. They said they want 
change, democracy and economic freedom. They want elections, 
they want to join the world, they want to be able to travel and 
run their own businesses in Cuba. Whether the U.S. trades more 
with Cuba is irrelevant to their lives.
    The Center for a Free Cuba opposes any loosening of 
restrictions on commerce with Cuba now for the following five 
reasons:
    Trade and tourism will not hasten a democratic transition 
there;
    Cuba is a terrible credit risk and cannot pay most of its 
bills;
    It exploits its workers shamelessly;
    It's an insignificant market for U.S. Consumer and other 
goods, and only the government, not the people, benefits from 
trade with us;
    There are no Cuban exporters or entrepreneurs.
    Mr. Chairman, only if and when a new Cuban leadership 
demonstrates through deeds, not words, as the President has 
said, that it is moving toward democracy and market freedoms, 
then we will be among the first to say, let's deal.
    Thank you very much for allowing me to testify here today.
    Mr. Rush. The Chair thanks the gentleman.
    [The prepared statement of Mr. Cason follows:]

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    Mr. Rush. The Chair recognizes himself for 5 minutes for 
questioning.
    The U.S. has a long history of trading with numerous 
nations with poor records on human rights and shoddy business 
and credit relationships. The list is very, very long. We 
import considerable amounts of oil from Nigeria, from 
Venezuela, despite their shoddy records on human rights and 
political freedom.
    Pakistan itself is the recipient of billions of dollars in 
American aid despite Islamabad's long history of repressing 
political freedom. Indeed, at one point, the United States 
traded with Iraq, even during the height of Saddam Hussein's 
brutality against insurgents in Shiite communities.
    Yet, despite all our long and continued history of doing 
business with nations with questionable or even poor records on 
human rights--and I might add China is a glaring example of 
this--this nation of Cuba has been singled out for a trade 
embargo because of its human rights issues and problems.
    Is there a double standard and why is there a double 
standard? Ms. Rothkopf, would you please respond to my 
question.
    Ms. Rothkopf. Yes. Thank you very much.
    Yes, you're absolutely right, the U.S. does have a history 
of engaging with many countries around the world in which human 
rights problems exist or political prisoners are unjustly 
deprived of their freedoms. And we have chosen another path, 
engagement. From China to Saudi Arabia, from North Korea to 
Afghanistan, we choose to engage to help advocate for those who 
have been abused by their systems. Engaging brings more of 
these stories to light; engagement brings countries more fully 
into the international community where established systems and 
multilateral mechanisms can work on behalf of the victims.
    I think we have to acknowledge that the embargo has failed 
to help the political prisoners in Cuba, and it's actually hurt 
the average Cuban by damaging the economy. But it hasn't 
damaged it enough to change things in the mind of the 
government, it's just damaged it to hurt the innocents in the 
country.
    So I do say, yes, we have had a double standard.
    Mr. Rush. Mr. Thale, should we subject some of these other 
countries to similar embargoes? Should we stop importing oil 
from Venezuela and Nigeria or even Saudi Arabia? Should we 
issue a trade embargo with China, and what would the effect of 
that be to the economy of our Nation?
    Mr. Thale. Thank you, Mr. Chairman. I think that's actually 
a really good question. I think it's a good question because it 
underscores the extent to which we ought to strive to have a 
single standard in how we approach trade and human rights and 
diplomacy issues around the world.
    I think our view is that there are limited selective 
occasions where sanctions do make sense. I think, by and large, 
sanctions have been effective forms of coercion against 
governments with whom we have disagreements. I think Cuba is 
one of the clearest examples of that; and I think the message 
is, we ought to engage with countries and, as part of that 
engagement, have human rights on the explicit agenda. We ought 
to do that with Cuba, we ought to do it with China, and we 
ought to do it around the world.
    Mr. Rush. Thank you.
    Mr. Jones, can you give us a perspective on the possibility 
of the President's recent pronouncement as it relates to the 
telecommunications industry? How do you foresee that from two 
vantage points--one, from the vantage point of the American 
corporations, and two, from the vantage point of the human 
people.
