[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]







                           TRADE WITH CUBA: 
                        GROWTH AND OPPORTUNITIES

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

                                HEARING

                               BEFORE THE

         SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 15, 2016

                               __________

                           Serial No. 114-150

                               __________

        Printed for the use of the Committee on Foreign Affairs





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                      COMMITTEE ON FOREIGN AFFAIRS

                 EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida         BRAD SHERMAN, California
DANA ROHRABACHER, California         GREGORY W. MEEKS, New York
STEVE CHABOT, Ohio                   ALBIO SIRES, New Jersey
JOE WILSON, South Carolina           GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas             THEODORE E. DEUTCH, Florida
TED POE, Texas                       BRIAN HIGGINS, New York
MATT SALMON, Arizona                 KAREN BASS, California
DARRELL E. ISSA, California          WILLIAM KEATING, Massachusetts
TOM MARINO, Pennsylvania             DAVID CICILLINE, Rhode Island
JEFF DUNCAN, South Carolina          ALAN GRAYSON, Florida
MO BROOKS, Alabama                   AMI BERA, California
PAUL COOK, California                ALAN S. LOWENTHAL, California
RANDY K. WEBER SR., Texas            GRACE MENG, New York
SCOTT PERRY, Pennsylvania            LOIS FRANKEL, Florida
RON DeSANTIS, Florida                TULSI GABBARD, Hawaii
MARK MEADOWS, North Carolina         JOAQUIN CASTRO, Texas
TED S. YOHO, Florida                 ROBIN L. KELLY, Illinois
CURT CLAWSON, Florida                BRENDAN F. BOYLE, Pennsylvania
SCOTT DesJARLAIS, Tennessee
REID J. RIBBLE, Wisconsin
DAVID A. TROTT, Michigan
LEE M. ZELDIN, New York
DANIEL DONOVAN, New York

     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

               Jason Steinbaum, Democratic Staff Director
                                 ------                                

         Subcommittee on Terrorism, Nonproliferation, and Trade

                        TED POE, Texas, Chairman
JOE WILSON, South Carolina           WILLIAM KEATING, Massachusetts
DARRELL E. ISSA, California          BRAD SHERMAN, California
PAUL COOK, California                BRIAN HIGGINS, New York
SCOTT PERRY, Pennsylvania            JOAQUIN CASTRO, Texas
REID J. RIBBLE, Wisconsin            ROBIN L. KELLY, Illinois
LEE M. ZELDIN, New York





















                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

C. Parr Rosson, Ph.D., head of department, Agricultural 
  Economics, Texas A&M University................................     5
Mr. Ray Stoesser, president, Texas Rice Council..................    17
Mr. Jason Marczak, director, Latin American Growth Initiative, 
  Atlantic Council...............................................    36
Mr. Mauricio Claver-Carone, executive director, Cuba Democracy 
  Advocates......................................................    43
Richard E. Feinberg, Ph.D., professor, School of Global Policy 
  and Strategy, University of California, San Diego..............    53

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

C. Parr Rosson, Ph.D.: Prepared statement........................     7
Mr. Ray Stoesser: Prepared statement.............................    19
Mr. Jason Marczak: Prepared statement............................    38
Mr. Mauricio Claver-Carone: Prepared statement...................    46
Richard E. Feinberg, Ph.D.: Prepared statement...................    56

                                APPENDIX

Hearing notice...................................................    78
Hearing minutes..................................................    79
Written responses from Mr. Mauricio Claver-Carone to questions 
  submitted for the record by the Honorable Edward R. Royce, a 
  Representative in Congress from the State of California, and 
  chairman, Committee on Foreign Affairs.........................    80

 
                           TRADE WITH CUBA: 
                        GROWTH AND OPPORTUNITIES

                              ----------                              


                        TUESDAY, MARCH 15, 2016

                     House of Representatives,    

        Subcommittee on Terrorism, Nonproliferation, and Trade,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The subcommittee met, pursuant to notice, at 1:30 p.m., in 
room 1334 Longworth House Office Building, Hon. Ted Poe 
(chairman of the subcommittee) presiding.
    Mr. Poe. The subcommittee will come to order.
    Without objection, all members may have 5 days to submit 
statements, questions, extraneous materials for the record 
subject to the length limitation in the rules.
    At this time I will make my opening statement. Then I'll 
recognize members if they wish to make them as well.
    In 1962, the United States imposed a trade embargo on Cuba. 
Fifty-four years later, Cuba is still communist and the Castros 
are still in charge.
    But it has succeeded--this policy--in hurting U.S. 
agricultural business. In December 2014, the administration 
announced that the U.S. would take steps to normalize the U.S.-
Cuba relationship.
    Cuba was removed from the state sponsor of terrorists list. 
A U.S. Embassy was opened in Havana. The Department of Treasury 
and Commerce rolled out three rounds of trade reforms. In fact, 
a new round of travel and trade reforms was announced today.
    But it is Congress alone than can lift the embargo on Cuba. 
This hearing gives us a timely opportunity to examine the 
changes made so far to the U.S. trade policy toward Cuba and 
question how the relationship will move forward.
    The United States used to be one of Cuba's most important 
agricultural trading partners. Before the embargo, Cuba bought 
more than half of the U.S. annual long grain rice. Rice exports 
to Cuba counted for over one-third of the total U.S. rice 
exports.
    However, this market has disappeared. The U.S. has not 
exported rice since 2009 because the United States has changed 
its cash on demand policy. As opposed to paying at the dock, 
now they have to pay cash before they leave.
    Rice farmers were not the only ones hit by the drop of 
exports to Cuba. Wheat farmers haven't exported to Cuba since 
2011.
    In 2014, the U.S. share of Cuban market was a measly 16 
percent, down from a high of 42 percent in 2009. As I 
mentioned, one of these reasons was the U.S. Treasury 
Department's interpretation of the rule that made it more 
difficult to be a reliable trading partner with Cuba.
    The distance between Cuba and the United States is less 
than 100 miles, as we all know. The distance between the Gulf 
Coast and Cuba is about 900 miles.
    The distance between Vietnam--that also sells rice, also a 
communist country--to Cuba is 9,000 miles. Exporting to Cuba 
requires no infrastructure because American exporters have a 
strong foothold in the Caribbean and Latin American markets but 
not Cuba.
    The Port of Houston would be a natural gateway for trade 
with Cuba because it already exports a lot of products that 
Cuba needs. Although some restrictions on trade with Cuba have 
been eased, there's still a small number of hurdles that put 
U.S. farmers at a competitive disadvantage.
    In Texas, my state, I've seen firsthand how the decline in 
exports to Cuba have affected American farmers. I'm thankful we 
have one of those farmers, Ray Stoesser, with us today. He's 
not a political philosopher. He works the soil and grows rice. 
Ray, thanks for coming.
    U.S. exporters should have an advantage over their foreign 
competitors because of the lower shipping costs and transit 
times, and the product is better.
    Unlike Cuba's current rice suppliers such as Brazil and the 
communist country of Vietnam, U.S. farmers can provide year-
round availability of high-quality rice that Cuban consumers 
prefer.
    However, the United States is not the only option in town 
for the Cubans. As the U.S. slowly struggles to sort out what 
our trade policy is, competitors such as the European Union, 
China, and other Latin American states are stepping up to get 
in on the action.
    Our competitors don't wait for the United States to make up 
its mind what it's going to do. It says that the Castro 
brothers are discriminating against American businesses as a 
form of leverage. People disagree on that but it could be 
possible.
    We know that the Cuban Government forces American farmers 
to sell their goods to a state-owned company called ALIMPORT.
    Although trade relations have opened up, the Cuban 
Government has been overly hesitant to actually sign business 
deals with the United States because our own Government is 
doing things that are holding U.S. companies back.
    For example, U.S. farmers cannot offer terms of credit to 
Cuban buyers. That means Cuba has to make all the payments up 
front in cash when purchasing agricultural commodities.
    My opinion is the United States Government should revoke 
this policy and allow the shipper--the agricultural shipper 
assume the risk in dealing with credit issues with Cuba and not 
have the U.S. Government prevent the financial transactions 
from taking place.
    In theory, our farmers have the freedom to export to Cuba 
but in practice the U.S. Government prevents it. It's time 
maybe to reassume and change the rules to allow our 
agricultural businesses to assume financial risk.
    The U.S. has the potential to be a strong contender in the 
Cuban market. According to some studies, lifting the embargo 
could potentially bring as much as $4.3 billion to the United 
States through exports and may create as many as 6,000 jobs.
    I look forward to this hearing and seeing from our 
witnesses how we can establish a better trade relationship with 
Cuba that benefits primarily American businesses but also Cuba.
    I will now yield to the ranking member from Massachusetts 
for his opening statement.
    Mr. Keating. Thank you, Chairman Poe, for conducting this 
afternoon's hearing. I'd like to thank our witnesses. The 
configuration of this room is such that you seem very far away.
    In fact, Cuba is probably closer--but bear with us. We're 
pleased to have you here and you truly bring some expertise to 
us.
    You're specialists representing the front lines of U.S. 
exports and trade, academia, advocacy organizations, and I 
welcome the conversation that we're going to have as the 
hearing progresses.
    The subcommittee previously held a hearing in September 
2015 which examined agricultural trade with Cuba with a panel 
of administration officials.
    Since then, the Commerce and State Departments, along with 
other agencies, have continued toward normalizing relationships 
with their Cuban counterparts.
    In January, the administration announced authorized trade 
with state-owned companies, which run the majority of the 
country's commerce, and later this month the President will 
schedule and make a landmark visit to Cuba, which will be the 
first visit to Cuba by a sitting U.S. President since 1928.
    While this trip will cover many topics, the focus on 
business opportunities and trade will be front and center. It 
will be important to hear from our witnesses about their views 
on the pros and cons of trade reforms that could help U.S. 
businesses.
    I understand the desire for a different relationship with 
Cuba surrounding new commercial opportunities in the Cuban 
market.
    Currently, Cuba imports about 80 percent of its food, next 
to the European Union, China and Brazil, the country's two 
highest suppliers.
    There's no denying that there are substantial opportunities 
for U.S. businesses, particularly in the agricultural industry.
    However, I remain cautious with regard to how well-intended 
policies may impact those hurt most by the regime's policy--the 
Cuban people.
    Opponents claim we have demanded too little from Cuba, 
particularly in the area of human rights. It should be 
emphasized that any economic gains made between the United 
States and Cuba should also accompany gains in civil and the 
civil society, free media and the ability for political 
discourse by the Cuban people.
    The jury is still out on Cuban Government's efforts to 
grant additional freedoms. After all, conditions on the island 
have not changed appreciably.
    The Cuban Government continues to jail political dissidents 
without just cause, engages in other human rights abuses and 
fails to respect the rule of law.
    As we continue to reassess our policy toward Cuba, it's 
fundamentally important that we strive to strike the right 
balance between economic prosperity and personal freedoms for 
both countries.
    Thank you, Mr. Chairman. I yield back.
    Mr. Poe. Chair will recognize members for their opening 
statements. Without objection, the Chair will recognize Mr. 
Crawford from Arkansas for a 1-minute opening statement.
    Mr. Crawford. Thank you, Mr. Chairman, and I'd like to 
thank you and the ranking member for holding this important 
hearing to discuss trade opportunities.
    We're currently missing out with Cuba. I also want to thank 
you, Chairman, for inviting me to be here. I appreciate your 
indulgence and I appreciate your partnership in efforts to open 
up the Cuba market for ag exports.
    I'd like to encourage my colleagues who favor a more 
incremental approach to Cuba trade to take a look at 
legislation that I've introduced--H.R. 3687, the Cuba Ag 
Exports Act.
    This bill simply allows our producers to sell food into the 
Cuban market just like we're able to do with virtually every 
other nation in the world.
    Yield back.
    Mr. Poe. Chair recognizes the gentlelady from California, 
Ms. Bass, for an opening statement.
    Ms. Bass. Thank you, Mr. Chair.
    First of all, I really appreciate your leadership on this 
issue and in particular your comments that you made regarding 
barriers between our two countries.
    The U.S. and Cuba have made historic diplomatic progress 
following President Obama's announcement to begin normalizing 
relations with Cuba in December 2014.
    I note the impressive bilateral steps we have taken 
regarding law enforcement, counter narcotics, mail claims, 
travel, commerce, intellectual properties and global health.
    While it is necessary to commend the significant steps we 
have taken, it is also important to note that there is still 
room for growth in areas of agricultural trade but also in one 
area I'm particularly interested in and that is health care and 
what we both have to learn from each other's countries.
    And I will mention specifically during the Q and A but 
there are a couple of areas--one, lung cancer and a vaccine 
around lung cancer, and another one related to diabetes, and I 
yield back the balance of my time.
    Mr. Poe. I thank the gentlelady.
    Without objection, all the witnesses' prepared statements 
will be made part of the record. I ask that each witness keep 
your presentation to no more than 5 minutes.
    As a side note, we will have votes again in approximately 2 
hours. We want to finish this hearing before that. I will 
introduce each witness and then give them time for their 
opening statements.
    Dr. Parr Rosson is a professor at the department head of 
the Agricultural Economics Department at Texas A&M University. 
His research interests focus on international trade, 
international marketing, economic impacts of trade, trade 
agreements and trade policy.
    Mr. Ray Stoesser is the president of the Texas Rice Council 
and a board member of the U.S. Rice Producers Association. He's 
a third-generation rice farmer who lives on the family farm in 
Dayton, Texas.
    Mr. Jason Marczak is the director of the Latin American 
Economic Growth Initiative at the Atlantic Council's Latin 
American Center. He is at the forefront of the center's 
analysis on issues such as trade and commerce, U.S.-Cuba 
relations, China-Latin America energy.
    Mr. Mauricio Claver-Carone is the executive director of the 
Cuba Democracy Advocates in Washington, DC. His nonpartisan 
organization is dedicated to the promotion of human rights, 
democracy and the rule of law in Cuba.
    Dr. Richard Feinberg is the professor of international 
political economy at the University of California, San Diego's 
graduate school of public policy and strategy.
    Previously, he served as senior director of the National 
Security Council's Office of Inter-American Affairs.
    Dr. Rosson, we'll start with you. You have 5 minutes. The 
Aggies go first.

