[Senate Hearing 114-147]
[From the U.S. Government Publishing Office]
S. Hrg. 114-147
OPPORTUNITIES AND CHALLENGES FOR
AGRICULTURE TRADE WITH CUBA
=======================================================================
HEARING
before the
COMMITTEE ON AGRICULTURE,
NUTRITION, AND FORESTRY
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
APRIL 21, 2015
__________
Printed for the use of the
Committee on Agriculture, Nutrition, and Forestry
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COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY
PAT ROBERTS, Kansas, Chairman
THAD COCHRAN, Mississippi DEBBIE STABENOW, Michigan
MITCH McCONNELL, Kentucky PATRICK J. LEAHY, Vermont
JOHN BOOZMAN, Arkansas SHERROD BROWN, Ohio
JOHN HOEVEN, North Dakota AMY KLOBUCHAR, Minnesota
DAVID PERDUE, Georgia MICHAEL BENNET, Colorado
JONI ERNST, Iowa KIRSTEN GILLIBRAND, New York
THOM TILLIS, North Carolina JOE DONNELLY, Indiana
BEN SASSE, Nebraska HEIDI HEITKAMP, North Dakota
CHARLES GRASSLEY, Iowa ROBERT P. CASEY, Jr., Pennsylvania
JOHN THUNE, South Dakota
Joel T. Leftwich, Majority Staff Director
Anne C. Hazlett, Majority Chief Counsel
Jessica L. Williams, Chief Clerk
Christopher J. Adamo, Minority Staff Director
Jonathan J. Cordone, Minority Chief Counsel
(ii)
C O N T E N T S
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Page
Hearing(s):
Opportunities and Challenges for Agriculture Trade with Cuba..... 1
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Tuesday April 21, 2015
STATEMENTS PRESENTED BY SENATORS
Roberts, Hon. Pat, U.S. Senator from the State of Kansas,
Chairman, Committee on Agriculture, Nutrition, and Forestry.... 1
Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan... 2
Leahy, Hon. Patrick J., U.S. Senator from the State of Vermont... 4
Panel I
Scuse, Hon. Michael T., Under Secretary, Farm and Foreign
Agricultural Services, U.S. Department of Agriculture,
Washington, DC................................................. 5
Borman, Matthew S., Deputy Assistant Secretary for Export
Administration, U.S. Department of Commerce, Washington, DC.... 6
Smith, John, Acting Director, Office of Foreign Assets Control,
U.S. Department of the Treasury, Washington, DC................ 8
Panel II
Beall, Michael V., President & CEO, National Cooperative Business
Association, Washington, DC.................................... 25
Harris, Terry, Senior Vice President, Marketing and Risk
Management, Riceland Foods, Stuttgart, AR...................... 27
Kaehler, Ralph, Farmer and Owner, Kaehler Cattle Company, St.
Charles, MN.................................................... 30
Keesling, Doug, Fifth Generation Owner, Keesling Farms, Kansas
Wheat, Chase, KS............................................... 32
Rosson, C. Parr, III, Ph.D., Professor & Department Head,
Department of Agriculture Economics, Texas A&M University,
College Station, TX............................................ 34
----------
APPENDIX
Prepared Statements:
Beall, Michael V............................................. 44
Borman, Matthew S............................................ 49
Harris, Terry................................................ 52
Kaehler, Ralph............................................... 58
Keesling, Doug............................................... 60
Rosson, C. Parr, III......................................... 64
Scuse, Hon. Michael T........................................ 73
Smith, John.................................................. 77
Document(s) Submitted for the Record:
Hon. Pat Roberts:
Bipartisan group of former Secretaries of Agriculture,
prepared statement......................................... 86
U.S. Agriculture Coalition for Cuba, prepared statement...... 88
Florida Department of Agriculture and Consumer Service,
prepared statement......................................... 89
U.S. Agriculture Coalition for Cuba, Charter part I, prepared
statement.................................................. 91
U.S. Agriculture Coalition for Cuba, Charter part II,
prepared statement......................................... 95
Beall, Michael V.:
The National Cooperative Working Group....................... 98
National Cooperative Business Association letter to Commerce
Secretary.................................................. 101
U.S. Cuba Cooperative Working Group Report................... 103
National Cooperative Business Association letter to Treasury
Secretary.................................................. 120
Question and Answer:
Beall, Michael V.:
Written response to questions from Hon. Pat Roberts.......... 124
Written response to questions from Hon. Debbie Stabenow...... 125
Borman, Matthew S.:
Written response to questions from Hon. Pat Roberts.......... 128
Written response to questions from Hon. Debbie Stabenow...... 129
Written response to questions from Hon. Kirsten Gillibrand... 130
Harris, Terry:
Written response to questions from Hon. Pat Roberts.......... 131
Written response to questions from Hon. Debbie Stabenow...... 132
Kaehler, Ralph:
Written response to questions from Hon. Pat Roberts.......... 134
Written response to questions from Hon. Debbie Stabenow...... 135
Keesling, Doug:
Written response to questions from Hon. Pat Roberts.......... 137
Written response to questions from Hon. Debbie Stabenow...... 138
Rosson, C. Parr, III:
Written response to questions from Hon. Pat Roberts.......... 140
Written response to questions from Hon. Debbie Stabenow...... 142
Scuse, Hon. Michael T.:
Written response to questions from Hon. Pat Roberts.......... 145
Written response to questions from Hon. Debbie Stabenow...... 145
Written response to questions from Hon. Kirsten Gillibrand... 147
Smith, John:
Written response to questions from Hon. Pat Roberts.......... 149
Written response to questions from Hon. Debbie Stabenow...... 151
Written response to questions from Hon. Kirsten Gillibrand... 152
OPPORTUNITIES AND CHALLENGES FOR
AGRICULTURE TRADE WITH CUBA
----------
Tuesday, April 21, 2015
United States Senate,
Committee on Agriculture, Nutrition, and Forestry,
Washington, DC
The Committee met, pursuant to notice, at 10:25 a.m., in
room 328A, Russell Senate Office Building, Hon. Pat Roberts,
Chairman of the Committee, presiding.
Present: Senators Roberts, Boozman, Hoeven, Ernst, Sasse,
Thune, Stabenow, Leahy, Brown, Klobuchar, Bennet, Gillibrand,
Donnelly, and Heitkamp.
STATEMENT OF HON. PAT ROBERTS, U.S. SENATOR FROM THE STATE OF
KANSAS, CHAIRMAN, U.S. COMMITTEE ON AGRICULTURE, NUTRITION, AND
FORESTRY
Chairman Roberts. Good morning. The Committee will come to
order. I call this meeting of the Senate Committee on
Agriculture, Nutrition, and Forestry to order.
At the beginning of this Congress, I was extremely hopeful
that trade would be one area where we could work across the
aisle to find agreement. I still maintain that hope. We
certainly hope that is the case. We are working very hard on
the Finance Committee to make that happen, as well as this
Committee.
Tomorrow the Senate Finance Committee will mark up the
Trade Promotion Authority bill. That allows our negotiators to
garner the best deal possible for American exporters. TPA is
good for agriculture, and I look forward to getting it passed.
International trade of American agriculture products is
critical, absolutely critical to the Nation and to the Nation's
economy and critical to our Kansas farmers and ranchers. We are
talking about 71,000 jobs, about $12 billion.
I have long fought to eliminate barriers to trade, and I
believe that we should continue to work toward new market
access opportunities for agriculture products, and that is what
we are here to talk about today.
The United States and Cuba certainly have a long history
full of contention and instability. There is no shortage of
opinion from Members of Congress about the relationship between
our two countries, both present and future.
Some are concerned about human rights, rightfully so,
others about socioeconomic ideology. But those concerns are not
what this Committee will focus on this morning. Today we are
here to discuss the role of agriculture, opportunities and
challenges in Cuba.
For over 50 years, agriculture exports to the island have
seen many ups and downs, sometimes due to the politics and
sometimes due to Mother Nature and the tropical storms that she
brings. This is not an issue we are going to be able to fix
overnight. It will take effort, hard work, in addition to bills
in Congress to truly normalize trade with Cuba.
The decisions that are made regarding increased trade with
Cuba must be made very carefully. Four months ago, the
President announced a major shift in U.S. policy towards Cuba.
It is my hope that in the future the President will work with
the Congress to determine the best path forward. Foreign policy
does not happen in a vacuum. We have to take a realistic
approach and work out a step-by-step plan towards lifting the
embargo. This is a goal that should include Congress, will
include Congress.
Today we will hear from an impressive panel of experts,
from the regulators responsible for writing our policies toward
Cuba to the producers who seek to grow the market for their
products. I understand that, like myself, many of our witnesses
here have traveled to Cuba to see firsthand what challenges and
opportunities do exist. I look forward to hearing about what we
might be able to achieve with more trade with Cuba, but we also
need to hear about the difficulties that lie ahead. If we want
to be successful in creating a new system of engagement with
Cuba, we are going to have to really put in the work.
Agriculture has long been used as a tool, not a weapon, a
tool for peace and stability. It is my hope that Cuba will
embrace the practices of free trade, enterprise, and commerce
so that both countries will gain from increased relations.