    Mr. Jones. First, just a minor point: American cell phones 
won't work in Cuba. So we can send all the cell phones we want, 
but it's not going to do any good. I mean, it ignores the fact 
that Cuba has a 12-year now joint venture with Italy which is 
in the process of redoing the whole telecommunication system in 
Cuba. They've launched a cell phone system; it doesn't cover 
the entire country, it covers the major population centers. 
There have been installations of public phones and an upgrade 
of telephone communications hardware.
    So U.S. companies are going into a market where there 
already is a foreign investor. Sometimes we tend to think if 
we're not there, nobody is there, but that's not the case in 
Cuba.
    Having said that, I have talked to Cuban officials who 
recognize that, were 1 million Americans to come to Cuba in 
free travel, they're going to have to make changes so that they 
can service Americans and their cell phones, which will mean a 
joint venture between some American company and Stet, the 
Italian company, there to widen the cell phone coverage, to 
engage in a business agreement and finances going back and 
forth for the expansion of that coverage, and to install a 
system where U.S. cell phones will work.
    But, again, American companies will be going into a 
situation that has been working for 12 years.
    Mr. Rush. My time is up. I want to recognize the ranking 
member for 5 minutes.
    Mr. Radanovich. Thank you, Mr. Chairman.
    Mr. Cason, welcome to you and everybody else here to the 
committee. I do have a question regarding your testimony.
    You mentioned in your testimony a Reuters report that Cuba 
may be in a fiscal crisis and near insolvency, on top of the 
fact that it already has $25 billion in unpaid debt and owes an 
additional $22 billion in Cold War era unpaid debts.
    Why are other countries still doing business, like this 
Italian company, with Cuba if they're not being repaid, if 
that's indeed the case?
    Mr. Cason. Well, what Cuba has been doing--even when I was 
there, we saw it all the time--they will take products from 
foreign countries, they will wait as long as they can to pay 
them and pay them a little bit to try to restructure the debt.
    They did that with Mexico, for example. It's a constant 
sort of kiting in the sense that they have so much debt and so 
little productivity and so little of what they export that's 
not already being sold, that they don't have the money they 
need to provide for all these great markets that people have 
been talking about.
    The fact is, they are tremendously indebted. There is no 
consumer demand because the average Cuban has no money, can 
barely survive, so it all depends on the whims of the 
government. And Fidel buys on political grounds, particularly 
from the United States, because he's trying to influence votes 
in Congress, or what he buys depends on a lot of calculations 
he made where he's going to get the main bang for the buck.
    Mr. Radanovich. Thank you, Mr. Cason.
    If American business, including agribusiness, were not 
required to accept cash-only terms of business and, instead, 
started giving credit to Cuba, what do you see happening in 
that--under that scenario?
    Mr. Cason. Well, I think any company that would want to not 
take cash before they even ship the goods when all these other 
countries are having great difficulty getting money would be 
nuts. I mean, they have the best deal going.
    I think that what would happen is, we will start running up 
huge debts with Cuba, and they may or may not pay us, depending 
on--like they do with the rest of the world.
    Mr. Radanovich. Can you tell me whether there would be more 
than credit risks involved if cash was not required for 
purchases of goods?
    Mr. Cason. The real risk is, this is not a market that is 
making decisions. This is Fidel and Raul who decides who gets 
paid, who gets booted out.
    When I was there, there was a move after many years to 
dissuade Spanish small and medium businesses from remaining. 
That's why, in those figures we heard earlier, there is a large 
number of companies that have left. And it's because they have 
decided that it's time for them to go, they've changed their 
mind.
    Mr. Radanovich. Thank you, Mr. Cason.
    You have mentioned also in your testimony a point which I 
would like you to elaborate on, if you would, please; and that 
is that to invest in Cuba today is to participate in the 
exploitation of defenseless Cuban workers and that there would 
be a backlash against Canadian, Spanish and other investors, 
who have taken advantage of the docile Cuban labor to make a 
fast buck.
    Could you expand on that, please?
    Mr. Cason. I talked to a lot of people in Cuba when I was 
there, and since then, who tell me that when the day comes and 
when there's freedom in Cuba, the fact that the United States, 
on principle, did not exploit Cuban labor the way I mentioned 
it, will be seen as a favorable development for American 
companies; but that the Spanish and others who have taken 
advantage--that you can't strike, that you can't have labor 
organizations--are going to not have the sympathy of the 
general public afterwards. And how that plays out, we'll have 
to see.