    STATEMENT OF C. PARR ROSSON, PH.D., HEAD OF DEPARTMENT, 
          AGRICULTURAL ECONOMICS, TEXAS A&M UNIVERSITY

    Mr. Rosson. Good afternoon, Chairman Poe, Ranking Member 
Keating and esteemed subcommittee members. I want to thank all 
of you for the opportunity to testify here today on 
agricultural trade with Cuba.
    I have conducted the economic analysis related to this 
topic for about 15 years and continue to monitor the conditions 
there in order to facilitate U.S. agricultural exports and 
business interests trying to operate in the country.
    What we found is that one U.S. job is created for every 
$76,000 in U.S. exports and furthermore an additional $170,000 
in business activity is also created.
    Cuba's market for imported foods approaches roughly $2 
billion annually. U.S. agricultural exports have averaged about 
$365 million annually since 2002.
    But our exports have been highly erratic. They've ranged 
from a low of about $141 million in 2002 to a high of just over 
$700 million in 2008.
    More recently, our exports have declined sharply to $149 
million in 2015. This product mix of U.S. exports has also 
changed.
    From 2002 through 2012, we exported a wide variety of food 
and agricultural products--corn, soybeans, rice, wheat, animal 
feeds, cotton, frozen chicken and turkey, pork, beef, dairy 
products, dry beans, snack foods, canned fruits and vegetables, 
grapes, pears, apples, condiments, drinks and treated poles.
    So our product mix was very diverse and highly varied 
during that period. More recently, however, U.S. exports have 
been concentrated in three primary product areas and that 
relates to frozen chicken, the soy complex--primarily beans and 
meal--and finally, corn.
    These products together accounted for about 99 percent of 
our exports in 2015. This change in product mix and the 
subsequent decline in U.S. exports can be attributed to several 
factors.
    First of all, Cuba has found other suppliers for many of 
their product needs, particularly rice, wheat, corn and some 
higher value foods.
    We see competition from Brazil, Canada, Argentina, Mexico, 
Spain and Vietnam, and this competition gains market share at 
the expense of U.S. exports.
    Very often, the competition provides credit and very 
lenient shipping terms, thereby displacing our products.
    Second, our cash in advance payment policy has made our 
products more expensive to Cuba, leading to delays in shipping 
and very often costly demurrage charges which are borne by the 
Cuban Government through ALIMPORT, the food import agency.
    Third, a stronger U.S. dollar and subsequently higher 
priced U.S. products has also had a negative impact on our 
exports, making them more expensive to Cubans and higher priced 
compared to the competition.
    Fourth, during the global recession, Cuba's earnings from 
tourism declined along with earnings from other important 
exports such as nickel. Remittances from Cuban-Americans living 
in the United States and other countries declined as well, 
leaving Cuban consumers with less disposable income.
    Finally, Cuba is a centrally-planned economy with a portion 
of food purchases made by ALIMPORT, the central-planned food 
import agency.
    Competitors do not have to go through ALIMPORT to export 
their products and therefore they are lower cost and more 
competitive.
    Now, despite these constraints, we believe that
    Cuba has potential for growth to become a larger market for 
U.S. exporters. Based on our recent research, we believe that 
U.S. exports to Cuba have the potential to reach somewhere 
between $1 billion and $1.2 billion annually and that is 
because Cuba's demographics are favorable for market growth.
    With a population of about 11 million people with a 
literacy rate of about 99 percent, Cuba has a highly trainable 
work force of more than 5 million people.
    In addition, those aged between 25 and 54 represent 47 
percent of the population and therefore in their peak 
consumption years.
    These characteristics are comparable to those of the 
Dominican Republic, which in 2015 was about a $1.1 billion 
market for U.S. food and agricultural products.
    For this potential to be realized, however, several things 
are important. The first is impound growth, the second is 
improvement of infrastructure and logistics and the third is 
continued growth in tourism and the continued flow of 
remittances.
    Consistent, transparent and facilitative trade policies 
will also help us stimulate exports as well.
    Thank you again for this opportunity to testify. I look 
forward to your questions.
    [The prepared statement of Mr. Rosson follows:]



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    Mr. Poe. Mr. Stoesser, you may make your opening statement. 
Fix your microphone, if you would. Push that button. Thank you.