Earlier this year, the U.S. Agriculture Coalition for Cuba
was launched. They have shared a statement and additional
information in support of our work today, and I ask unanimous
consent that it be entered into the record at this point.
Without objection.
[The following information can be found on page 88 in the
appendix.]
Chairman Roberts. I look forward to hearing from our
witnesses, and with that, I will recognize our distinguished
Chairwoman Emeritus, Senator Stabenow, for any of her remarks.
STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR FROM THE STATE
OF MICHIGAN
Senator Stabenow. Thank you very much, Mr. Chairman. It is
great to have an opportunity to talk about this topic. I really
appreciate the opportunity to work with you on trade
opportunities between the United States and Cuba and to work
with all the Committee. We thank those who are with us, the
officials and industry representatives testifying today, for
your part in the process. We look forward to hearing from you.
Improving trade with Cuba represents not only a great
opportunity for American farmers and ranchers and
manufacturers, but a meaningful way to help rebuild trust
between our two countries. After more than 50 years of
stalemate, it is time for a new policy in Cuba.
When I visited Cuba earlier this year with Senator Leahy,
who is really one of the Senate's experts if not the expert, I
think, on various pieces of Cuban culture and economy and so on
for so many years, we visited just days after the President
eased trade restrictions. This is the second time I had the
opportunity to be in Cuba with Senator Leahy and Senator Flake
and others, and it was very different the second time with
people--instead of being very reserved and cautious, Cubans
were coming up to us and were very eager to develop a new
relationship. It was just a very different tenor. But we can
only do that with meaningful steps that will soften the
barriers that exist between us and eventually eliminate them.
America's farmers and ranchers are uniquely positioned to
lead the way, and I agree with Senator Roberts that agriculture
is in a very key position.
Consider this: In 2014, the U.S. exported just over $290
million in agricultural goods to Cuba. Good start, but this is
a country only 90 miles off our shore. We can do a lot better
than that. Cuba's own import agency, estimates it will receive
approximately $2.2 billion in U.S. dollars' worth of food and
agriculture this year, and we can do even better than that.
That type of economic potential deserves a chance to succeed
and is one reason why many of the largest producer groups,
trade associations, and companies from within agriculture have
come together to increase engagement.
Many on the Committee, as Senator Roberts indicated, have
taken the opportunity to go to Cuba in addition to Senator
Leahy, again, who he and his staff have been real leaders in
this effort in developing our relationship with Cuba, but
Senator Klobuchar, Senator Boozman, and Senator Heitkamp I know
are working in a bipartisan way as well, and we appreciate your
leadership and your efforts.
The commitment to democratic ideas and human rights we
share as Americans are best realized through engagement, and I
believe our bedrock principles accompany every single product
that our farmers and ranchers send to Cuba.
Last week's actions by the President are a step forward in
normalizing a relationship and will test the commitment of the
Cubans to this process. But even while we are making
significant progress in rebuilding our relationship, the
policies governing trade between our countries are not yet
designed to allow a steady flow of goods and services.
So, Mr. Chairman, I look forward to working with you and
others on the Committee to find a path for U.S. financial
institutions to be able to safely and securely work with Cuban
purchasers, including extending the lines of credit, to look
for a broader range of goods and services and supplies that we
can export to Cuba. These measures are not only good for
business, but they will help Cuba's agricultural capacity and
make the island a better trading partner in the long run. I
know that, working together, we can write the next chapter in
the U.S.-Cuban relationship.
Thank you.
Chairman Roberts. Thank you, Madam Chairwoman.
I now have the pleasure of introducing a friend and
colleague of mine, Senator Leahy, the undeclared but yet
accurate king of the dairy policy, and the dairy policy posse,
who comes in at the 11th hour and 59th minute to help us write
a farm bill from time to time, for brief remarks, sir, so you
may go manage a bill on the floor in your very snappy attire.
STATEMENT OF HON. PATRICK J. LEAHY, U.S. SENATOR FROM THE STATE
OF VERMONT
Senator Leahy. Thank you, Mr. Chairman. I like being with a
Chairman who knows how to comb his hair.
[Laughter.]
Chairman Roberts. I appreciate so much that you said that.
Just let it go, okay?
Senator Leahy. I cannot do as well as you do with the tones
on your phone, but I commend you for holding this hearing in
all seriousness. This is an important hearing. Here is Cuba 90
miles from our shores. We have the ability to help them gain
control of their own lives, but we can also expand markets for
American farmers selling their product. There will be some
winners as part of the normalizing of trade with Cuba. I think
we have to temper our hopes and remember that Cuba's economy is
in shambles. Its people are suffering. But I would note what
Senator Stabenow said, and she went and spent time with the
agricultural community there on our last trip.
I have been going to Cuba numerous times in the last 20-
some-odd years. This last trip you saw a huge difference. I
started seeing American flags in the stores, American flags on
the taxis. You know, a lot of these taxis are mid-1950s
automobiles, and they have flags of different countries. I had
never seen American flags on them before. Now we saw them.
Now, we are not going to have an immediate commercial
windfall for American agriculture, but Cuba has used our
embargo as a phony excuse for its own failed policies. Now we
have a chance to create a more efficient and less burdensome
opportunity for Cubans to buy U.S. products. Canada and the
European Union are there already. The last time we were there,
they were talking about things that we produce, that the Cubans
were bringing in from New Zealand, and we are 90 miles away.
So I think that American agriculture has often been the
bridge in normalizing with countries. This will allow us to do
that, but also let the Cuban people see that it is their own
government, not the United States, that is to blame for the
poverty and dysfunction and repression in their country. Mr.
Chairman, I say all that really to applaud you for doing this.
I think we can all learn by this, and I look forward to my next
trip down there.
Chairman Roberts. Well, thank you, sir. I thank you for
your comments, and I know you have to manage a bill on the
floor. That is something that we are doing differently this
year. We are actually managing bills. Good luck in that
respect.
Senator Leahy. Having been here for 40 years, it is kind of
nice to go back to the old way. Thank you.
Chairman Roberts. Welcome to our first panel of witnesses
before the Committee this morning.
The Honorable Michael Scuse serves as Under Secretary for
Farm and Foreign Agricultural Services. Under Secretary Scuse
has previously served as the Deputy Under Secretary for Farm
and Foreign Agricultural Services as well as Secretary of
Agriculture for the State of Delaware. Welcome, Mr. Under
Secretary. I look forward to your testimony.
STATEMENT OF THE HONORABLE MICHAEL SCUSE, UNDER SECRETARY, FARM
AND FOREIGN AGRICULTURAL SERVICES, U.S. DEPARTMENT OF
AGRICULTURE, WASHINGTON, DC
Mr. Scuse. Chairman Roberts, Ranking Member Stabenow, and
members of the Committee, I am pleased to come before you today
to discuss agricultural trade with Cuba.
As you know, in December, President Obama announced policy
and regulatory changes to chart a new course in U.S. relations
with Cuba. The measures also seek to expand opportunities for
America's farmers and ranchers to sell goods in Cuba.
In January, the Treasury Department published regulatory
changes including a revise interpretation of the term ``cash in
advance'' and authorization for U.S. banks to establish
correspondent accounts at Cuban banks. These changes had been
sought by members of the U.S. agricultural community.
Fifteen years ago, Congress lifted the decades-old ban on
the export of agricultural products to Cuba. But despite this
opening, U.S. Government agencies, including USDA, remain
prohibited from providing export assistance and credit
guarantees for exports to Cuba. As Secretary Vilsack has said,
he cannot use a single dollar of trade promotion funding for
trade with Cuba. These restrictions apply to USDA's very
successful market development programs like the Market Access
Program and the Foreign Market Development Program.
The policy changes announced by the President are
significant, but legislative hurdles remain. Bills have been
introduced to further open trade with Cuba, including
legislation sponsored and cosponsored by members of this very
Committee. USDA stands ready to provide technical assistance to
Congress as it considers further openings with Cuba.
If the embargo is removed, we could be poised to become a
major agricultural trading partner with Cuba. Cuba depends on
imports to feed its 11 million citizens. According to the World
Food Program, Cuba imports about 80 percent of its food, which
means the potential for our producers here is significant. The
United States has potentially huge advantages in exporting to
Cuba. Chief among them is location. We are less than 100 miles
away, as has been pointed out, meaning lower shipping costs and
transit times, especially compared to our current top
competitors--Brazil and the members of the EU.
In fiscal year 2008, U.S. agricultural exports to Cuba
reached $658 million. However, by the end of last fiscal year,
they had fallen to $300 million. At the same time, global
agricultural exports to Cuba have doubled over the past decade
to approximately $2 billion.
Right now, the largest U.S. agricultural export to Cuba is
poultry, followed by soybean meal, soybeans, and corn. I am
confident that U.S. agricultural exporters can capture the
market in Cuba, but I do not want to minimize the obstacles.
Cuba is a country with limited foreign exchange. We are also
behind our foreign competitors in market development.
Another impediment is Cuba's import policy requiring all
U.S. imports to be channeled through one state corporation--
Alimport.