    And I would remind you also that Lech Walesa has written a 
letter to the President recently saying, please don't forget 
the situation of labor rights in Cuba when you talk about 
changing your policy toward Cuba. And I think that's very 
important.
    Mr. Radanovich. OK. Thank you, Mr. Cason.
    Ms. Rothkopf, I couldn't help but notice in your testimony 
on the Chamber's desire to do business in Cuba that you would 
want to be able to do business.
    A couple of minor things to get out of the way: That would 
be that--there's a long list here--the Cuban Government will 
have to provide certain guarantees and safeguards to U.S. 
business in the areas of rule of law, the environmental 
protection, infrastructure for travel requirements, 
intellectual property protection and incentives for innovation 
and labor rights, also important considerations regarding 
financing.
    That's quite a long list. I mean, do you care to comment on 
that? That's a pretty high barrier to overcome.
    Ms. Rothkopf. Sure.
    I think the reason that that was included in my testimony 
was to make the point that we think that opening trade with 
Cuba is going to bring political and economic change to the 
island, but just because we were to open and make that option 
available, that doesn't mean that everybody is going to rush in 
and automatically do business.
    And I think that the important thing is to say that we 
don't place that limit on other countries, on businesses. 
Businesses will make a smart decision based on business 
decisions and whether it makes sense for their company.
    A company that doesn't have the safety requirements that 
they need, they're going to stop operating. If they're not 
getting the intellectual property protection that they need, 
then they're not going to continue to do business with that 
country. If infrastructure isn't there for the travel 
requirements, they're not going to go in.
    So basically what we're saying is, U.S. businesses are 
successful because they take a smart look at the business 
opportunities. And my point is that they are going to continue 
to take a smart look at the opportunities and they're going to 
make a smart decision based on what the Cuban Government 
decides to do or not to do.
    Mr. Radanovich. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Rush. The Chair thanks the gentleman.
    The Chair now recognizes the gentlelady from Florida, Ms. 
Castor, for 5 minutes.
    Ms. Castor. Thank you, Mr. Chairman.
    Thank you all very much for being here today.
    Following President Obama's announcement that lifting of 
the restriction on Cuban-American families and their ability to 
travel to Cuba, it's been met at home with great enthusiasm. 
And I wanted to give you one example of a newspaper headline 
that followed within the week. It's from the Tampa Tribune, but 
it had a similar message in many other papers: Thirst for Cuba 
Trade and Travel.
    And I think folks at home, they're very hopeful for the 
economic opportunity that modernization of the relationship 
will bring eventually--great potential in the ports in Florida, 
ag products, all products, the cruise industry, et cetera. But 
I think, because of the family ties and historic ties, that we 
have folks who do not want economic opportunity to come at the 
expense of progress and change on the island, especially on 
human rights.
    So now where are we? President Obama appeared at the Summit 
of the Americas and made another overture, met rather 
surprisingly with a response from the Cuban President that said 
everything is on the table, followed up by brother Fidel Castro 
who said, well, wait a minute.
    If you all are advising the Obama administration and the 
Congress now on how to proceed, what is the plan? It's unlikely 
that it's going to come by just a lifting of the embargo. That 
may not practically happen. So what is the plan? What are we 
going to be seeking on human rights improvement, and where can 
we make progress?
    And if you all can each take about 45 seconds to answer.
    Mr. Cason. Well, I think the embargo has always been a 
tool. And both President Bush and, I think, reiterated by 
President Obama have said that if we see evidence that the 
Cuban Government is serious about engaging--it takes two to 
tango, give us a sign--and begins moving in the direction of 
where we want to see Cuba, which is greater freedom and 
economic prosperity for the Cuban people, then everything is 
open for discussion.
    But Hillary Clinton said a couple of days ago in a hearing 
that she has seen no response yet from Cuba, and Fidel keeps 
undercutting his little brother by saying he didn't mean that, 
he's still in control. And I think he's made it clear from day 
one of his administration that he--he said, when this war is 
over, I'll start a longer and bigger war of my own; the war I'm 
going to fight against them, I realize that will be my true 
destiny.
    He, Fidel, will continue to do everything he can to 
sabotage, I think, a closer engagement between the two 
countries.