  STATEMENT OF MR. RAY STOESSER, PRESIDENT, TEXAS RICE COUNCIL

    Mr. Stoesser. Mr. Chairman and members of the committee, I 
am Ray Stoesser, a third-generation rice farmer from Dayton, 
Texas.
    I am president of the Texas Rice Council and serve on the 
board of the U.S. Rice Producers Association. As a first-time 
witness before the Congress I am honored and humbled to appear 
here today.
    I will summarize my prepared statement, which has been 
submitted for the record. The Stoesser farm has been in 
production for over 100 years. I am blessed that my sons, Neal 
and Grant, have joined me in farming.
    Common sense access to the Cuban market will ensure that 
Neal, Grant and my grandchildren will be able to continue 
operating our farm into its fifth generation.
    After more than 50 years, it is clear that our Cuban policy 
defies common sense. It punishes U.S. farmers and costs U.S. 
jobs. Before the embargo, Cuba was our largest rice export 
market. In 1959, Cuba bought 51 percent of all U.S. rice 
exports.
    The 11 million people in Cuba are among the greatest 
consumers of rice in the Western Hemisphere. Cubans consume 125 
pounds of rice per person per year. This compares to only 27 
pounds per person in the United States.
    In 2000, Congress opened agriculture sales and Cuba became 
our fastest growing rice market. There's a chart that says 
that. In 2004, the Cubans bought $64 million worth of our rice, 
providing 1,400 U.S. jobs.
    In 2005, the Office of Foreign Assets Control restricted 
payment terms for ag sales to Cuba. As this chart indicates, 
our rice sales to Cuba plummeted to zero by 2009 and stayed 
there.
    By 2005, the Cubans had purchased a total of more than $1 
billion in U.S. ag goods. Cuban buyers paid promptly and most 
often paid in cash, contrary to what opponents of the trade 
with Cuba had foretold.
    The only disruption of trade was brought about by the U.S. 
Government, not by Cuban buyers. Cuba can return to a top 
market of U.S. rice but no buyer can rely on food supplies if 
the exporting country's government may once again restrict 
exports without warning.
    U.S. agriculture has become a secondary supplier for rice 
and other farm goods to Cuba. Cuba's need for imported rice is 
enough to buy more than the entire Texas crop each year. This 
could generate almost $27,000 annually for every rice farmer in 
the United States.
    As Dr. Rosson explained, rice is just one of the many ag 
goods that Cuba must import. Based on a review by the 
International Trade Commission, we estimate that the 
restrictions on U.S. trade with Cuba cost U.S. farmers, 
processors and exporters at least $800 million every year. 
Sadly, our share of the Cuban market continues to fall.
    This January, OFAC reversed the 2005 rule on the term cash 
in advance for commodity sales to Cuba. But our reputation as a 
reliable supplier cannot be restored until the Cubans are 
confident that the U.S. Government will not void contracts or 
restrict trade.
    OFAC has relaxed sanctions to allow export financing for 
goods that support Cuba's agricultural production, processing 
and distribution. So financing can now be provided to enable 
Cuba to compete with U.S. farmers but not to sell U.S. food to 
Cuba.
    U.S. law also prohibits the use of credit, credit 
guarantees and market development and promotion funds to 
increase sales of our food to Cuba.
    We continue to lose market share to competitor countries 
that are free to use these other tools. Rice farmers urge 
Congress to return common sense to our Cuba policy.
    We strongly support legislation such as H.R. 3238 and H.R. 
3687 to correct these discriminatory effects on U.S. farmers. 
We urge the repeal of the embargo.
    Thank you very much.
    [The prepared statement of Mr. Stoesser follows:]
    
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    Mr. Poe. Thank you, Mr. Stoesser.
    The Chair will recognize Mr. Marczak for his 5-minute 
opening statement.

STATEMENT OF MR. JASON MARCZAK, DIRECTOR, LATIN AMERICAN GROWTH 
                  INITIATIVE, ATLANTIC COUNCIL

    Mr. Marczak. Chairman Poe, Ranking Member Keating and 
members, thank you very much for the invitation to testify this 
afternoon on trade with Cuba. It's a great honor to be here.
    I'll be summarizing my written testimony and will focus on 
the geopolitical implications of opening trade as well as how 
to build our commercial relations.
    First, to put this in context, it was only 15 months ago 
the United States reversed a 54-year policy that sought regime 
change and isolation but yet had clearly failed.
    It is also important to put this moment in context in the 
hemisphere. The pendulum is swinging away from nationalist 
regimes, whose claim to power partly rested on an anti-U.S. 
imperialist message. The Cuba rapprochement is accelerating 
this trend.
    Expanding U.S.-Cuba trade opportunities is a strategic 
long-term opportunity for the U.S. A stronger commercial 
relationship will open up opportunities for American 
businesses, empower the Cuban people and move forward broader 
U.S. foreign policy priorities.
    Political liberties for the Cuban people should continue to 
be a top priority for U.S. policy. But it's time to help the 
people of Cuba secure greater economic rights as well, 
otherwise the Cuban people will continue to face economic 
challenges that could drive instability and mass migration just 
off our shores.
    It was in a press conference in 1955 when President 
Eisenhower observed that ``trade is the greatest weapon in the 
hands of the diplomats.'' Trade can not only raise living 
standards but is an instrument of peace and a means to spread 
Western values.
    Further, opening trade with Cuba carries ramifications for 
U.S. relations and strategic priorities in the Western 
Hemisphere. Venezuela plays an important role in keeping the 
Cuban economy afloat, giving the autocratic regime in Caracas 
sway in Havana.
    Greater U.S.-Cuba commercial relations will chip away at 
Venezuelan influence on the island, making it clear to those 
across the region that not even Cuba recognizes that the future 
is with Venezuela and its anti-U.S. tirades.
    Instead, a deeper trade relationship with Cuba will only 
further strengthen our allies such as Colombia. A stronger 
trade relationship and the economic dividends it could pay for 
both sides may also reduce Cuba's need to lean toward Russia in 
times of economic uncertainty.
    Geopolitics aside, the U.S.-Cuba relationship is changing 
and the world is taking notice. But without congressional 
action, just as the U.S. is opening to Cuba, American companies 
are losing ground to international competitors from the U.K. to 
Brazil and Spain to Mexico.
    And just on Friday, Cuba and the European Union signed an 
agreement to normalize relations, allowing for closer economic 
ties.
    Losing these opportunities to our European and Latin 
American allies is frustrating. Losing them to competitors such 
as China and Russia could be reason for concern.
    And although the Cuban GDP is only around $77 billion, it 
is a market with important potential for U.S. companies in 
sectors such as agriculture, telecommunications and technology 
and travel and tourism.
    Expansion in trade will also benefit the Cuban people. 
Greater foreign investment, better access to capital and a more 
robust private sector will lead to fewer Cubans dependent on 
the government for jobs, income and resources, freeing them to 
seek greater rights without the fear of job loss.
    Although privately-run businesses are replacing the state 
sector in certain industries, more than 500,000 worked in the 
private sector, a 240 percent increase in the last 6 years.
    What is the way forward? Regulatory changes have largely 
exhausted what can be done without Congress with today's 
executive actions further facilitating commerce and travel.
    But relations expand beyond just government actions. In 
2015 the Cubans were inundated by an avalanche of business 
executive delegations. This was a moment of building first 
contact and of exploring the potential trade opportunities in 
countless sectors.
    But while U.S. companies wanted to move quickly, the Cubans 
have taken a ``go it slow'' approach. To build trust, U.S. 
commercial interests should be tied both to what is possible 
under U.S. regulations but also to Cuba's investment 
priorities. Projects that do not fit both qualifications will 
fall on deaf ears.
    Now, most of the major obstacles left to achieving 
normalization remain in the hands of Congress. In addition to 
lifting travel restrictions, measured steps can be taken to 
remove codified rules that would have a broad economic effect 
without political cost.
    Though executive action allows financing and credit to be 
easier for certain industries, agricultural exports are exempt 
under the Trade Sanctions Reform and Export Enhancement Act of 
2000.
    Congress is also responsible for allowing American 
telecommunications infrastructure to be built. Finally, 
Congress can legislate to remove the barriers to Cuba's entry 
into the international financial institutions.
    Amendments to the Cuban Liberty and Democratic Solidarity 
Act of 1996 would allow both for Cuba to join institutions like 
the Inter-American Development Bank as well as for funds from 
the institution to be spent on loans that assist Cuba.
    Technical support from the IDB would inject global 
standards in financial and economic management while providing 
critical assistance in transitioning to a single Cuban 
currency, all issues critical for emboldening the Cuban private 
sector and enhancing U.S. trade.
    Thank you once again for the opportunity to appear before 
the subcommittee today. I look forward to your questions.
    [The prepared statement of Mr. Marczak follows:]
    
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    Mr. Poe. I thank the gentleman.
    The Chair now recognizes Mr. Claver-Carone.