The policy changes towards Cuba are just one example of
opportunities to help our farmers and ranchers build on their
record agricultural exports. In fiscal year 2014, agricultural
exports reached a record $152.5 billion and supported nearly 1
million American jobs. The potential for U.S. agricultural
exports around the globe is, in fact, considerable. It is
critically important that Congress quickly consider and pass
bipartisan Trade Promotion Authority legislation introduced
last week. TPA will help ensure that America's farmers,
ranchers, and food processors receive the greatest benefit from
trade agreements currently being negotiated.
In conclusion, there is potential for expanding
agricultural exports to Cuba over time. Agriculture has served
as a bridge to foster cooperation, understanding, and the
exchange of ideas among people. I have no doubt that
agriculture will play an important role as we expand our
relationship with the Cuban people.
Thank you, Mr. Chairman and members of the Committee.
[The prepared statement of Mr. Scuse can be found on page
74 in the appendix.]
Chairman Roberts. We thank you, sir.
Mr. Matthew Borman currently serves as the Deputy Assistant
Secretary of Commerce for Export Administration. In this
position, Mr. Borman is responsible for implementing the Bureau
of Industry and Security controls on the export of dual-use
items for national security, foreign policy, non-proliferation,
and short-supply reasons.
Welcome, Mr. Borman. I look forward to your testimony. I
thank Under Secretary Scuse for being on time. Just to remind
the witnesses that most Senators can read, all of their staff
can read. Feel free to summarize your statement, sir.
STATEMENT OF MATTHEW S. BORMAN, DEPUTY ASSISTANT SECRETARY FOR
EXPORT ADMINISTRATION, U.S. DEPARTMENT OF COMMERCE, WASHINGTON,
DC
Mr. Borman. Thank you, Mr. Chairman, and thank you, Ranking
Member Stabenow and the members of the Committee. It is a
pleasure to be here.
Of course, I will address the role of the Department of
Commerce with regard to agricultural trade with Cuba. As you
know, in terms of the Cuba embargo, the Commerce Department is
responsible for regulating the export of items to Cuba. The
Treasury Department, of course, is responsible for financial
transactions, including travel.
As you know, on December 17, 2014, the President announced
the most significant changes in Cuba policy in more than 50
years. As the President noted, these changes are intended to
create more opportunities for the American and Cuban people by
increasing commerce, travel, and the free flow of information.
To implement these changes, we at the Department of Commerce's
Bureau of Industry and Security amended our Export
Administration Regulations on January 16, 2015, to expand the
authorization for exports and re-exports of certain categories
of items to Cuba.
Principally, we expanded the License Exceptions available
for consumer communication devices to facilitate the flow of
information among Cubans and between Cubans and the outside
world. We also expanded the ability for U.S. exporters to send
gift parcels and consolidated packages to Cuba without a
license. Then we created a new License Exception Support for
Cuban People. So in our system, a License Exception means as
long as the exporter complies with the conditions of the
License Exception set out in the regulations, they do not have
to come into Commerce, submit a license application, and wait
for the Government to say yes or no and give them a license. So
exporters always feel that License Exceptions facilitate trade
in whatever transaction they cover.
The principal focus of the License Exception Support for
Cuban People is getting items into the hands of the private
sector in Cuba. So under that License Exception, U.S. persons
are now able to export building materials for private sector
building activity in Cuba. They are able to export items going
to the private agricultural sector in Cuba, the agricultural
co-ops, again without a license; and generally items that go to
private sector entrepreneurs. So the focus of that License
Exemption is to make it much easier for the export of items
from the United States to the private sector in Cuba, including
the private agricultural sector in Cuba.
The License Exception also authorizes the export of items
to the Internet infrastructure in Cuba to, again, facilitate
communication among the Cuban people and between the Cubans and
the outside world.
You will notice in all that I have mentioned, there is just
a small focus on agriculture. We did not change our primary
regulatory process for agricultural exports to Cuba, and the
reason we did not is that it is pretty well governed by the
Trade Sanctions Reform Act. So under that Trade Sanctions
Reform Act, we have an expedited process in place where a U.S.
company that wants to make an agricultural export to Cuba comes
into Commerce, we refer it to the State Department, we get a
position from the State Department, and we give them an answer
typically in 12 days. So it is an expedited process, but it
still is a licensing process. Again, that is largely governed
by the requirements of the Trade Sanctions Reform Act.
Under that process, exporters can get an online
application. As I mentioned, we consult with the State
Department. We also screen the end users of the agricultural
exports to make sure that they are not involved in terrorist or
proliferation activities.
Then the last requirement is that those exports that are
licensed must be made within the year of the license.
Last year, we processed 56 notifications under this
expedited process, valued at about $2.4 billion. That is what
we authorized. As you heard, the actual dollar value of exports
is far less than that, roughly $290 million. So you can see
U.S. exporters see a tremendous market in Cuba by the
authorizations they seek from us even though currently they
only export a small fraction of that.
As you also heard, all of those exports go through
Alimport, which is the Cuban agricultural import agency. So
there are really no changes in our regulations specifically on
agricultural exports to Cuba because, again, that is limited by
the Trade Sanctions Reform Act.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Borman can be found on page
49 in the appendix.]
Chairman Roberts. Thank you for your statement.
Our next witness is John E. Smith, Acting Director, Office
of Foreign Assets Control, the Department of Treasury. Mr.
Smith serves as the Acting Director of the Department of
Treasury's Office of Foreign Assets Control, or OFAC--that is
Mr. Smith's acronym for which he works--which is tasked with
administering economic trade sanctions to advance U.S. national
security and foreign policy goals. Prior to joining OFAC, Mr.
Smith served as an expert to the United Nations' Al Qaeda and
Taliban Sanctions Committee and as a trial attorney at the U.S.
Department of Justice. Welcome to your new job.
Thank you for joining us, Mr. Smith. I look forward to
hearing from you, sir. Please proceed.
STATEMENT OF JOHN E. SMITH, ACTING DIRECTOR, OFFICE OF FOREIGN
ASSETS CONTROL, U.S. DEPARTMENT OF THE TREASURY, WASHINGTON, DC
Mr. Smith. Good morning, Chairman Roberts, Ranking Member
Stabenow, and distinguished members of the Committee. Thank you
for the opportunity to appear before you today to discuss our
recent amendments to the Cuban Assets Control Regulations and
the implications for agricultural trade with Cuba.
On December 17, the President announced a number of
significant policy changes regarding our relationship with
Cuba. To implement the sanctions policy changes, Treasury's
Office of Foreign Assets Control, or OFAC, amended the Cuban
Assets Control Regulations, and our colleagues at the
Department of Commerce amended the Export Administration
Regulations on January 16. These amendments ease sanctions
related to Cuba in a number of key areas, including trade,
financial services, travel, and remittances. These changes are
intended to enhance commerce and communications between the
United States and Cuba and to help the Cuban people to freely
determine their own future.
OFAC expects its recent rule changes will benefit American
exporters in at least four key respects:
First, OFAC expanded the financing provisions of the
regulations to allow America's agricultural exporters to be
more competitive in selling their wares to Cuba.
Second, OFAC broadened the ability of U.S. financial
institutions to provide services and effectuate payments for
exporters and others authorized to engage in trade with Cuba.
Third, OFAC authorized trade delegations and exporters
satisfying the conditions of its regulations to travel to
Cuba--without needing to come into OFAC first to apply for and
receive a license--and expanded the ability of airlines and
other U.S. travel service companies to offer more reliable and
potentially cheaper travel with far less paperwork to Cuba.
Finally, OFAC permitted certain humanitarian projects in
Cuba, including those related to agricultural and rural
development that promote independent activity.
With respect to the first change, OFAC modified the
regulatory interpretation of the term ``cash in advance,''
which describes a financing requirement for agricultural trade
between the United States and Cuba that is imposed by statute.
Previously, OFAC had determined the statutory term to mean that
the U.S. exporter had to receive payment from the Cuban
importer prior to the goods leaving American shores--an
interpretation that U.S. exporters said made their products
less competitive than those from other countries. OFAC has now
revised its interpretation of the term to mean that payment
from the Cuban purchaser is required now prior to transfer of
title to and control of the goods. This change should provide
for a more efficient, less expensive means for Cuban importers
to purchase American-produced agricultural, medical, and other
authorized products.
U.S. exporters, however, continue to face barriers,
including that all U.S. agricultural goods are imported via
Alimport, a Cuban state-run monopoly. Also, U.S. exporters
continue to be prevented by statute from offering financing
inducements, such as loans, for authorized agricultural
exports, a limitation that may prevent them from being as
attractive to Cuban importers as third-country competitors.
With respect to the second key regulatory change, to
improve the speed, efficiency, and oversight of authorized
payments between the United States and Cuba, OFAC has
authorized U.S. banks to establish correspondent accounts at
financial institutions in Cuba. This change is intended to ease
the flow of authorized payments and eliminate the need for
third-country payment structures, which should benefit U.S.
exporters to Cuba.
With respect to the third key regulatory change, it is
important to note that OFAC's Cuba sanctions program is the
only such program that restricts travel to a country. The
recent regulatory amendments eased travel restrictions by
generally licensing certain additional travel within the 12
existing categories of travel in OFAC's regulations, without
the need for a specific license from OFAC. This means that
exporters and other travelers who satisfy the criteria in our
regulations may travel to Cuba and conduct travel-related
transactions there without requesting or receiving individual
authorization from OFAC.