    Ms. Rothkopf. I completely agree with you. We don't want 
the economic opportunities to come at the expense of the 
possibilities of democracy. But we actually believe that 
broadening economic engagement with the island through 
additional commercial and people-to-people contacts will 
promote the transition to democracy and to full civil 
liberties.
    We very much hope to see an end to the embargo. Absent a 
full end to the embargo, there are some steps that can be 
taken, for example, removing the restrictions on financing, 
allowing the ability to travel for the purpose of establishing 
commercial relationships, allowing visits from Cuban officials 
to confer with U.S. suppliers, inspect facilities and discuss 
sanitary and phytosanitary issues. All of these would have a 
positive effect.
    Mr. Thale. Similarly, I don't expect that the process of 
political opening in Cuba is going to be a tit-for-tat series 
of movements by the United States and the Cuban Government back 
and forth.
    My view is, we will see political change there and 
political openings to relaxation as the U.S. moves forward in 
its relationship. I think we ought to move forward pursuing our 
own interests which have to do with maintaining human rights as 
a concern of ours and being very clear and public about that; 
pursuing some common interests around migration, drug 
cooperation and environmental concerns; and moving forward in 
pursuit of our economic interests.
    And I think in that process, we will see change beginning 
in Cuba. But I don't think we will see a back-and-forth, tit-
for-tat kind of process.
    Mr. Jones. Can I just add a couple of comments?
    If there are preconditions, if we are going to say to Cuba, 
we're not going to do this until you do that, that means two 
things. That means, one, we have put into Cuba's hands how we 
conduct our foreign policy, because we're letting them set the 
conditions.
    Secondly, it's a nonstarter. Cuba will not respond to any 
preconditions and has said so repeatedly. President Obama did 
something that no other President since John Kennedy has done, 
which is to say publicly that the policy over 50 years has been 
a failure. In response to that, Raul Castro said everything is 
on the table, something that no Cuban President has said for 50 
years. Raul Castro is President of Cuba; he has an older 
brother who has no official office in managing the government.
    I think it would be a mistake to take an editorial or a 
column--and grandma--and interpret that as being the final word 
on Cuban Government policy. I think we ought to take them up on 
their word. I think there's a way to begin in terms of talking 
about resurrecting the bilateral talks that the previous 
administration stopped on immigration and drug interdiction, on 
the environment, all to our interest; and we ought to begin the 
process of talking in the same way that Ronald Reagan, in 
calling the Soviet Union the ``Evil Empire,'' still kept on 
talking.
    Ms. Castor. Thank you.
    Mr. Rush. The gentlelady's time is up.
    The chairman now recognizes the gentleman from Georgia, Dr. 
Gingrey, for 5 minutes.
    Dr. Gingrey. Mr. Chairman, thank you. And I want to thank 
all the witnesses of this second panel.
    I happen to disagree with Ms. Rothkopf, Mr. Thale and Mr. 
Jones, and do completely agree with Ambassador Cason. But 
that's the way life is; you have your opinion and you feel very 
strongly about it, and we have to go on.
    I do want to commend Ambassador Cason for 38 years' 
experience in the Foreign Service, mostly in Latin America, and 
some time in Cuba as Chief of Mission from 2003 to 2006. I 
think that gives him a pretty darn good insight into what's 
going on, I think--his comments about labor and the problem in 
regard to labor violations in Cuba.
    I made the analogy in regard to why we didn't ratify the 
free trade agreement, bilateral trade agreement with Colombia. 
And that's the Democratic majority, Mr. Chairman; it keeps 
blocking that just mainly over labor issues. So it seems a 
little disingenuous that we would be wanting to open up trade 
with Cuba when their labor record is deplorable, abhorrent.
    I want to specifically ask Ambassador Cason, though: What 
do you think the current creditworthiness of Cuba is and what 
is on the horizon that will give us faith that Cuba can afford 
to pay its debts?
    If you could quickly, in about 30 seconds, answer that, I 
would appreciate it.
    Mr. Cason. I think the credit rating is terrible, it 
couldn't get lower, and I don't think there is anything on the 
horizon that is going to bring the big bucks that will allow us 
to have Cuba the natural trading partner that some day it will 
be when Cuba is free and has the right economic policies that 
allow for growth and human ingenuity and entrepreneurs that are 
repressed there.