 STATEMENT OF MR. MAURICIO CLAVER-CARONE, EXECUTIVE DIRECTOR, 
                    CUBA DEMOCRACY ADVOCATES

    Mr. Claver-Carone. Thank you, Mr. Chairman, Ranking Member, 
members of the committee. It's really a privilege to be here 
and join you today to discuss these important and consequential 
issues surrounding U.S. trade policy toward Cuba.
    And I particularly appreciate being given the opportunity 
to be the sole dissenting voice in this panel, as free 
expression is a right enjoyed by 34 out of 35 nations in this 
hemisphere with one exception--Cuba.
    So as you are aware, pursuant to the Trade Sanctions Reform 
and Export Enhancement Act of 2000, the sale of ag commodities, 
medicine, medical devices to the Castro regime in Cuba was 
authorized by Congress with one important caveat--these sales 
must be for cash in advance.
    Prior to that, the export of food, medicine and medical 
devices to the Cuban people, I would highlight, had been 
authorized under the Cuban Democracy Act of 1992.
    I, for one, have no problem with taking cash away from the 
Castro regime, and that's not a point of contention in this 
hearing in any way. It's the consequences of expanding these 
cash sales to bilateral trade, financing and investment--in 
other words, flushing--giving the Castro regime cash. That 
should be a concern to us all.
    I'd also--I can't help but note that, you know, whatever 
rice sales had been lost to the Cuban people in 1959 I'm sure 
has been made up in multiples to the Cuban people in Miami 
since 1959 since those people are now in Miami as opposed to 
Cuba.
    For years we've heard of how an improvement in U.S.-Cuba 
relations and easing of sanctions and increased travel to the 
island would benefit U.S. farmers.
    Well, the fact is since December 17th, 2014 the Obama 
administration has engaged the Castro regime and has provided a 
litany of unilateral policy concessions.
    We've seen the payment terms for agricultural sales have 
been eased, American travel to Cuba increased by over 50 
percent, Cuba's GDP grew by over 4 percent, diplomatic 
relations were established and all these trade delegations have 
visited Havana.
    So surely, based on this, ag sales to Cuba would have grown 
exponentially, right?
    Wrong. U.S. ag exports to Cuba plummeted in 2015 by nearly 
40 percent and that's not the only counterproductive result 
from President Obama's policy of unilaterally easing sanctions 
in December 2014. Additionally, we've seen political arrests 
have intensified.
    A new Cuban migration crisis is unfolding. The number of 
self-employed workers in Cuba has decreased. Internet 
connectivity ranking has dropped. Religious freedom violations 
have increased tenfold. Castro reneged on the release of 
political prisoners and visits by international monitors.
    So you may ask what do all of these facts regarding 
political, civil and economic rights have to do with trade with 
Cuba. The answer is everything, because the Castro regime is 
the only client business partner for foreign companies in Cuba.
    If we're going to have an honest debate about trade and 
tourism sanctions on Cuba, it's important to understand how 
that regime conducts business.
    First and foremost, from an economic perspective the very 
concept of trade and investment in Cuba is grounded in the 
misconception about how business takes place on the island.
    In most of the world, that means dealing with privately-
owned or operated corporations. That's not the case in Cuba. In 
Cuba, the trade and investment is the exclusive domain of the 
state. There are no exceptions, and that state's exclusivity to 
trade and investment was enshrined in Article 18 of Castro's 
1976 constitution.
    That exclusivity has extended to TSREEA sales and we've 
seen that of the $5 billion in U.S. ag and medical products 
that have been sold to Cuba, the unpleasant fact is that all of 
those sales by over 250 U.S. entities have only had one Cuban 
buyer--every penny--the Castro government.
    So we already know what lifting sanctions toward Cuba would 
look like. TSREEA sales have actually provided essentially the 
model for this.
    It would be Americans in the system whereby commerce is 
simply a tool to benefit and strengthen Cuba's totalitarian 
regime and let's remember what we're talking about here. The 
dominant force in Cuba's economy is the armed forces holding 
company known as GAESA.
    These are the same Cuban armed forces that held a stolen 
U.S. Hellfire missile for nearly 2 years that were caught twice 
smuggling heavy weaponry including the worst sanctions 
violation ever to North Korea, that oversee the most egregious 
abuses of human rights in the hemisphere, that have subverted 
human rights and democracy in Venezuela, export surveillance 
systems technology to other countries in the region, that 
welcome Russian military intelligence ships that dock in their 
ports, that share intelligence with the world's anti-American 
regimes, that have three senior Cuban military officers 
indicted in the United States for the murder of Americans.
    These aren't nice people in that regards. An important 
issue that I think it's important also here to recognize is 
that we need to make sure to protect American victims of stolen 
property.
    According to the American Law Review, the Castro regime's 
confiscation of U.S. assets was the largest uncompensated 
taking of American property by a foreign government in history.
    We need to make sure, and I urge Congress, for example, to 
pass legislation. If we're going to consider expanding trade 
and other issues with Cuba, we should consider taking away the 
President's waiver authority over Title III of the Libertad Act 
and allow Americans legal standing to pursue justice in courts.
    I also think it's very important that we need to uphold 
U.S. law and international labor norms. Some of the measures 
that have been recently announced have been in direct--by the 
Obama administration have been in direct contravention of the 
letter, spirit and intent of current U.S. law regardless of 
your position.
    Those should be upheld. Moreover, those deals have violated 
a myriad of international labor covenants including freedom of 
association, protection of wages, right to organize, 
discrimination, employment policy convention, et cetera.
    To conclude, there are many theories and estimates about 
how much more money one sector or another can make from 
conducting business if sanctions were eased or lifted and we're 
hearing many of those theories and estimates today.
    However, as we've learned from the drastic sale over the 
last year, that's hardly guaranteed and we need to make sure 
that those are weighed by serious factual considerations 
regarding the structure of Cuba's business entities run by the 
military, its beneficiaries, the Castro family and its cronies, 
the rights of its victims both Cubans and Americans and whether 
such practices are in our national interests.
    Thank you.
    [The prepared statement of Mr. Claver-Carone follows:]
    
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    Mr. Poe. I thank the gentleman.
    The Chair now recognizes Dr. Feinberg for his statement.

 STATEMENT OF RICHARD E. FEINBERG, PH.D., PROFESSOR, SCHOOL OF 
GLOBAL POLICY AND STRATEGY, UNIVERSITY OF CALIFORNIA, SAN DIEGO