With respect to the fourth key regulatory change, and to
help strengthen Cuban civil society, OFAC eased certain
restrictions on remittances to Cuba and authorized remittances
to certain individuals and independent nongovernmental
organizations in Cuba for humanitarian projects, including
those related to agricultural and rural development. Increased
remittances will afford individual Cubans with increased
financial resources to purchase American-produced agricultural
goods.
Thank you, and I look forward to answering any questions.
[The prepared statement of Mr. Smith can be found on page
78 in the appendix.]
Chairman Roberts. To the entire panel, thank you again for
taking the time to share your professional experiences and
perspectives about the opportunities and the challenges we face
in opening up trade with Cuba.
For the entire panel, what was the administration's process
in preparing for this major policy shift in the United States'
relationship with Cuba? What was the involvement of the
stakeholders in determining what changes could be made? How
have you worked with industry during the regulatory amendment
process? A big question, hopefully a short answer. I apologize
for that. Under Secretary Scuse?
Mr. Scuse. Mr. Chairman, we have been working with the
cooperators now for quite some time, not just at the national
level but also at the State level. It has been evident now for
a number of years that our stakeholders have wanted Cuba opened
up for the markets that--for the products that our farmers and
ranchers produce in this country, which are the best to be
found anywhere in the world. We have been at a very big
disadvantage because of the restrictions that have been in
place.
But our stakeholders have made it known very clearly that
this is a country that they want to do business in. When you
look at--I will give an example, not because Betsy Ward is
sitting behind me, but rice, half the rice consumed in that
country is imported, and it is coming from Vietnam. It is not
coming from the United States, and it should be.
So our stakeholders, again, this has been something they
have been wanting for a great deal of time, and we look forward
to the opportunity to eventually get products in there on a
level playing field.
Chairman Roberts. Mr. Borman.
Mr. Borman. Thank you, Mr. Chairman. As far as the process
goes, we work very closely with our colleagues in the executive
branch to identify ways that we could facilitate trade to the
private sector in Cuba within the bounds of the existing
embargo, and that is how we can go from individual license
requirements to license exceptions. Since the announcement of
our regulations, we have probably done several dozen outreach
events, both from Washington and across the country, where we
explain the changes and answer questions. We estimate we have
probably individually talked to, as part of these events, well
over 3,000 people. So we continue to solicit feedback from
those who want to understand what the regulations are.
Chairman Roberts. I appreciate that. Mr. Smith.
Mr. Smith. I would echo the comments from my colleagues
here. We work very closely within the executive branch to
utilize some of the comments that we have received from
industry and Members of Congress over the years about how we
could better change our regulations, and we have worked with
Commerce and other agencies since that time to actively promote
our regulatory changes so people know what the new rules are.
Chairman Roberts. This is for Under Secretary Scuse. I have
traveled to Cuba, as many others have done. Sometime back,
Senator Max Baucus, now the Ambassador to China, and I went
down--we did not tell anybody; we just went down--and for 18
hours discovered the world according to Fidel Castro, and then
also with an ag group trying to establish trade. I want to make
sure that we go about this change in the right way.
After a very long history of little or no meaningful
engagement with Cuba, many of these folks have come down, met
with people, and then been informed, yes, you can trade, only
to find out you could trade with hospitals, schools--and what
was the other one? I will think of it in a minute. Three very
limited situations. Then all of a sudden, you come up against
the state-owned enterprise, and that is where it ended. So all
of the talk and everything happened, and nothing really
happened.
So do you envision the reestablishment of diplomatic
relations to be helpful to agricultural trade? Are there any
concerns you have regarding this renewed relationship, the
process to establish these ties, and its interaction with
exports to and agricultural development within Cuba, sir?
Mr. Scuse. I think normalizing relations and opening up
trade, Mr. Chairman, will have a tremendous impact on
agriculture. The United States is the only country, to my
knowledge, that has to go through the state-owned corporation
of Alimport to gets its products in there. So hopefully with
the normalization of relations and opening of trade, that
restriction would, in fact, be lifted.
Number two, there has been a study done by Texas A&M as
well as the American Farm Bureau that said once relations are
normalized and trade is opened up, there will be a significant
increase in the purchase of products by Cuba. What the study
showed was that U.S. sales of agricultural supplies to Cuba
could exceed $1 billion. So I think that is a tremendous
increase over the $300 million that we are selling today.
Chairman Roberts. This is for all of the panel, and I
apologize to my colleagues for going just a tad over time. All
of you made reference to Alimport, the state-run monopoly
through which all U.S. agricultural imports are channeled.
By the way, it was churches, schools, and hospitals we were
able to export product to, and then we hit a brick wall.
As the U.S. begins to implement changes removing
restrictions on our side of the transaction, what commitments,
if any, have been made by the Cuban Government to provide the
same ability that our competitors receive to trade with other
Cuban organizations? Any one on the panel. Mr. Smith, we will
try you first.
Mr. Smith. I would have to say that is a question I would
largely defer to the State Department. I think that is
something that we would expect as part of a normalization of
relations, that would be discussed as part of the talks, and
that would be something that we would expect to open up as part
of that process. I do not know of any commitments that have
been made, but, again, I would have to refer that to the State
Department.
Chairman Roberts. Mr. Borman.
Mr. Borman. I agree with Mr. Smith and also note that we
have an ongoing series of discussions with Cuban Government
officials, and I expect that this certainly would be one of
those topics that will come up in those sector-specific
discussions.
Chairman Roberts. Under Secretary Scuse.
Mr. Scuse. No, I would defer to the answer of my
colleagues.
Chairman Roberts. Senator Stabenow.
Senator Stabenow. Well, thank you very much, Mr. Chairman.
When I was last in Cuba, I had the same conversations with the
Secretary of Agriculture about Alimport and the process for
them. They were indicating about 80 percent of the farmland is
still owned by the government, about 20 percent by the private
sector. I said, ``Well, can we sell to the 20 percent? Can we
sell farm equipment to the 20 percent?'' No. It has got to all
at this point go through the same process. So there is a lot of
change that needs to occur.
I do want to stress that--and I know we will hear from the
second panel, but we have tremendous opportunities. When
Senator Leahy was talking about products from New Zealand, they
are getting milk from New Zealand in powdered milk form, and so
I talked to our Michigan milk producers who would be happy to
oblige, as I know others would as well. We are a whole lot
closer. There are potatoes and beans and a whole range of
things that are available, and apples seems to be a delicacy at
Christmastime. I said, ``We can give you Christmas every day.''
So we have a lot of opportunities.
Let me ask, Under Secretary Scuse, there is an expression
that says the first step to achieving success is showing up,
and I think that is really true on trade, showing up and also
our ability to market. So you mentioned the Market Access
Program and the other tools at the Department of Agriculture,
and I wonder if you might speak more to what--while they are
not currently authorized in Cuba, how would you envision the
USDA's MAP programs going forward and creating opportunities
and tools for American agriculture?
Mr. Scuse. Well, again, if we were allowed to use our
marketing programs such as our Market Access Program, it is an
area where we work with our cooperators to go in, to do the
trade missions, to look at ways to develop markets and what the
actual needs are through the Market Assistance Program, help
our producers, help the different commodity groups make inroads
into establishing markets in that country. The Foreign Market
Development Program was where we actually worked with the
cooperators to do studies on what the demands are for different
products.
So if we were allowed to use these products, as well as do
a trade mission to Cuba, I think it would go a long way in
getting back much of the market that we have lost in the past.
But the lack of the ability to use these programs as well as
our inability to extend credit is the main issue why we have
lost our market share since 2008. The economists at the
University of Florida did a study, and what their study showed
was that the biggest loss or the reason for the most loss in
our market share there was our inability to extend credit as
our competitors, the EU and Brazil and others, are doing.
So the playing field right now is not level, Senator. A
level playing field, they are going to buy the best products
from the United States.
Senator Stabenow. Well, we heard that over and over again
as well when I spoke to the minister of agriculture in Cuba. We
heard over and over again the same thing with the foreign
minister, foreign relations, talking about the lack of credit.
When we look at how we get through that--and you have all
spoken to it, but I wonder if anyone wants to comment further
on the specifics of what we need to do to make sure that
process is open. The President has taken the first step, taking
out the intermediary, being able to allow payment not before
the shipment leaves but at a later point when it is in process
and arrives. But we all know that the issue of credit, whether
it is using USDA credit opportunities, other credit
opportunities, is a serious issue for us.
What do we need to do to be able to make that happen? Is
this all about lifting the embargo completely? Or are there
other things that we should be doing?
Mr. Smith. I could start out and answer. At least one
provision that is at issue is the provision in the TSRA statute
that prohibits any financing of goods, agricultural goods and
others, to go to Cuba other than third-country financing or
payment by cash in advance. So we are not allowed to offer any
kind of payment deals, payment terms other than going through a
third country to receive that financing or to pay the Cuba
importer in advance of the goods being turned over. I think
that is what my colleague has indicated is necessary to be able
to extend credit. We would need to remove that statutory
prohibition.
Mr. Borman. I would also add clarity on the provision of
TSRA that appears to require an individual license for any ag
export to Cuba, to change that, or make it clear that we could
allow it by license exception would also really facilitate ag
exports to Cuba. That is what we have heard from U.S.
agricultural exporters.