    But right now there's nothing. And so I think that it's 
wishful thinking that the money will just appear, and we will 
all get paid.
    I would like to say that I used to run trade promotion for 
the U.S. Government in southern Europe. I worked for 3 years as 
the head of trade promotion, so I'm all in favor of businesses 
making a buck.
    I'm also interested in them getting paid and not giving up 
human rights in the process just to make a buck on a market 
that's extremely small, is shrinking and is not going to grow 
other than by some miracle that I don't know where that's going 
to come from.
    Dr. Gingrey. Absolutely.
    Well, let me just say this too. I think the other three 
witnesses are talking about that--basically, what it sounds 
like to me is, the end justifies the means and that sanctions 
haven't worked. And I would suggest to them that sanctions do 
work when they're implied across the board. And maybe the 
people that are out of step are the other people of the Western 
Hemisphere and Europe that were not willing, did not have the 
intestinal fortitude to apply the sanctions.
    Mr. Jones, you referenced John Fitzgerald Kennedy. You and 
I are probably about the same age. We were probably in our 
early 20s when Fidel Castro allowed Nikita Krushchev to put 
those ballistic missiles on that island 90 miles from our shore 
and aiming right at us. So I think the courage was, of course, 
on the part of President Kennedy, who is probably spinning in 
his grave today listening to some of this testimony.
    I'm not specifically asking you a question, but if you want 
to respond in just a second, I will let you. Let me go on to 
Mr. Thale, though.
    There is something in your testimony, Mr. Thale, that 
really, really bothered me. You said a reference in a United 
States State Department human rights report. In your written 
testimony, it says, ``Although that report criticizes Cuba's 
treatment of prisoners, the State Department human rights 
report does not allege that the Cuban Government engages in 
torture,'' and then in parentheses you have, ``an issue with 
which we are grappling here in the United States.''
    And in your verbal testimony--and if you don't recall it, 
we can, Mr. Chairman, have the transcriber read it back to us--
you reference Guantanamo Bay.
    Were you suggesting, Mr. Thale, that in the previous 
administration, that President Bush or anybody a part of that 
was endorsing torture, that we were torturing people? Is that 
what you were suggesting?
    Mr. Thale. Well, I was suggesting, Mr. Gingrey, that there 
is a debate going on in the United States about the documents 
that have just been released. There is the whole Abu Ghraib 
debate, and this is an issue that is clearly under discussion 
in the United States.
    I think the general thrust of my testimony was that, if you 
look at the human rights situation in Cuba, you see a set of 
serious problems which have to do, as I said, with freedom of 
association, freedom of the press, free expression, political 
prisoners, but that there is a set of--in the universe of human 
rights issues that are under debate in the world today, there 
are some----
    Dr. Gingrey. Well, reclaiming my time, I just want to say 
in conclusion, Mr. Chairman, that I'm getting a little weary of 
people that represent this government going around the country 
talking about what we do and how we are guilty of human rights 
violations and apologizing for the previous administration. I 
think it is entirely inappropriate.
    And I yield back.
    Mr. Rush. Would the gentleman yield?
    Dr. Gingrey. Of course I will yield to the chairman.
    Mr. Rush. Dr. Gingrey, you're a good friend of mine, but I 
just want to bring your attention to a matter in my home State 
of Illinois where there is a fellow by the name of John Burge, 
who is a former police commander. And he has recently been 
indicted after about 30 years for torturing American citizens 
and forcing them to confess to crimes. And some have served for 
many years on death row.
    Your friend, a Republican governor, George Ryan, who is 
also convicted now, is a friend of mine. But one of the things 
that he did that I really admired him for it, he freed all the 
prisoners on death row, because a lot of them were there 
because of torture.
    So this does occur in all countries and so--and even in our 
own country. And right now there is a current real issue in my 
own State of Illinois, the city of Chicago. You're probably not 
mindful of that, but I just for the record wanted to reflect 
that.
    Thank you so much. I yield back.
    The time of the gentleman has expired, and now we will 
recognize the gentleman who just joined us, Mr. Scalise, who 
has joined us from Louisiana.