    Mr. Feinberg. Mr. Chairman, thank you very much for 
inviting me to participate in this most timely hearing on the 
eve of the historic visit to Cuba by President Barack Obama. 
May I ask that my full text, which I will just summarize now be 
entered into the record?
    Mr. Poe. Without objection.
    Mr. Feinberg. Thank you. The views here are solely my own 
and should not be attributed to other institutions. As U.S. 
relations with Cuba gradually normalize, Cuba will become an 
interesting if modest market for the U.S. economy but of 
considerable value for many individual U.S. businesses large 
and small and I will discuss some of these market 
opportunities.
    But, as Jason Marczak has already emphasized, commerce with 
Cuba is about much more than the exchanges of grains and 
widgets. As the U.S. pivots toward a policy of positive 
engagement, economic exchange can be a potent political force.
    Commercial exchange can also support broader U.S. 
objectives of advancing market-friendly economic reform, a more 
robust and independent private sector in Cuba and a thriving 
and diversified foreign investment presence.
    Together, these changes make more likely--more likely the 
advance of fundamental U.S. interests in Cuba, the peaceful 
transition to a more pluralistic and prosperous Cuba to a Cuba 
more open to the world where the new normal is the free flow of 
goods, services, capital and ideas between our two nations.
    Cuba today altogether imports about $14 billion in goods 
and services. For a small economy, that's a low import GDP 
ratio of only 17 percent.
    Cuba cannot import more because it doesn't export to pay 
for those imports. But let's look ahead. Let us assume that 
Cuba accelerates its market-friendly economic reforms.
    Let us assume that as part of that reform process Cuba's 
rates of capital investment rise, Cuban exports become more 
competitive and therefore Cuba's capacity to import expands. 
Let's assume that Cuban import growths is about 5 percent a 
year over a 10-year period.
    If we take a compound rate of growth, sir, by 2027 Cuba 
will be importing $26 billion total, possibly as much as $34 
billion.
    What does that mean for U.S. producers? Given Cuba's 
geographic proximity and the complementarity between our two 
economies it is reasonable to project that U.S. exporters could 
capture 40 percent, perhaps, more of that expanded market.
    U.S. businesses, as we've heard, are certainly well 
positioned to provide many of the agricultural and also 
industrial products that make up large portions of Cuba's 
current import requirements as well as the financial and 
professional services that a more dynamic Cuban economy will 
require.
    By 2027, therefore, U.S. businesses could be selling $11 
billion to $14 billion each year to Cuba. Over the 10-year 
period from 2018 post-Castro to 2027 U.S. businesses could sell 
during that 10-year period a cumulative $86 billion to $101 
billion in goods and services to Cuba.
    Cuba also desperately needs massive inflows of foreign 
investment. Cuba's domestic savings and investment ratio under 
10 percent. The Latin American average is over 20 percent. Cuba 
must import more foreign investment to grow.
    The Cuban Government has recognized that. It's advertized a 
list of 326 investment projects with an initial investment 
value exceeding $8 billion.
    Cuba has said it has no particular objection to U.S. firms 
bidding on these opportunities, although it will seek a 
diversity of investment partners.
    As we've already heard, many foreign firms from Europe, 
Latin America, Canada, China have already invested in Cuba. 
U.S. regulations, of course, prohibit U.S. firms from investing 
in Cuba. But eventually a new normal in cross-straits relations 
will witness many U.S. firms seizing these investment 
opportunities.
    And Mr. Chairman, we know that U.S. investments abroad 
bring U.S. exports in their wake. Therefore, as the Cuban 
economy accelerates and U.S. investments--and U.S. businesses 
invest in Cuba, U.S. exports will also grow.
    So therefore, my estimate of $11 billion to $14 billion in 
annual U.S. exports to Cuba a decade from now may prove to have 
been overly modest.
    Now, just a brief word about the Cuba private sector. This 
is a very important part of our strategy. To date, the Cuban 
Government has authorized \1/2\ million of its citizens to work 
in the self-employment private sector.
    According to my calculations, as many as 1\1/2\ million 
additional Cubans have at least one foot in the private sector. 
That's as many as 2 million Cubans, 40 percent of their 
workforce compose the emerging private sector.
    The U.S. is already a big piece of this emerging private 
sector in Cuba. U.S. investors are dining at private paladares, 
lodged at private guest homes and purchasing the creations of 
independent artisans, and remittances from the United States 
are driving many of these new businesses and they're allowing 
homeowners in Cuba to remodel their dwellings, employ private 
contractors and participate in the newly legal real estate 
market.
    Cuba's emerging entrepreneurs and middle classes and by 
many measures, which I don't have time to go into today, Cuba 
is a middle class society.
    These private entrepreneurs and middle class Cubans will 
seek a Cuba that is more normal, more like other societies in 
the Caribbean Basin where individuals have access to middle 
class consumption patterns and have ample opportunities to 
realize their talents, participate in public affairs and pursue 
their careers independent of state control.
    Finally, Mr. Chairman, later this week President Obama and 
the First Lady will step foot on Cuban soil. President Obama 
will attempt to nudge the Cuban Government to press forward on 
their economic reforms with greater vigor.
    But most important, I think, will be the messages that he 
delivers directly to the Cuban people. He will meet with the 
island's emerging entrepreneurs and middle class citizens.
    He will engage with civil society and political dissidents.
    Mr. Poe. The gentleman's time has expired. The rest of your 
statement will be made part of the record.
    Mr. Feinberg. Thank you, sir. Thank you very much, Mr. 
Chair.
    [The prepared statement of Mr. Feinberg follows:]
    