Senator Stabenow. Right. Under Secretary Scuse, is it those
two things specifically, or is there anything else from the
USDA's standpoint that we need to be changing to create
opportunities for you to fully provide assistance?
Mr. Scuse. Well, again, I think those are the biggest
changes that we need to have made so that we could use, again,
our marketing money, as well as the commodity groups with their
check-off funds, because they are not allowed to use their
check-off funds for promotion in Cuba either. So those changes
would allow us to do marketing in Cuba as well as give us the
ability to extend credit, again, to put us on a level playing
field with our competitors.
Senator Stabenow. Thank you.
Mr. Chairman, as you know, there is a hearing going on in
Finance. I am going to step over there for a moment and then
come back. So be on your best behavior while I am gone.
[Laughter.]
Chairman Roberts. I will try to do that and would urge you
to do the same on behalf of a good trade bill. Thank you.
[Laughter.]
Senator Stabenow. Yes, that is right.
Chairman Roberts. Senator Boozman.
Senator Boozman. Thank you, Mr. Chairman, and thank you all
for holding this very, very important hearing. I believe that
the way that you change the world is through personal
relationships. If we are serious about really bringing real
change to Cuba, we need to expose the Cuban people to America.
We are not only trading our products, but we are trading our
democratic ideals. Cuba represents a remarkable opportunity for
American farmers, but it is also an opportunity for Cubans to
gain access to safe, affordable, and high-quality agricultural
products from the United States.
I am encouraged by recent steps to reform the U.S.-Cuba
relationship. Boosting our commercial ties would have
significant benefits for both of our economies. In my State, it
is estimated that easing finance and travel restrictions with
Cuba will result in an increase of over $35 million in
agricultural exports from Arkansas annually.
Mr. Scuse, let us talk again a little bit about what
percentage of the food that Cuba consumes is actually grown in
Cuba.
Mr. Scuse. According to the World Food Program, 80 percent
of their food is imported.
Senator Boozman. What countries--you mentioned Vietnam, I
believe, as----
Mr. Scuse. Vietnam is supplying half the rice. If you look
at corn, corn is coming from Brazil and Argentina. if you look
at wheat, wheat is coming from the European Union and Canada.
Our sales from the United States to Cuba currently, 50
percent of our sales are poultry products; 25 percent of our
sales are made up of soybean meal and soybeans. So that makes
up three-quarters of the sales from the United States.
Senator Boozman. What about the quality of Vietnam rice
compared to American rice?
Mr. Scuse. Well, Senator, I am real partial to U.S.
products.
[Laughter.]
Mr. Scuse. I said earlier, I think our farmers and ranchers
produce the very best products to be found anywhere in the
world, and I am going to stick to that.
Chairman Roberts. Said very well.
Senator Boozman. Exactly. I do think that is important in
the sense that it is not only an opportunity, but it is an
opportunity for the Cuban people.
Mr. Smith, you have talked a lot about easing financing and
things like that. Out of the things that we are doing, what is
the most important thing that we need to be doing?
Mr. Smith. Well, I think when you started out, you talked
about travel between the American people and Cubans. I think
that is right that, as the President said, and I think you have
said, the best ambassadors for America can be ordinary
Americans going to travel and embodying our ideals. We
generally licensed or authorized travel within the 12
categories that we have. Congress has prohibited any further
opening for tourist travel under the TSRA statute, so that is a
statutory prohibition. We also have a statutory prohibition
with respect to not only private assistance to Cuba for
exports, for agricultural exports, but also for U.S. Government
exports.
Senator Boozman. Very good.
Do you agree with that, Mr. Borman? Or have you got any
other----
Mr. Borman. No; I certainly do. One other thing that I
would point out, in TSRA there is also a prohibition on U.S.
Government export promotion for trade with Cuba. So that really
limits the Commerce Department's ability to carry out the kind
of trade promotion and market analysis work that it does in
virtually every other country of the world.
Senator Boozman. Again, you guys can jump in, but even with
the changes that we have made, is it fair to say that the
majority of the restrictions regarding trade are still in
place?
Mr. Smith. It is correct that most trade, most imports,
most exports, most other transactions remain prohibited.
Senator Boozman. So we have got a good step in the right
direction, but we have got a long way to go.
You know, we have talked about financing. Are you aware of
any other countries that go through the financing scheme that
Americans have to go through?
Mr. Scuse. You mean to get products----
Senator Boozman. The financing restrictions.
Mr. Scuse. No, I am not aware of any other country that has
those type of restrictions. Senator, we do trade in
approximately 200 countries around the world.
Senator Boozman. So America is unique in that regard. Very
good.
In dealing with the Cubans, how does Cuba differ from other
major export markets in terms of how normal commercial
operations work?
Mr. Scuse. Well, again, as I pointed out earlier, we are
restricted to dealing with one state-owned corporation,
Alimport, for access for our U.S. products. So that is unique,
and it does present its own problems.
Senator Boozman. Mr. Borman.
Mr. Borman. My understanding is that for virtually all
imports into Cuba, regardless of the product category, they
have to go through some Cuban Government import agency.
Senator Boozman. Mr. Smith.
Mr. Smith. The other differences, the financing terms, as
we have talked about, in most other contexts the exporter could
get financing of some kind, either from the U.S. or from the
importer. That cannot occur here.
Senator Boozman. Thank you, Mr. Chairman, and thank you all
very much for being here.
Chairman Roberts. Senator Donnelly.
Senator Donnelly. Thank you, Mr. Chairman, and I would like
to thank all the witnesses.
I am a big supporter of increasing American exports to
world markets, and I am intrigued by the possibility of opening
the Cuban market, not only for Hoosiers but for all of our
country to export the things we build and produce.
But the concern is I want to make sure that the Cuban
people actually benefit from it. You know, what can we do from
a policy perspective to better ensure that the benefits of
trade reach the Cuban people as opposed to all the products
going into one agency and then being divvied out? What do you
see as the keys to making sure that the Cuban people actually
benefit from this?
Mr. Scuse. Senator, I think that by normalizing relations,
by breaking down the restrictions that we currently have for
trade, the Cuban people are going to benefit from that right
away. If you look at just the cost in transportation, again,
rice coming from Vietnam and you look at the cost of that, corn
coming from Argentina, wheat coming from the European Union, we
have a tremendous advantage in logistics and being able to
supply them top-quality products at what I would believe would
be a more reasonable price than what they are currently paying
for products shipping from those countries all over the world.
So I think that there would be an immediate benefit.
Could there be additional benefits? If, in fact, we are
treated like other countries and do not have to go through one
state-owned corporation for our products, which I believe and
hope would happen, then I think there would be additional
benefits.
Senator Donnelly. One of my concerns is just what you
referred to, which is having to go through Alimport, the state
agency there. We talk about the higher quality. I have been to
my friend Senator Boozman's home State, the extraordinary rice
they produce there, the pork products produced in my home
State, and all of us. We talk about the benefits of lower
price, easier transportation, and all of those things. The
question is: How do we make sure that lower price actually gets
passed on so they are not paying--the Cuban people are not
paying the same and that this group who will set it, in effect,
if you know what I mean?
Mr. Scuse. Yeah, I understand the concerns, but, again,
hopefully once relations are normalized and trade is
liberalized, again, I would hope that we would be treated like
the other countries that are currently trading with Cuba so
they do not have to go through one state-owned corporation for
those products.
Senator Donnelly. This would be for any of you. When
Canadian products are sent to Cuba, how are they entered into
the country? Who are they distributed through, do you know?
Mr. Borman. I do not know.
Senator Donnelly. Do they have to go through Alimport?
Mr. Scuse. To the best of my knowledge, no. The United
States has to go through Alimport.
Senator Donnelly. So that is one of the points I would like
to make as you talk to State, as you move forward with this.
One of my concerns and I know a lot of my colleagues' concerns
is that we be treated the same as everybody else. That is the
way the Cuban people benefit, that our products are able to go
directly to the Cuban people, that we are treated the same, and
I think that much of what we look at as we move forward will be
dependent on that being incorporated into any agreement that
comes through.
Thank you, Mr. Chairman.
Chairman Roberts. We thank you, Senator.
Senator Hoeven.
Senator Hoeven. Thank you, Mr. Chairman. I actually want to
pick up on a point that Senator Donnelly is making, and that
is, I think there has to be a carrot and a stick to what we are
doing here. We want to expand ag trade. That is good for our
farmers. Hopefully that is good for the Cuban people. But at
the same time, we want to put more pressure on the Cuban
Government to change its policies on human rights.
So what can we do, as we work here on ag trade, to make
sure that we are doing that? How do we get these products down
to the small businesses and the entrepreneurs that are actually
trying to make something happen in terms of free enterprise in
Cuba? How do we at the same time create some pressure on the
Cuban Government, on the Castro regime, to change and to
particularly change in regard to human rights? I would like to
hear from each one of you on that.
Mr. Scuse. Senator, as you well know, coming from the big
ag State that you are from, agriculture throughout history has
been a way to break down some of the barriers that we have
faced. If we can open up trade with Cuba and--because they are
only supplying 20 percent of what they currently consumer, but
the demand is certainly there. There is a way to help build the
agricultural sector in that country, which would create jobs,
which would create income, which would create more demand. As
that happens, I think you are going to see an awareness. Just
opening up the country and normalizing relations, there will be
an awareness of the people that I do not believe currently
exists. So I think this is a really good first step to helping
the Cuban people.