    Mr. Scalise, you are recognized for 5 minutes for 
questioning.
    Mr. Scalise. Thank you, Mr. Chairman.
    I would first ask--the comment that Mr. Jones made a few 
minutes ago about who is calling the shots, I guess, in Cuba. 
Do you really suggest that Fidel Castro is not in some way in 
control of the Government of Cuba?
    Mr. Jones. I am suggesting that he remains as head of the 
Communist Party but he is not President of Cuba. There has been 
a whole new wave of people brought in. Does that mean Raul 
Castro does not consult his older brother? Absolutely, I'm sure 
he does. But I think it would be a mistake to take his writings 
in Granma as necessarily reflecting the absolute position of 
the Cuban Government.
    And I think, just as President Obama did not take the 
statements of Mr. Gibbs and Mr. Restrepo, which were fairly 
hardline, but he put forth a different view of what his view 
was in terms of the relationship with Cuba, and I think we 
should wait, the U.S. Government should wait for the official 
response from Raul Castro or his ministers in terms of how they 
want to proceed.
    Mr. Scalise. You know, I would still doubt that Fidel is 
removed from giving orders or having a direct say in how the 
government is running. But I do think, as we look at and debate 
this proposal to change U.S. policy, a policy that has been in 
effect for decades, I think we need to look at a broad range of 
issues, not just the economic issues but the political issues, 
and also the impact it would have on Americans who live here 
today who were literally run out of Cuba, who still have very 
vivid memories of their property being taken, their families 
being threatened, in some cases detained, and in all of the 
things that they escaped and what this would mean to them, the 
people that are contributing to our economy, who are active 
citizens in their communities, who are business owners, and who 
have taken offense and many have expressed very publicly the 
offense they would have to assisting this Castro government. 
Whether it is Fidel or Raul, it is still the Castro government 
that is running and keeping the reins over the citizens there.
    I don't know if any of you all have consulted the different 
Cuban-American communities throughout our country to----
    Mr. Jones. The only thing we know, the only thing those 
people know----
    Mr. Scalise. Which people? Which people?
    Mr. Jones. The people who are concerned about their 
property being confiscated and families and the problems of the 
early '60s.
    The only thing we know, after 50 years almost, is that none 
of those problems have been solved with the current policy.
    The confiscation of property, for example: First, not a 
single trademark has been confiscated. There are 5,000 
registered trademarks of U.S. brands in Cuba that are 
maintained today. And I have taken companies down to the Cuban 
Chamber of Commerce and other places----
    Mr. Scalise. I apologize to cut you off. My time is running 
out. Ambassador Cason has had his hand up.
    Did you have something you----
    Mr. Cason. Yes, I think the embargo was put in place, of 
course, originally because of confiscation of U.S. properties. 
Mr. Jones mentioned nickel. That was one of the properties that 
was seized from the American Government at the time.
    I would like to make the point that nobody's policies have 
been able to budge Fidel Castro from the course that he has 
been on. For 50 years, the rest of the world, except us, has 
pursued a policy of engagement in trade and tourism. My 
question is, where is the beef? They've been doing this for 50 
years; we are the only ones that haven't. And people say, now, 
we should do something different, and Castro will change. We 
don't have magic pixie dust to make that happen. It's because 
this is the nature of this guy.
    It's too bad that nobody's policy has worked. But I think 
when they are gone, what is left of the embargo will be a 
leverage on the military, because it is a military 
dictatorship. Those guys will see their vested interest in 
moving the country in the right direction so that we can 
liberate the hordes of American tourists that we would like to 
see go there.
    Mr. Scalise. And for Mr. Thale and Ms. Rothkopf, I know 
China, Venezuela, other countries are doing business in Cuba 
today. We've heard testimony about the average per capita 
income. If you can address that, as well, and what types of 
consumers are in the country that we could even be doing 
business with if we went down that road.
    What types of products do China, Venezuela, other countries 
provide that aren't available, or what are they not providing 
where there even would be a role for America to play? And then, 
what type of consumer base is out there?
    Ms. Rothkopf. I think the first thing that we have to think 
about, in terms of what the U.S. can provide that isn't being 
provided by other countries, is to think about our proximity. 