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    Mr. Poe. The Chair will now recognize himself for 
questions. Then we'll let the members of the panel or the dais 
make comments and questions. Thank you once again, gentlemen, 
for being here.
    It seems to me that the U.S. policy against Cuba, the 
Castro regime, as articulated by Mr. Claver-Carone, a lot of 
reasons why the Government of Cuba is not acting appropriately 
by international standards.
    We cannot solve all those problems here today. Maybe we can 
talk about one of those, which is normalizing relationships 
regarding the issue of trade.
    It seems to me that Cuba trades with everybody in the 
hemisphere except us. They get their rice from Vietnam. Happens 
to still be a communist country.
    And getting rice from Vietnam that they consume I do not 
understand how that punishes the Castro regime by not letting 
us sell agricultural goods to Cuba with Vietnam as a 
competitor. It would just seem to me that that doesn't punish 
the Cubans. It helps the Vietnamese and it punishes the United 
States.
    Now, Mr. Claver-Carone has talked about some changes in 
U.S. policy that actually, because of the changes, agricultural 
sales to Cuba and specifically rice dropped as opposed to 
increased.
    Now, I'd like you all to weigh in on this. Mr. Marczak, can 
you weigh in on this issue that Mr. Claver-Carone mentioned? 
U.S. changes its policy and the policy doesn't help trade.
    It reduces trade, and how did that affect the Cuban 
Government on dealing with us because of that change in policy 
in 2004 or 2005, whichever it was?
    Would you explain that specifically, please?
    Mr. Marczak. Chairman Poe, thank you for the question.
    I think that we have to look at the, first of all, the 
decrease in agricultural exports to Cuba, which is not a result 
of the President's--President Obama's actions but it's a result 
of a number of different factors on the island and also a 
result, as my colleagues on the panel have mentioned--a result 
of the lack of competitiveness that our agricultural----
    Mr. Poe. Lack of what?
    Mr. Marczak. Lack of competitiveness.
    Mr. Poe. Okay.
    Mr. Marczak. That our agricultural exporters have in so far 
as exporting their products to Cuba when looked at comparison 
to other countries around the world.
    As you mentioned, Mr. Chairman, Vietnam is a prime example 
of that. It's a country that is taking advantage of the fact 
that the U.S. should naturally be the number-one agricultural 
exporter to Cuba.
    But because of the restrictions that lay in U.S. law 
including restrictions that Congress could potentially modify, 
the United States----
    Mr. Poe. Let me interrupt a minute. We trade with Vietnam, 
do we not?
    Mr. Marczak. Yes, we do.
    Mr. Poe. And Vietnam, like other countries, have human 
rights violations that we're concerned about as a nation, 
correct?
    Mr. Marczak. That's correct.
    Mr. Poe. Continue.
    Mr. Marczak. That's correct. And I would also say that our 
opening with--trade with Vietnam has allowed for an opening and 
a degree of liberty in Vietnam.
    Obviously, Vietnam remains a communist country but we see 
the result of an opening of trade with Vietnam in so far as 
providing greater economic liberties and opening the door for 
political liberties to the Vietnamese.
    So, in conclusion, in answer to your question, Mr. 
Chairman, you know, the policy that Congress has the ability to 
change and policy that could be changed, I think, without a lot 
of political cost specifically in the agricultural sector could 
allow U.S. agricultural exporters to be more competitive and to 
also ensure that the Cubans, you know, get their agricultural 
products and help to create jobs here in the United States 
rather than creating jobs back in Vietnam.
    Mr. Poe. Specifically, what change could be made? I know 
Congress can--has to be the one to lift the embargo but what 
are you talking about regarding the financial situation of cash 
on demand as opposed to credit, letting the agricultural 
community assume the risk rather than prohibiting it 
completely? Delve into that specifically in the remaining time 
that you have?
    Mr. Marczak. Yes. Specifically, Congress could--the 
administration has allowed for the financing of exports in a 
range of sectors through executive action.
    But Congress has the sole authority because of Helms-Burton 
to be able to remove the restrictions that prohibit 
agricultural export financing, and without that financing and, 
as you suggest, that financing--the risk for that financing 
could be taken by the exporters themselves. But without the 
ability to provide financing for those agricultural products 
our exporters and our products are at an inherent disadvantage.
    Mr. Poe. All right. My time has expired.
    I'll recognize the gentleman from Massachusetts, Mr. 
Keating.
    Mr. Keating. Thank you, Mr. Chairman.
    Sunday's New York Times included an article that 
highlighted the United States' and Cuba's different visions of 
economic engagement and we touched on some of these things.
    But tourism has long satisfied Cuba's need for foreign 
currency and it's clear that there remains a stark disparity 
between the willingness of Cuban businesses or authorities to 
enter into trade with the United States companies and the 
desire of our domestic business people to do so.
    One statistic in that article that was cited by the 
president of U.S.-Cuba Trade and Economic Council--he said that 
he counted 500 visits to Cuba by American business people since 
December 2014, more than 140 visits by United States 
representatives and officials but he can count on the number 
of--count on his fingers, you know, just the business deals 
that had been reached.
    Meanwhile, Cuban officials repeatedly just point to the 
trade embargo as an example of the United States' lack of 
commitment to strengthen relations.
    I'd just like to--and we touched on some of these things 
but give everyone a chance--how would you explain this lagging 
growth of trade between U.S. and Cuba? What other things that 
we haven't touched on to explain that lack of growth, given the 
trade restrictions? Mr. Feinberg?
    Mr. Claver-Carone. I'll take a stab. I'd be happy to take a 
stab because I think it ties into both of these questions.
    You know, the issue here, if we were talking here about 
trade with the Cuban people, as a matter of fact even trade 
with Vietnam where there are private entities that you can be 
involved with trade with, it's a whole different story, you 
know, because it's not politicized trade.
    Trade with Cuba is all politicized because there's only one 
customer. If that were to change, my testimony would have been 
very different today.
    But the fact is our sales and what the Castro regime is 
doing with--particularly with what you notice is essentially 
trying to coerce the U.S. business community to pursue its 
geopolitical gains--its needs, in the same way that it took an 
American hostage in order to gain--to coerce the United States 
into releasing three spies including one that was serving two 
life sentences for the murder--for murder conspiracy of some 
Americans and now wants to coerce the business community in 
order to unilaterally finance its regime.
    And I think that that right there is the fundamental 
problem here--the fundamental difference with Vietnam. The 
fundamental also difference with Vietnam and Brazil and the 
sales to them is that those are essentially subsidized by the 
state, by entities and deals that are less than transparent in 
which the state is essentially financing those completely.
    I mean, we're not even going to be able to compete with 
those deals in that regards because it's all politicized and 
that's the problem. When that opens up, then we can have a 
different picture and a different story.
    Mr. Keating. Is there any--some people have suggested that 
there's a deliberate effort reducing imports to the United--you 
know, from the United States to increase political pressure on 
the United States for additional sanction easing measures. Do 
you think there's any truth to that, Dr. Feinberg?
    Mr. Feinberg. So I think, first, in terms of limitations on 
our side, up until a few weeks ago, U.S. exporters were only 
permitted to export to the emerging small-scale private sector 
in Cuba.
    So we were still not allowed to export to the state-owned 
enterprises which still make up 80 percent of production in 
Cuba, okay, so that was a big no on our part.
    And with regard to investment, many U.S. firms when down 
there thinking about investment. That is totally off the table 
because of U.S. sanctions still to this day. Okay. So we have 
those restrictions on our side.
    Now, on the Cuban side, we have said the small-scale 
private enterprise we are happy to sell to you. There is where 
the Cubans have been dragging their feet and I would suggest a 
couple of reasons for that.
    One is ideological. They tend to prefer the state-owned 
enterprises as still socialists. So they don't like us 
preferring and giving advantage to the small-scale private 
sector.
    Now, most recently the Obama administration did say okay, 
U.S. firms under certain conditions can also sell to state-
owned enterprises.
    So we'll see now when President Obama is down in Havana if 
he'll be able to say okay, we gave you something that you were 
pushing for--now open channels for U.S. firms to sell to the 
emerging private sector in Cuba, and I hope very much he can 
bring home that concession from Cuba.
    Mr. Keating. Well, let me take it a step further. Let's 
assume that result. Are they going to still--because they have 
this ideology, are they going to still try and limit the 
activity with the private side? They're going to continue to do 
that even more so maybe?
    Mr. Feinberg. Well, so they've allowed, as I mentioned, 
500,000 in the private sector so far. There are still all sorts 
of limitations.
    The President will be meeting with a group of these private 
sector entrepreneurs, I understand. I think we'll have a--he 
will have a dialogue with them. He'll listen, what are your 
major problems.
    Mr. Keating. You think there's an ideology there so this is 
being manipulated?
    Mr. Feinberg. It's a combination of ideology and power. I 
mean, the government--power comes through the control of the 
economy and the state-owned enterprises. That causes them to 
want to limit the growth of the small-scale enterprises, 
without a doubt.
    Mr. Keating. That's interesting. Thank you. I yield back.
    Mr. Poe. The Chair recognizes the gentleman from 
Pennsylvania, Mr. Perry.
    Mr. Perry. Thank you, Mr. Chairman.
    I hate to be the guy that doesn't want to join the Cuba 
lovefest here but I need to associate my remarks with Mr. 
Claver-Carone.
    And then that I'm probably not going to talk about trade 
here. I got a couple statements to make and I know you're all 
interested in making money and that's great. So am I.
    From General James Clapper, director of national 
intelligence, last month, the threat from foreign intelligence 
entities is persistent, complex and evolving. Targeting and 
collection of U.S. political, military, economic and technical 
information by foreign intelligence services continues 
unabated. Russia and China pose the greatest threat followed by 
Iran and Cuba.
    I'll just remind you that something you all know, they're 
about 100 miles off the coast of Florida, right. Two weeks 
prior the U.S. military Southern Command held its annual 
Caribbean regional security conference.
    Senior members of Castro's KGB-trained spy agency were 
invited to participate. I find that particularly irritating and 
self-destructive as a person who served decades now in the 
United States military.
    I also want to remind you of the listening posts, the 
largest ones in the world based at Lourdes, which is sponsored 
by Russia and reopened after we brought Cuba to their knees 
financially and the Soviet Union as well and forced them to 
close it at some point but reopened, and the one by China at 
Bao Cao.
    I would also like to remind you that Cuba's--this is from 
the Cuban--the state-sponsored newspaper, Cuba's communist 
propaganda newspaper, Granma, has published an article claiming 
that President Obama's scheduled visit to Havana in March 
dispels decades of evidence that the Cuban Government violates 
the human rights of its citizens on the very weekend in which 
Cuban state police arrested almost 200 dissidents for peaceful 
marches against communism.
    And I'd further like to remind you of recent arrests of 
U.S. State Department officials--an official and his wife for 
over 30 years of spying at the State Department named Walter 
and Gwen Myers as well as Ana Montes, who worked for the 
Defense Intelligence Agency as a United States citizen, as a 
Cuban spy.
    While you all might like to dance with the devil to make a 
couple bucks, you can be--and with all due respect to Dr. 
Weinberg when you said they prefer the socialist model--I'll 
remind you, as you probably well know that socialism is an 
economic construct. Communism is the political construct that 