You know, our policies over the last 50 years have not been
one that has provided that openness, that transparency, and the
education about the United States that I think normalizing
relations and opening up trade will.
Senator Hoeven. Mr. Borman, you and I talked specifically
before the meeting about how do we make sure that these
restaurants and other small businesses that people in Cuba are
trying to get going--I mean, how do we support that effort as
we do this?
Mr. Borman. Several ways. One is, of course, the folks who
make the exports from the United States know who they are
intended for and they typically know those individuals, because
they are often relatives who are running the bed and breakfast,
the auto repair shop; and if the items do not get to them, they
will hear about that. We have a very good working relationship
with a lot of the exporters from our enforcement side to make
sure that the items go to where they are supposed to go.
Senator Hoeven. See, that is right on the mark. Now you are
starting to talk about actually helping people,
entrepreneurship, business enterprise, the kind of things that
hopefully will create some pressure for change over there. So
do you have a way to enforce that if we are going to have food
products or other products going in there to make sure that
they are actually getting to these small businesses that are
trying to get going?
The other thing is payment. How are you going to make sure
that people get paid for products that they ship into that
market?
Mr. Borman. Right. Well, so far we have not heard any
complaints of U.S. exporters not getting paid, and I am sure we
would, and I think----
Senator Hoeven. Well, that is because the old policy was
cash in advance. You are changing that, aren't you?
Mr. Borman. Well, but remember, it is still cash on
delivery, so----
Senator Hoeven. Cash when you change title.
Mr. Borman. Right. But that is still--and, again----
Senator Hoeven. Delivery, the product is delivered. It is
there.
Mr. Borman. Right.
Senator Hoeven. Which limits your ability to go get it,
doesn't it?
Mr. Borman. Well, but, again, if that, in fact, happens, we
will find out about that quickly, and then we will have to
decide----
Senator Hoeven. Again, go back to getting it to those small
businesses, how you enforce that.
Mr. Borman. Well, again, the first part is we make sure
that the folks who want to make the exports understand who the
small businesses are and what the limits are. Two, remember,
the Cuban people are very aware of these changes, and if over
time they do not see any significant changes, that is going to
create more pressure on the government internally. We have
already seen exports made to the private sector agricultural
co-ops in Cuba. We have seen that in the trade data.
Mr. Smith. I think we can continue to focus on the Cuban
people as we make our changes. I think the recent round of
changes that we made were very much focused on the ability of
the Cuban people, and to strengthen the Cuban people. We
increased their ability for communications, for Internet, for
other things so that they could better understand the changes
that were being made. We also increased the limits that can be
given on remittances, the financial amounts that U.S. citizens
can give to Cubans, and we increased those amounts for support
for the Cuban people, humanitarian projects, and other things
that would help agricultural development as well, including
microfinancing activities. So those are very much focused on
the individual Cubans, the small Cuban development businesses
that might want to grow, and it was the focus of our change.
Senator Hoeven. I think it is very important that you are
focused on that area, including putting information into that
market every way you can, because as we provide people with
more information, I think that also helps with their efforts to
try to force change from the inside as we try to force change
from the outside.
A final question for Mr. Scuse. What food products, farm
products do you particularly see as opportunity areas? You said
three-fourths of our exports now are poultry and soybeans. What
else do you see as good opportunities?
Mr. Scuse. Well, I think we have a great opportunity to
increase our exports of corn. There is no reason why the
European Union and Canada have the wheat market. That market
should also be ours. I think there is a great opportunity for
us to have the rice business in Cuba. I think it was pointed
out earlier in this meeting, there is a great opportunity for
dairy and dairy products.
Senator Hoeven. Thank you.
Chairman Roberts. I thank the Senator for his most
pertinent comments and thank the panel for responding.
Senator Heitkamp.
Senator Heitkamp. Thank you, Mr. Chairman, and thank you
for holding this meeting.
We have asked the witnesses probably three or four times
now about Alimport, and you all said you hope that we will see
this restriction lifted. I think I can remind you hope is not a
strategy, and we are hopeful that you all--hopeful--will take
the concern that is being expressed today about Alimport back
to your smaller groups as you discuss opportunities going
forward.
We have long been concerned about the extension of credit
for ag transactions and trade. Hopefully, I think tomorrow, we
are going to try to take a move in the right direction. I think
you guys have highlighted the number one thing that we think we
can deal with, which is Section 908. I personally support
lifting the embargo entirely. However, that may be a bridge too
far for this Congress. So we have to take these baby steps.
With that, I have a couple specific questions for you,
Under Secretary. To date, the Federal check-off dollars have
not been used for promotion of trade for Cuba. The loose
reasoning, I think almost an assumption, is that this is due to
the language of TSRA, which precludes the use of any United
States assistance, including United States export assistance.
Of course, the check-off dollars are not taxpayer dollars. They
are producer dollars. The Federal check-off program is set so
that farmers elect a board of peers who decide how those check-
off dollars are used.
It is not tax money, and as a result, does USDA recognize
the difference between your Government assistance programs like
MAP and FMD and producer-raised and controlled check-off funds?
Can producers utilize their own check-off dollars for promotion
for activities in Cuba? If not, why not?
Mr. Scuse. My understanding, Senator, is that the Federal
check-off funds cannot be used for trade promotion in Cuba.
Now, if it is----
Senator Heitkamp. I am asking you why.
Mr. Scuse. My understanding is it is because of the current
law that is in place.
Senator Heitkamp. I am suggesting that maybe the current
law is being broadly interpreted, and you might want to go back
and take a look to see if we can make that change without
legislative changes.
Mr. Scuse. Okay. We will do that, but I also understand--it
is my understanding that if there is State check-off money,
that can be treated differently. But the Federal dollars, the
Federal check-off money cannot be used. But, again, we will go
back and take a look at just what the law says and if it can be
used.
Senator Heitkamp. Yes, I think just to reexamine that
policy.
Mr. Smith, I am running out of time, but I want to go back
to the cash in advance original definition and the other
changes you are making to facilitate more efficient and
affordable exports to Cuba. At this time, do you feel like the
administration has gone as far as legally possible, in terms of
the definition, to open up opportunities? Were there other
things on the table as you discussed the changes that you did
make, that maybe you said, well, maybe we should not do that?
Are there other kinds of policy things that were abandoned that
maybe we should reexamine?
Mr. Smith. In terms of the restrictions on financing, I
think the definition that we use is the definition that had
been in appropriations bills from the Congress. That had been
as far-reaching as I had heard in terms of transfer of title
and control. So it is hard to imagine that you could interpret
cash in advance far beyond transfer of title, because it is
largely the last step before you actually turn over the goods.
So there has been no other definition that I have heard
that could meaningfully interpret that statutory term.
Senator Heitkamp. So you mean cash in advance means cash in
advance?
Mr. Smith. That is what I mean.
Senator Heitkamp. Okay. Finally, Mr. Scuse, I know that you
do not have any boots on the ground in Cuba, but you do have
folks in DC who follow exports and our competitors closely. We
believe we grow the highest-quality products with the nearest
market. Cuba obviously is a huge opportunity for my State and
the States that are represented in the Ag Committee.
Given that export assistance funding is prohibited by TSRA,
are you still allowed to place someone within the Havana
embassy that could make those contacts and begin to do that
groundwork without crossing the boundary? Are you intending to
do that at USDA?
Mr. Scuse. Well, correct me if I am wrong. I do not believe
we have an embassy just yet.
Senator Heitkamp. Well, we are hopeful.
Mr. Scuse. Okay. So am I. We can put individuals in there
on a short-time basis for whatever assistance may need to be
needed to look at different projects or to help them with
different regulations that we may need. But that is only short
term.
Long term, I would hope that when the day comes that we
have an embassy there, we would work with the State Department,
and we would be able to put staff in that embassy to help us
facilitate trade and to move American products into Cuba.
Senator Heitkamp. How many staff do you have currently in
Cuba?
Mr. Scuse. To the best of my knowledge, we do not have any
at USDA.
Senator Heitkamp. Do you believe that you are prohibited
from having staff in Cuba right now?
Mr. Scuse. You know, I do not know, to be quite honest with
you. Again, to have full-time staff in Cuba, I do not believe
that we would have the need right now to have any full-time
staff until trade is actually opened.
Senator Heitkamp. I think you get my intention, which is we
think that this is going to happen probably sooner rather than
later. So we want to hit the ground running, and we would
appreciate it if you guys would take a look at what kind of
opportunities you could avail yourself of today that could, in
fact--once we get things lined up--facilitate further trade.
Mr. Scuse. Senator, I believe that when that day comes, we
will be able to act very quickly.
Chairman Roberts. Senator Klobuchar.
Senator Klobuchar. Well, thank you very much, Mr. Chairman.
Thank you for holding this hearing. It is good to see you,
Under Secretary Scuse. We love you in Minnesota because you
were willing to come out to a forum I held on Cuba in February,
and that means a lot to us in Minnesota.