And in my testimony I identified a number of areas, including 
agriculture, for example. Cuba has the potential to be the top 
foreign market for U.S. rice, for example. We've discussed 
tourism, machinery, oil. I think we talked about biotechnology.
    There is a whole host of products that we can provide, 
including agricultural products and consumer products, simply 
because we are closer, which will give us a competitive edge 
over----
    Mr. Scalise. What is the average per capita income?
    Ms. Rothkopf. Was that in your testimony? It was not in 
mine.
    Mr. Thale. Mr. Scalise, the average--I believe the average 
per capita income is about one-fifth of that of the United 
States. So the per capital income of the United States is about 
$40,000, and that in Cuba is about $8,000, $8,500.
    So there is no question, consumer demand is not what's 
going to drive trade between the United States and Cuba. What's 
going to drive demand is infrastructure, wholesale commodities 
and so on. And the U.S. has--it's less about filling holes. I 
think there are some holes, but it's less about filling holes 
than it is about the comparative advantage we have because of 
the reduced shipping costs. And I think rice is the single most 
dramatic example that----
    Mr. Rush. The gentleman's time has expired.
    Ms. Rothkopf. Right. And just to add to that, the 
additional tourist arrivals, just for example, from the 
increased tourist demand for food will boost domestic demand 
for U.S. products, as well.
    Mr. Scalise. I yield back.
    Mr. Rush. I thank the gentleman.
    If the witnesses will indulge us, we will go into a second 
round of questioning. And we will ask the members of the 
committee to restrict their questions to 2 minutes.
    And the Chair recognizes himself.
    Ambassador Cason, I see that you served in Venezuela and 
Bolivia during your career, outstanding public service. And 
have these two nations engaged in any form of nationalization 
of companies and other business entities?
    Mr. Cason. Yes, Bolivia most recently.
    Mr. Rush. Would you suggest that we create a trade embargo 
around these two nations?
    Mr. Cason. No. I think that, you know, if you were starting 
today and said, would the trade embargo--if we were to launch 
it today, would it change Cuba's behavior, I think the answer 
would be no. And I think we've seen----
    Mr. Rush. Why would you suggest that we continue the trade 
embargo against Cuba and----
    Mr. Cason. Well, first of all----
    Mr. Rush. Let me ask the question, please.
    And, also, why wouldn't we also have a similar practice as 
it relates to other countries that have significant human 
rights violations, extraordinary human rights violations in 
some instances?
    Mr. Cason. As I said originally, the embargo was originally 
designed as a reaction to confiscation of American properties 
in Cuba, and it has evolved over the years. I think if you were 
to say, with what we know about the embargo today, if you 
started it fresh, would it induce somebody like Fidel Castro to 
bring democracy, like every other policy in the world of every 
variation that anybody else has tried, it hasn't.
    So, to think that ending the embargo now would somehow 
induce Fidel Castro at this late stage in his life to become a 
democrat or do any of the things that we say are our endgame 
for Cuba, it is just not going to happen.
    Mr. Rush. Thank you. The Chair's time is up.
    The Chair now recognizes the ranking member, Mr. 
Radanovich, for 2 minutes.
    Mr. Radanovich. Thank you, Mr. Chairman.
    Mr. Jones, I do have a question for you. You testified that 
there are about 500 international companies represented in 
Cuba, with substantial investment there. But according to the 
State Department, the business environment is so unfriendly 
that the number of joint ventures dropped from 540 in 1982 to 
287 in 2005.
    Because of the government's recentralization efforts, it is 
estimated that one joint venture and two small cooperative 
production ventures have closed each week since the year 2000. 
And foreign direct investment dropped from $448 million in the 
year 2000 to $39 million in 2001 and to zero in the year 2002.
    Are these 500 international companies independently owned, 
or are they joint ventures? And if they are joint ventures, why 
the difference between the State Department figures and your 
testimony? Can you help bridge that?
    Mr. Jones. Yes, I will try.
    First, the joint ventures have actually fallen even 
further, down to about 237 now. And there is a reason for that. 