forces the economic construct.
    These folks in power have no interest at all in changing 
their ways and they are going to use us and our foolishness, 
our generosity to further their intentions.
    And while you all might be happy that we have a socialist 
running for the presidency of the United States, I find it 
particularly vexing that American service members spent and 
pledged their lives and often gave their lives in the fight 
against exactly that.
    And now we're saying yet again it's great to engage with 
these folks in the hope--in the hope that they will change 
after 40 or 50 years.
    I don't know what delusion you folks are under but listen, 
if you're under one that's great but do me this favor and I 
would hope that the President would do us this favor as well, 
which is if you're going to make a deal when a deal's been made 
let's find out what we're getting up front as opposed to giving 
everything away and then hoping that we'll get something on the 
other side.
    And so with that I will ask one question--one question 
only. Anybody can answer it. Everybody can answer it. What did 
we get--specifically, tangibly, what did we get for the deal 
that we just made?
    Mr. Marczak. I'm happy to take the first response to that.
    Thank you, Congressman, for your question. I think, first 
of all, I think I'm not trying to dance with the devil to make 
a few bucks here, right.
    I'm the director of the Latin American Growth Initiative at 
a nonpartisan think tank here. I have no skin in the game in so 
far as cash on this.
    But I think what we have to look at insofar as what is 
the--what is the best way to seek greater political and 
economic liberties for the Cuban people. I think that that's--
--
    Mr. Perry. I'm with you. Economic is one of the powers that 
we have. But I wonder what we're getting, what we have gotten 
for the deal.
    Mr. Marczak. Yes.
    Mr. Perry. We gave in--we already gave, right? So what do 
we get? What do we hope to get?
    Mr. Marczak. Yes. Yes. I would say there's a few things 
that we've--well, first of all, I think there's a few things 
that we've gotten from the actions of the last 15 months.
    One is that on a geostrategic perspective we've increased 
the power, the positioning of the United States and our 
perception among our allies not just across the hemisphere--
countries that are incredibly important for us to work with.
    Our policy toward Cuba has been the thorn in our side 
insofar as seeking greater relationships across Latin America, 
encountering other regimes that I think that we would be in 
agreement with that we also want to--that are also restricting 
the ability of their people to express their political 
liberties including that regime in Caracas, Venezuela.
    Mr. Perry. If I may ask you, with your indulgence, Mr. 
Chairman, which Latin American countries have we increased our 
stance with by--via our position with Cuba now? Which Latin 
American countries?
    Mr. Marczak. I would say we have increased our stance with 
Brazil, with Argentina, with Colombia, with probably Mexico. I 
would say most countries in the hemisphere had gotten to the 
point that they could no longer defend our policy.
    Now, insofar as what does that mean for the Castros, 
right--what does this--our policy should not be one that keeps 
the Castros in power. Our policy should be one that seeks to 
provide greater liberties for the Cuban people.
    And I would contend that over the last five-plus decades 
our embargo has been the crutch and the answer for the Castro 
regime of why the country is continuously suffering from 
economic ills.
    Whenever there's a problem in Cuba the answer is it's 
because of the embargo. Now, obviously the embargo still 
remains in place but by chipping away at some of the--some of 
the restrictions in our policy we're taking away bit by bit the 
reasons in which the Castro regime can blame others from the 
outside, specifically the imperialists from the United States, 
for the economic problems that they have in their own country.
    Mr. Perry. Thank you, Mr. Chairman, I yield.
    Mr. Poe. The other four gentleman may submit their answer 
for the record in writing to Mr. Perry's question. I understand 
we're going to have votes very soon.
    So I'll recognize the gentlelady from California, Ms. Bass.
    Ms. Bass. Thank you, Mr. Chair.
    I think my questions are from a little slightly different 
direction there but with all due respect to my colleague over 
there.
    You know, I have had problems for many years with the U.S. 
policy directed to Cuba and our policy with regime change 
through the embargo, to me, has really hurt U.S. businesses.
    And I appreciate you describing from the agricultural 
industry ways that you could certainly expand your business if, 
you know, we were to remove the remaining barriers.
    I have also always resented the fact that my freedom was 
denied to travel wherever I choose to travel regardless of what 
regime might be in power. I have resented the fact that my own 
country prohibited me from travelling to where I would like to 
go.
    I had mentioned before that I wanted to talk about health 
care and I do have a question for you about agriculture as 
well.
    You know, the Cubans have invented a vaccine that helps 
with lung cancer and there is also a medical product that they 
have a medication that helps reduce the need to amputate for 
diabetics.
    Diabetics--the lead cause of feet amputation in the United 
States and probably many other countries is diabetes and the 
Cubans have a medication that helps with that.
    And so one question I have for Dr. Feinberg is do you think 
that the President could issue a general authorization for 
Cuban-developed pharmaceutical and other medical products?
    The problem is, as I understand it, is that we are allowing 
this medication, which is called Heberprot--we are allowing it 
to be tested--clinical trials in the United States.
    But we will not give a company the ability to market it and 
no company in the world is going to invest the expense into a 
clinical trial unless they have the ability to market the drug 
as well.
    So I want to know, given the current restrictions, if you 
think that that might--you know, that the President might be 
able to issue that.
    And then to Mr. Stoesser from the--from the Texas Rice 
Council, you know, one of the other things that I think our 
companies as well as the Cubans could benefit by is our 
scientific technology--our scientific knowledge, farming 
technology and farm equipment in terms of sales.
    And then I believe Dr. Feinberg said that there is already 
a restriction that our commerce in agriculture has to be with 
small farmers. I think that that's what you were saying.
    So those are the questions I would propose--I would pose to 
Dr. Feinberg and also to Mr. Stoesser.
    Mr. Feinberg. So just to clarify, so my general comment 
about U.S. sales was for all products other than agriculture.
    Ms. Bass. Oh, I see.
    Mr. Feinberg. Which has separate legislation, and some 
medicines. So I think when President Obama goes down there we 
will see the warmth of the Cuban people.
    Ms. Bass. Oh, by the way, I'm going on a trip. So thank you 
for telling me about what I'm going to experience when I'm 
there in terms of meeting with small farmers. Go ahead.
    Mr. Feinberg. Okay. Excellent. Well, I think then you also 
will experience the warmth of the Cuban people and their 
admiration and appreciation for the President of the United 
States and for Americans in general, and that is one result of 
the people-to-people diplomacy that has been going on for the 
last several years as a result of the relaxation of certain 
sanctions.
    As you point out, Cuba has a very active biotechnology 
sector. They have developed these various vaccines, as you 
point out.
    Now, for them to be marketed in the U.S., of course, they 
have to go through clinical trials. As you may know, the 
Roswell Cancer Center in New York is working on the lung 
vaccine, which seems promising but, of course, we have to be 
sure that it's effective and safe.
    I do completely agree with your basic point that the United 
States ought to say in general with regard to medicines which 
are, after all, lifesaving--a very obvious humanitarian 
product, that if they pass FDA regulations ought to be 
available to American----
    Ms. Bass. Humanitarian for us.
    Mr. Feinberg. Precisely. For us, on our side. Yes. So 
humanitarian.
    Now, I think there, there is the additional element, 
however, that the Cuban Government has been hesitant to allow 
joint ventures or even licensing to not only U.S. but 
international pharmaceutical companies in general, and that's 
another area where one has to recognize that the timidity of 
the Cuban state--their lack of knowledge and their fear of 
global markets--is something that they're going to have to 
gradually work their way through. But we can encourage them in 
that regard.
    Ms. Bass. Thank you.
    Mr. Poe. The gentlelady yields back her time.
    Mr. Stoesser, you'll have to put that in writing, the 
answer to her question.
    The Chair recognizes the gentleman from Arkansas, Mr. 
Crawford.
    Mr. Crawford. Thank you, Mr. Chairman.
    To Mr. Stoesser and to Dr. Rosson, my understanding of the 
cash in advance rules have been rewritten again to be less 
restrictive. But there's been no noticeable improvement to rice 
exports to Cuba.
    Do you believe the Treasury Department's reinterpretation 
of the rules will have any impact on our competitiveness in 
Cuba or will our ag export posture remain weak until exporters 
are able to offer credit to Cuban importers?
    Mr. Stoesser. It's my understanding that commodities were 
not included in that recent ruling, only tractors and 
telecommunication things but not agricultural commodities.
    Mr. Crawford. Okay.
    Mr. Stoesser. And I think that rule needs to be changed to 
include commodities, of course.
    Mr. Crawford. Sure. Dr. Rosson, the U.S. poultry sector has 
seemed to find ways to have a stronger export presence in Cuba. 
What's keeping other ag industries from implementing a similar 
framework?
    Mr. Rosson. Well, I think when we look at the overall 
commodities situation globally today, things like nickel, for 
example, those prices are at near historic lows and that 
affects the ability of the Cubans to generate enough foreign 
exchange to purchase products.
    Now, what's different about much of the poultry that we 
export there it's largely leg quarters, which are sold at a 
discount relative to other cuts of poultry. So therefore they 
naturally have a competitive advantage.
    Where we tend to lose is the fact that we don't offer 
credit--that our payment terms are somewhat restrictive. And so 
by the time we transfer funds around the--between Cuba, a third 
country, back to the United States, we've lost time and as a 
result we have vessels that are held up and being charged extra 
money because of those delays in shipping and the Cubans bear 
that cost and the result is they tend to turn elsewhere for 
some of their supplies.
    Mr. Crawford. You conclude that food and ag exports have 
the potential to exceed $1 billion annually but even stronger 
exports can be achieved through further infrastructure 
improvement investment. To what extent do you believe that U.S. 
direct investment in the private Cuban agribusiness would 
strengthen our export posture?
    Mr. Rosson. I think investment is absolutely crucial. My 
experience of having been there several times over the last 
number of years port infrastructure, road infrastructure needs 
improvement.
    I've had personal experience working with companies that 
were exporting frozen foods into the Cuban market and we'd have 
a power outage and those frozen desserts would melt, then 
they'd refreeze and you take those out and display them at a 
food show and you run into problems trying to sell your 
product.
    So infrastructure is crucial. Reliable power, good 
infrastructure, improvements in all load, off load capability. 
The port is important, and then another aspect is business 
development. We have not been active in business development 
there because we've been precluded.
    Now we do have the opportunity to do that and by business 
development I'm talking about working with the private sector 
individually to try and improve their capacity to do business 
and develop their economy on a fairly small scale in the 
beginning but which has the potential to grow, and as that 
growth occurs we would see incomes rise and we would see 
improvement in the Cuban consumer's ability to buy food.
    Mr. Crawford. Mr. Marczak, do you believe that American 
investment in private Cuban agribusiness might help accelerate 
privatization in the Cuban ag sector?
    Mr. Marczak. Yes. I believe that the Cuban--what the Cuban 
private sector needs is more investment from outside, right. I 
think that there's a few things.
    One is that--you know, that includes fully lifting the 
remittance cap as well so the Cubans--the small businesses in 
Cuba can have access to the necessary financing and investment 
that would be--that is critical for their long-term survival 