Senator Heitkamp. Everybody in North Dakota agrees. We
claim you as our own.
Senator Klobuchar. Exactly. As you know, we discussed at
that forum--you did a great job, by the way--the potential for
the U.S. to export products to a country that is just 90 miles
off our shores, 11 million people. When I went there a few
months ago with Senator Warner and Senator McCaskill, I was
able to see the new port that is being built, which is a very
big port, and it is going to replace the Port of Havana, which
will be used for tourism. But when I saw that port, I thought,
``If they are going to bring in goods here and sell things in
Cuba, we want them to be American goods.'' As you know, I am
carrying the bill to lift the embargo, and I appreciate the
support of Senators Enzi, Flake, Stabenow, Leahy, Durbin, and
Paul. There are other Senators that are interested. We are
adding to our numbers.
We know it is going to take a while to get it done, but
that is truly the way, I think you would agree, Under Secretary
Scuse, to have some trade with Cuba and actually sell our
goods. Now they are being done on a humanitarian basis, but
could you talk about the effect it could have if we were to
actually lift the embargo?
Mr. Scuse. It will have, I believe, a tremendous impact on
our ability to sell products and greatly increase the amount of
products that we are currently selling to Cuba. Again, right
now you are looking at about $300 million worth. Again, the
study by Texas A&M and the American Farm Bureau believes that,
with normalized relations and lifting of the trade
restrictions, that number could be in excess of $1 billion.
What this also, I believe, would mean to the Cuban people,
with the ability to purchase agricultural inputs--fertilizer,
seed, chemicals, and equipment--I think it would give them also
the ability to have agricultural businesses, produce more of
what their actual demands are in the country, and create
revenue throughout the countryside, and, again, help the Cuban
people, especially that live in the rural areas. So I think it
is a win for both of us, in my opinion.
Senator Klobuchar. Yes. Now, Mr. Under Secretary, some have
argued that while Cuba is a small market and also clearly has a
lot of poverty, why would this still be such a benefit? Are
there other reasons outside of just selling to Cuba that this
could be a benefit to American agriculture?
Mr. Scuse. Again, I think it is not just selling
commodities, but I think it is selling agricultural equipment.
I think it is not just about the sales. It is about the jobs
that will also be created here in the United States. You know,
when you look at our exports currently at $152.5 billion
supporting almost 1 million American jobs, any increase that we
are going to be having in sales, that is an increase in
American jobs.
But, again, I think it is also a win for the Cuban people,
supplying them with the very best products to be found anywhere
that can be purchased, and an opportunity to also create jobs
there as well.
Senator Klobuchar. Well, and another argument, which you do
not need to get into but that I have heard raised, is that it
is often thrown in our country's face in other countries in
Latin America, our situation with Cuba, and there is some
belief it could help us to open up some markets for our
agriculture and other products as well.
I want to ask about foreign competition. When I was there,
we met with a number of the ambassadors from places like Brazil
and Spain and other places. As you know, their investment--they
do not have embargoes, but their investment has been slow.
However, I detected that they might start picking up as they
see the potential for the U.S. coming in. Do you think other
countries are going to continue to expand their market share? I
will never forget being at the port and saying, well, they said
they got their computers from China because they were not able
to use U.S. computer companies like most ports do across the
world. But do you want to discuss that briefly?
Mr. Scuse. Well again, there are opportunities there. But,
yes, we are going to face competition from those countries that
are currently doing business there. If you go back again and
look at the business that we--the trade that we had in 2008,
$658 million down to $300 million last year, look at the reason
why. Other countries were able to extend credit, and we were
not. So the main result of that was a substantial loss in the
Cuban market for U.S. products.
Senator Klobuchar. Right.
Mr. Scuse. So I think we are going to face competition
from--continued competition from countries like Brazil,
Argentina, Canada, and the EU.
Senator Klobuchar. Okay. Just one last question of you, Mr.
Borman or Mr. Smith. What do you see as the biggest obstacles
on the Cuban side to increasing American agricultural exports?
We clearly have issues there with human rights, and it is our
hope as the negotiations go forward, this will clearly be part
of the negotiations. But when I was there, I saw the double
currency issue and some of the other things. What do you see as
some of the obstacles to trade?
Mr. Borman. Well, I think in addition to the Alimport
issue, just more generally the Cuban bureaucracy's ability to
freely let goods into the country, because I think that is
historically not the way they have done things.
Senator Klobuchar. That is putting it mildly, yes. All
right. Mr. Smith.
Mr. Smith. I would add to what Mr. Borman said that also
the development of private business, and that is something that
we are trying to encourage here, so to encourage that, there is
more money for individuals and more money for private
businesses to be able to import.
Senator Klobuchar. Exactly. I think there is something like
600,000 entrepreneurs now. This has loosened up recently. They
have their own currency. But there is still a long way to go. I
will say, in ending, that I just saw such a spirit of
entrepreneurship there with the people and that the people are
a bit ahead of the government--again, putting it mildly.
So I want to thank the Chairman for holding this hearing
and really being willing to hold such a hearing. As we know,
this can be a controversial issue on both sides of the aisle,
and I really appreciate you doing it. Thank you.
Chairman Roberts. Thank you, Senator.
Senator Brown.
Senator Brown. Mr. Chairman, I echo the----
Chairman Roberts. Senator Brown, you might want to put your
sign up. Everybody knows you, but that is Mr. Leahy's.
Senator Brown. I did not know I was removed from the
Committee.
Chairman Roberts. What on Earth happened to Mr. Brown?
Senator Klobuchar. The Senator Brown sign is missing.
Senator Brown. It is missing.
Chairman Roberts. Did you lose your----
Senator Brown. I do not know, Mr. Chairman. It is okay.
Chairman Roberts. Senator Brown, we will pick----
Senator Brown. I lost my train of thought, Mr. Chairman,
but thank you, as Senator Klobuchar said, for holding this
hearing. I have two questions.
One, Mr. Secretary, talk to me about what this means, as
trade restrictions are eased, what it means to a State like
Ohio in terms of agricultural exports.
Mr. Scuse. For a State like Ohio, what our current
restrictions mean, it means that it is difficult to get
agricultural products from a State into Cuba. We are at a
tremendous disadvantage--the playing field is not level--
because we are not allowed to do marketing programs like other
countries do. We are not allowed to extend credit like other
countries do. So the playing field is not level, and it creates
a great deal of difficulty for us to compete against those
country.
Senator Brown. So tell me what it will mean as we ease
them.
Mr. Scuse. Well, again, I think that as we ease the
restrictions, it is going to be easier for us to get products
in there. Again, I went through the list. Right now the corn is
coming from Brazil and Argentina. I think that we should be the
number one supplier for corn. If you look at wheat, wheat is
coming from the European Union and Canada. Again, there is no
reason why that should not come from the United States. Fifty
percent of the rice is coming from Vietnam. We should be the
one supplying the rice to Cuba. Again, I think there are
opportunities for us to ship dairy and dairy products to Cuba.
So when these current restrictions are gone, I think there
are a lot of opportunities for those products as well as a lot
of others. Our fruits--apples would be another good example of
a product that there is a demand for that we could ship down
there.
So I think there is a lot of opportunity, but we need to
get the current restrictions lifted. We need to be able to use
our marketing programs, and we need to be able to extend
credit.
Senator Brown. Thank you, Mr. Secretary.
Mr. Smith, in light of Treasury's policy changes under
TSRA, has there been much interest shown by U.S. banks willing
to do this type of trade? Have there been issues or problems
with establishing correspondent accounts with Cuban banks? If
you could kind of give me your assessment about what is
happening and what you think will happen.
Mr. Smith. Sure. There has been tremendous interest from
U.S. financial institutions in terms of the engagement that may
be allowed in Cuba. As far as I am aware, no U.S. financial
institutions have yet opened correspondent accounts there. A
number of U.S. financial institutions have decided to begin
engagement on the credit card and debit card front that we have
allowed. Many of the financial institutions have talked about
concerns over the state sponsor of terrorism designation that
still exists with respect to Cuba, which may be changed.
Senator Brown. Would that be sort of the on switch for
correspondent accounts, once that is lifted or once that is
changed?
Mr. Smith. It could be. We have authorized it, but it is up
to an individual financial institution's risk appetite and
whether they are concerned--whether their concerns will be
ameliorated by the removal of the state sponsor of terrorism
designation remains to be seen.
Senator Brown. One of the things that has changed in
today's banking system from particularly 10 years ago but that
began to change 5 years ago with the financial crisis is banks
increasingly, even smaller banks of $20 and $30 and $40
billion, even some smaller than that, have sort of elevated in
stature their risk officer to look at--to make sure that they
sit at the table to be part of decisionmaking on is this too
risky for our bank to engage in. In the past, that question was
not asked often enough, and look what happened.
Is Treasury talking to risk officers about this issue of
risk, sort of injecting that in the conversation in board
rooms, at least in the largest banks in the country, to help
them think through the issues of risk?
Mr. Smith. Yes. Almost daily, we are talking to the
financial institutions and particularly the risk officers, the
compliance officers, to make sure that they understand the
changes that we are making, what our policies are and what our
requirements are, so that they have a chance to dialogue with
us. We have had a number of open outreach events where we have
had financial institutions present, but we have also had one-
on-one conversations with many financial institutions.
