[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
TRADE WITH CUBA:
GROWTH AND OPPORTUNITIES
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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
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Printed for the use of the Committee on Foreign Affairs
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Available via the World Wide Web: http://www.foreignaffairs.house.gov/
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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
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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
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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.]
A P P E N D I X
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