and I think as well the agriculture sector, specifically the 
growth in the number of agricultural cooperatives, has been a 
real success insofar as the incremental.
    Again, we have to look at success in measured terms. This 
is only a few years after a long policy of completely closed 
off. But it's an area in which there is--it's ripe for further 
engagement from the private sector and private sector growth.
    Mr. Crawford. Do you think that U.S. investment might help 
reduce the Castro regime's role in the Cuban economy more 
quickly than maintain our current isolationist posture?
    Mr. Marczak. I believe that current--I believe that 
investment--the more investment from the U.S. the more jobs 
that creates in the Cuban private sector, the fewer Cubans are 
dependent upon the state for their jobs and the more Cubans can 
express their free will without the potential recourse of 
losing their only income.
    Mr. Crawford. Thank you. I yield back.
    Mr. Poe. The Chair recognizes the gentleman from Minnesota, 
Mr. Emmer.
    Mr. Emmer. Thank you, Mr. Chair, and thanks to the 
witnesses for being here today.
    Mr. Claver-Carone, when's the last time that you visited 
Cuba?
    Mr. Claver-Carone. The Castro regime, as you know, has a 
list of 100,000 Cubans at least that they don't allow----
    Mr. Emmer. Mr. Claver-Carone, reclaiming my time.
    Mr. Claver-Carone. They don't--they don't give me a visa. 
They don't give me a visa.
    Mr. Emmer. When's the last time that you've been there?
    Mr. Claver-Carone. When I was a little kid because they 
don't give me a visa because people that are critical of the 
Castro regime don't get a visa because I think that's important 
to know.
    Mr. Emmer. Thank you. Thank you very much. Reclaiming my 
time.
    I find it interesting when you talk about what's happening 
in Cuba because if you had been there recently you would see 
that the Castros, they live in what I would describe as 
suburban Dallas--a nice neighborhood with boulevards and well-
manicured lawns and nice big homes and the rest of the 
population they don't live in--well, I would say they do live 
in very underwhelming circumstances and that would leave one to 
believe when they see it firsthand and they experience that 
whether the embargo is in place or not the Castros are going to 
do just fine. It's actually more about the Cuban people when we 
talk about trade.
    This is a mutual relationship with value on both sides, and 
I guess I think when you talk about the issues of religious 
freedoms and other humanitarian concerns they're real and I 
don't have any doubt maybe to the degree and where they're 
happening but I think we can agree that that's still real.
    The fact is, however, that these have existed now for 55 
years and the embargo has been in place actually more than 55 
years. The embargo has been in place for 55 years. It hasn't 
changed.
    The definition of insanity, I've been taught, is doing the 
same thing over and over and over and expecting a different 
result, and I'm not even going to bother to ask how you think 
that the current state of economic sanctions is going to change 
something in the next 55 years.
    Instead, I think I want to turn to Mr. Marczak and ask when 
it comes to the embargo it was initially put in place as a 
policy to isolate the Castro regime and to destabilize the 
Castro regime so that ultimately the Cuban people could self-
determine once again and enter into these agreements that we're 
talking about, this growth opportunity.
    But in fact, Mr. Marczak, isn't it true that what's 
happened is the policy has isolated the United States. It 
hasn't isolated Cuba because Cuba's doing business with 
everybody around the world and everybody in the Western 
Hemisphere with the exception of the United States, correct?
    Mr. Marczak. Correct, Congressman, and I'm sure that you've 
seen when you've been to Cuba as well the number of foreign 
Embassies across Havana.
    Cuba has more foreign Embassies than any country in the 
Western Hemisphere outside of the United States. So Cuba has 
successfully used the embargo and the isolation and 
destabilizing intention of the embargo to claim an outsized 
role insofar as geopolitical posturing and insofar as its place 
not only in the global affairs but as a leader in the global 
south.
    Mr. Emmer. So talking about growth then--trade and growth--
right now the question is not really about whether Cuba is 
going to be able to do business because there are entrepreneurs 
from all over the world rushing into Cuba right now as we speak 
because of the President's unilateral action to start to relax 
whatever the administration can outside of Helms-Burton.
    The question really is whether or not the United States 
entrepreneurs will have that same opportunity. Isn't that 
correct, Mr. Marczak?
    Mr. Marczak. That is correct. There's a real concern that 
because of the--if we have this opening of regulations the rest 
of the world sees the writing on the wall that our policy and 
the embargo is eventually going to be lifted.
    Mr. Emmer. So lastly--I mean, I heard one of my colleagues 
talk about China and Russia and Iran. I mean, isn't the risk 
that those types of players will move in to Cuba and isn't 
that--isn't that really what's happened with our foreign policy 
since the 1950s, that our policy literally pushed this regime 
to Russia and don't we risk that again?
    Mr. Marczak. Yes. You correctly state that Russia has been 
the fall back for the Cubans at times of economic uncertainty. 
The Chinese are looking at increasing their investments in 
Cuba.
    Mr. Emmer. Thank you.
    Lastly, Mr. Stoesser, thank you so much for being here. I 
just want to clarify, you aren't just in the business of 
agriculture to make money with a 100-year business.
    I take it you have some pride in feeding the world with 
what you do?
    Mr. Stoesser. I sure do. I want my sons and grandsons to be 
able to do what I did because they love it, too. I love to 
farm.
    Mr. Emmer. Thank you.
    Mr. Stoesser. I need to have it return.
    Mr. Emmer. Thank you. I yield back.
    Mr. Poe. The Chair will recognize the gentleman from 
California, Mr. Sherman. We are voting so if the gentleman 
would be precise.
    Mr. Sherman. I know that another colleague asked Mr. 
Claver-Carone whether--when was the last time you were in Cuba. 
I assume that the last time you were in Cuba would have been 
the last time that you would be a free man.
    One of my colleagues tried to get me to go to the Gaza 
Strip and I had to explain to him that my record was not in 
accord with that of Hamas.
    Biggest opportunity for Cuba is tourism. Is there any--I 
would evidence that we're going to increase the total amount 
that Americans have to spend on their vacations or if Americans 
spend money on their vacations in Cuba they won't be spending 
it elsewhere.
    Mr. Claver-Carone, is there--would this just pull tourist 
dollars away from Puerto Rico, the Virgin Islands, Florida and 
other tourist destinations in the United States?
    Mr. Claver-Carone. I always say that first and foremost if 
you're looking for a tourist destination Miami Beach is 
basically going to help our economy a lot better or Cape Cod or 
California has beautiful beaches and things of that sort. So I 
believe we should support our economy. But I think the 
important thing is----
    Mr. Sherman. And even if you do want to go to a foreign 
country you can go to how many different Caribbean countries 
are there who will then buy U.S. products on fair terms?
    Mr. Claver-Carone. Absolutely, and the whole concept that 
we hear so much with agricultural trade is that we want U.S. 
tourists to go over there so then there's a demand created for 
more products from here from the United States.
    But essentially we're feeding the same American mouth 
whether we feed it in Miami Beach or we feed it in Barrero 
Beach. I think it's essentially the same product.
    But I think that brings to an important point is the reason 
we have these travel-related, tourism-related transactions in 
Cuba is because it's the Cuban military and security services' 
number one source of income. The Cuban military is the largest 
hotel owners in Latin America. They own more hotel rooms than 
the Walt Disney World Company. We sanction tourism toward Cuba 
and we sanction oil to Iran for a reason, because one is the 
number one source of income versus that of another.
    Mr. Sherman. There are, I think, 6,000 certified U.S. 
claims where the Cuban Government has appropriated American 
assets. Does Cuba have any interest in settling any of those 
claims?
    Mr. Claver-Carone. Not that I'm aware of in that regards. 
They like to talk a lot and we see that there's a lot of talk 
and I think in that regards we need to consider, as I mention 
in my testimony, the rights of Americans.
    President Obama and President Bush and President Clinton 
before him had always waived Title III of the Libertad Act that 
provided a right of action for American victims of that.
    But now if we're going to allow investment in essentially 
for the Castro regime to lease back to us our own stolen 
property then we should perhaps consider having a prior right 
of action as is current law in order for the American victims 
of this trafficked property to be able to receive compensation.
    Mr. Sherman. Let me ask the other witnesses, in order to 
export agricultural items to Cuba will it be necessary for us 
to provide the financing?
    Mr. Feinberg. So let me say I think that, first of all, in 
general Cuba does state to state credits. They seek soft bland 
credits when possible. That's basically what lies behind, for 
example----
    Mr. Sherman. So in order to export the Cubans are going to 
ask the U.S. Government to--so we have 6,000 Americans who were 
ripped off by the Cubans in the past and now the U.S. taxpayer 
is supposed to make unsecured loans to the same government that 
ripped off 6,000 others. Gee, fool me once, shame on me. Fool 
me twice, you know.
    Mr. Feinberg. So if that's a question, so over the last 55 
years of embargo we have not succeeded in getting compensation 
for those Americans who did lose their properties.
    So I would say under the current policy of engagement we 
have a better chance at least of getting some compensation for 
those lost properties and the Cuban Government has agreed and 
already we had a first round of discussions with the Cuban 
Government on the resolution of these claims.
    As you may know, the Cuban constitution----
    Mr. Sherman. If I could just interrupt. If we--as I 
understand it we allow agri-food exports to Cuba and so the 
question is not whether we'll have free trade in agricultural 
products to Cuba but whether we'll have taxpayer-subsidized----
    Mr. Poe. Your time has expired.
    The Chair recognizes the chairman of the full committee.
    Chairman Royce. I'm just going to be very brief because of 
the vote. But I'd like to submit for the record some questions.
    The Obama administration has announced several regulatory 
changes that have allowed them to chip away at the embargo. 
Most recently the administration announced a regulatory 
loophole that will allow us to facilitate Cuba's use of U.S. 
dollars to make international financial transactions.
    How is Cuba's banking system set up and is it sufficiently 
transparent is the first question I put for the record. Will 
the Cuban people be able to partake in such transactions or 
would it be for state entities only?
    Would allowing such transactions be consistent with 
legislation passed by the U.S. Congress? In other words, would 
it be legal? And with current OFAC Cuba sanctions regulations 
that restrict Cuba's ability to transact in U.S. currency? And 
what have been the practical effects for the average Cuban 
citizen of the relaxing of OFAC Cuba sanctions regulations?
    Have U.S. negotiators secured the right of Cuban workers to 
collect their earned wages or does the Cuban Government 
continue to collect wages directly from the employer to then 
distribute as low as 5 percent of those wages to the 
corresponding worker, keeping the rest for the Cuban 
Government?
    Those are the questions I'd like to ask not only for the 
panel to respond to but I intend to submit that in writing to 
the administration as well.
    Thank you, Mr. Chairman. I yield back. Thank you, Ranking 
Member, as well.
    Mr. Poe. I thank the gentleman. What the chairman was 
saying was he's asked you those questions so now respond in 
writing, if you would.
    There were other questions Mr. Perry asked and there were 
some other members that asked questions as well. You will 
receive those questions again and respond within 10 days in 
writing to those questions.
    Thank you, gentlemen, for being here today. This has been a 
very thought-provoking hearing. I appreciate all of your 
testimony and as mentioned earlier your testimony is a part of 
the record.
    The subcommittee is adjourned.
    [Whereupon, at 3:45 p.m., the committee was adjourned.]

                                     

                                     

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