Cuba, when it started into the joint venture business, which 
was in '94, '95, they were in a learning process. There hadn't 
been a single joint venture in Cuba between 1959 and 1994. They 
were learning how to do this. And things change over the times, 
and they learned what they wanted, what the country needed, 
which joint ventures contributed to national economy, which 
they wanted to do and didn't do. And over the course of time, 
they began closing and not renewing and not entertaining small- 
to medium-sized joint ventures, with a concentration on larger 
joint ventures of a much more strategic and nationally 
important basis. For that reason, many were closed, many ended, 
and the people left.
    Those 500 companies--I haven't got the breakdown as to 
which are representatives, which are sales agents, which are 
real estate partners. All I know is that there are offices 
there of non-U.S. Companies for a variety of business reasons.
    Mr. Radanovich. So you're saying that Castro now permits 
wholly owned private international businesses to operate 
without taking a cut?
    Mr. Jones. Joint ventures are generally on a 50-50 basis. 
There have been some 100 percent foreign-owned joint ventures, 
particularly in the power generation area.
    Most of them, as I said, are 50-50, with a joint venture 
partner. And the Cuban enterprise with which it has a contract 
forms a board, develops a business plan, sets up a business, 
joint venture. The foreign partner can take its profits after 
taxes out of the country. And many, particularly in the oil, 
mining, and some of the areas that I mentioned earlier, are 
functioning very well.
    Mr. Radanovich. Thank you, Mr. Chairman.
    Mr. Rush. The gentleman's time has expired.
    The Chair now recognizes the gentlelady from Florida, Ms. 
Castor, for 2 minutes.
    Ms. Castor. Thank you, Mr. Chairman.
    Mr. Thale, in your testimony, you state that some of the 
countries that currently trade with Cuba use their engagement 
to promote human rights. Provide an example for us, or a few 
examples, of what other countries that are currently trading 
with Cuba are doing to promote human rights in Cuba?
    Mr. Thale. Thank you for the question.
    The two most dramatic, I think, and most high-visibility 
examples are Brazil and Spain.
    And in the case of Brazil, the President of Brazil visited 
Cuba last January. He pledged a billion dollars in credit for 
trade and investment. And it is widely believed, including by 
U.S. Government officials, that he began a dialogue with the 
Cuban political leadership about the release of political 
prisoners and about long-term political relaxation in Cuba 
itself. And I think it is generally believed that President 
Lula has continued to raise those issues in all of his and his 
government's subsequent interactions with Cuba. So, again, I 
don't think Lula is expecting all 200 political prisoners to be 
released tomorrow. But I think that is an issue on the table 
for the Brazilians.
    It think Spain, as it's led the European Union's policy 
shift and re-engagement with Cuba, has had that issue on the 
table, as well. And I think it's fairly clear that the release 
of political prisoners for Zapatero and the Spanish Government 
is an important question. Again, I don't think they are going 
to have, sort of, ``We'll add a new trade deal; you'll release 
four political prisoners'' kind of thing, but I do think you've 
seen movement on this.
    And I think the historic example here, Congresswoman, is 
that if you look at the period in the year around the Pope's 
visit to Cuba, when Vatican diplomacy focused on the political 
prisoner question, there was never any explicit deal made at 
all, but in that period, the number of political prisoners in 
prison in Cuba was reduced by about a third.
    Similarly, if you look at the period around when President 
Carter reopened the U.S. Interest Section in Havana, the number 
of Cuban political prisoners dropped significantly.
    So I think the evidence is that you do see movement on 
these kinds of issues when there is consistent engagement, when 
there is real interaction, and when you're not looking for, 
sort of, a precondition or tit-for-tat kind of concessions.
    Ms. Castor. Thank you.
    Mr. Rush. Thank you.
    Ambassador Cason and the other witnesses, I really 
appreciate your testimony. I must say that I spent 4 hours in 
meetings with President Raul Castro, an hour and a half at the 
home of Fidel Castro, and had some extensive conversations with 
him. And I must agree with your other witnesses, Ms. Rothkopf, 
Mr. Thale and Mr. Jones--I certainly disagree with you--about 
the mind of the Cuban people and the mind of Fidel Castro and 
the mind of Raul Castro as it relates to normalization. I want 
to just say that, in conclusion, it was very informative for 
me, a first-time visitor to Cuba.
    With that, the hearing is now concluded. I want to thank 
the witnesses for your presence. Thank you for appearing before 
us. And this hearing is now adjourned.
    [Whereupon, at 4:26 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

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