Senator Brown. Thank you.
Thanks, Mr. Chairman.
Chairman Roberts. I am going to ask one quick question
before we ask the second panel to come up, with all due respect
to my colleagues.
Director Smith, in view of the questions asked by Senator
Brown--and I like that term ``risk appetite.'' Where did you
come up with that? That is probably the first question. But, to
date, have many U.S. financial institutions set up
correspondent accounts with the financial institutions in Cuba?
How many businesses do you expect utilize this type of account
through their bank?
Mr. Smith. So I am not sure where I came up with ``risk
appetite.'' I am sure I heard it somewhere, and----
Chairman Roberts. Well, chew on that awhile.
[Laughter.]
Mr. Smith. I will, indeed. As far as I am aware, no U.S.
financial institutions yet have opened correspondent accounts.
I think what we do is we authorize certain activities, but we
do not require financial institutions to engage in any certain
activities.
Chairman Roberts. Obviously. Well, if that were the case,
how many U.S. businesses would you expect to utilize this type
account through their bank? Do they have the risk appetite to
do that?
Mr. Smith. I think the more financial institutions--or the
more U.S. industry wants to trade with Cuba, the higher the
trade goes with Cuba, the more demand there will be on the
banks from their clients to say, ``We need you to be in there
servicing us.'' So I think the more the trade increases, the
more we would expect the pressure on the banks to go in.
Chairman Roberts. I appreciate your answer. This will
conclude the first portion of our hearing this morning. Thanks
to each of our witnesses, especially for taking time out of
your very busy schedule to share your perspectives and your
insights about the opportunities and challenges we face in
expanding agricultural trade with Cuba.
To my fellow members, I would ask that any additional
questions you may have for the record be submitted to the
Committee clerk 5 business days from today, or by 5:00 p.m.
next Tuesday, April 28.
We now invite the second panel of witnesses to come to the
table. Thank you very much, gentlemen.
Mr. Scuse. Thank you, Mr. Chairman.
Mr. Smith. Thank you.
[Pause.]
Chairman Roberts. I would like to welcome our second panel
of witnesses before the Committee. First, Mr. Michael Beall,
president and CEO of National Cooperative Business Association.
Mr. Beall joins us today on behalf of the National Cooperative
Business Association where he serves as the president and CEO.
Before joining NCBA, he served as president and CEO of the
Missouri Credit Union Association and president and CEO of the
Maryland-District of Columbia Credit Union Association. He
additionally held positions at the World Council of Credit
Unions and the North Carolina Credit Union League. Anybody need
any credit in the audience, you ought to see Mr. Beall.
[Laughter.]
Chairman Roberts. Welcome, Mr. Beall. I look forward to
hearing from you. We will wait to introduce the second
panelists after you conclude, sir. Please feel free to
summarize your comments.
STATEMENT OF MICHAEL V. BEALL, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, NATIONAL COOPERATIVE BUSINESS ASSOCIATION, WASHINGTON,
DC
Mr. Beall. Good morning, Chairman Roberts. You have
introduced me.
NCBA works to provide educational, technical expertise, and
advocacy that helps cooperatives thrive and survive in today's
economy. My remarks today will focus on the new day in U.S.-
Cuba relations and some ways forward to foster better, more
productive, and positive relationships between the two
countries, notably through agricultural trade.
As a preface, I want to convey two thoughts regarding U.S.-
Cuban cooperative development.
First, the U.S. should view Cuban cooperatives as a
fundamental to building a market-based economy in Cuba, one
that incorporates a proven business model in economic
empowerment for member owners, for consumers. Cooperatives are
functioning, successful businesses that provide tangible
economic ownership and benefit consumers wherever they are
found, and NCBA is optimistic that Cuban cooperatives will be
no exception to this rule.
Second, U.S. cooperatives here are ready to assist right
now. We have already begun to build ties with Cuban
cooperatives, and we can hit the ground running whenever the
laws discussed in the first panel permit. The message here is
simple: Put U.S. cooperatives to work with Cuban cooperatives.
By way of background, there are 29,000 member-owned co-ops
in the U.S., employing about 2 million folks. One in three
American consumers does business with a cooperative. Consumers
and producers benefit greatly from cooperatives in areas like
agriculture in particular, but also in housing, rural electric
and telecommunications, and credit unions. Co-ops work for
consumers.
The cooperative form of business where the members own the
enterprise is particularly well suited for the Cuban people and
especially in this period of transition. Cooperative ownership
combined with cooperative business practices that use the
profits for the benefit of the members and the form of
governance where each member gets one vote are all features
that are going to have special appeal as they grow in Cuba.
Our understanding is that Cuba has begun to change its
cooperative law, starting in 2011, making lots of businesses
become cooperatives and changing the ownership structure. This
is a welcome departure from the other types of government or
state-owned enterprises. NCBA in our work, we have been told by
Cuban cooperative officials there are about 5,200 agricultural
cooperatives currently operating in Cuba that contribute 80
percent of all the fruits and vegetables consumed by consumers,
and by all appearances this Cuban ag sector is the foundation
for their economic stability and growth.
NCBA has taken preliminary steps to initiate stronger ties
with Cuban co-ops. Last year, we established the U.S.-Cuba
Cooperative Working Group to explore opportunities to engage
with Cuba on cooperative development. We sponsored a trip last
year of co-op leaders, establishing connections, and actually
we are hosting a group of co-op ag leaders the first week of
May.
In terms of some of what I have seen in travel to co-ops,
there are challenges. There is lots of focus on the 1950s era
cars, but on the co-op farms we visited, the ag equipment is
from that era as well, and it would be considered vintage.
One of the other main concerns that I would say that I saw
is that none of the cooperatives for us produced financial
statements, and so we are not able to verify how profitable are
these cooperatives. What are the expenses that they are taking
on? More importantly, perhaps most importantly, what is the
treatment of the state-owned equipment that is being delivered
over to co-ops? What is the treatment on the balance sheet of
the land that cooperatives are operating on?
So as NCBA, as cooperatives build relationship with Cuban
cooperatives, this is really where we want to see progress.
This is where we want to see proof, if you will, that the
cooperatives are independent and able to manage these assets
and not with interference from the Cuban Government.
I did return very optimistic about the future of U.S.,
Cuban, and cooperative endeavors. Furthermore, the challenges
facing the cooperatives there are technical, they are
accounting, educational obstacles are the exact kinds of issues
that can be addressed and addressed well by Americans and
American co-ops. We stand with U.S. co-ops ready to provide
this as soon as the legal and governmental issues between the
two countries are resolved. U.S. co-ops are a compatible
development tool that can make a difference in developing
healthy and vibrant cooperatives in Cuba, and cooperatives that
can over time become valuable to both the American and the
Cuban consumer.
The legal and governmental issues we have talked about this
morning are real and are something for us to look to
policymakers like you to resolve. NCBA is a business group
focused on consumer empowerment and economic results. We are
leaving diplomacy to the diplomats.
As the new U.S.-Cuban relationship takes place, NCBA
respectfully but forcefully wants to remind Congress that we
are here, that cooperatives are ready to roll up their sleeves
and get to work, and cooperatives are an ideal democratic
structure and form of operation that can produce results on the
ground.
Cooperatives are going to help the Cuban people develop
financially viable, member-owned businesses that assist in the
economic empowerment of Cuban entrepreneurs, and in doing so we
provide Cuban consumers with marketplace choices and, perhaps
most importantly, further U.S. interest by demonstrating the
benefit of democracy and financial independence that ownership
confers.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Beall can be found on page
44 in the appendix.]
Chairman Roberts. We thank you, Mr. Beall.
Senator Boozman wanted to introduce Mr. Harris.
Senator Boozman. Thank you, Chairman Roberts, Ranking
Member Stabenow. I am very pleased to welcome Terry Harris to
testify before our Committee. Thank you for extending the
invitation to this distinguished witness.
Mr. Harris has worked for Riceland Foods since 1975, and
currently he is the senior vice president for marketing and
risk management. Mr. Harris has traveled to Cuba more than 20
times, and he has a wealth of knowledge on the practical
challenges that America's farmers and ranchers face with
trading with Cuba. Mr. Harris lives and works in Stuttgart,
Arkansas, which is the rice and duck capital of the world. I
look forward to hearing Mr. Harris' testimony. Thank you for
being here.
STATEMENT OF TERRY L. HARRIS, SENIOR VICE PRESIDENT, MARKETING
AND RISK MANAGEMENT, RICELAND FOODS, STUTTGART, ARKANSAS
Mr. Harris. Thank you, Senator Boozman. Mr. Chairman, thank
you for the opportunity to appear before this Committee today.
Riceland is a family farmer-owned cooperative that was
formed in 1921 to market rice. Today Riceland serves
approximately 6,000 farmer members in Arkansas and Missouri who
grow rice, soybeans, and wheat. The cooperative markets about a
third of the rice grown in the southern United States and about
25 percent of the national production.
Riceland is primarily a direct exporter, selling directly
to buyers in importing countries. As a result of this direct
approach, our staff is very well schooled in the details of
everyday management of logistics and finance related to the
export business.
Riceland Foods is also proud to be a member of the USA Rice
Federation. USA Rice represents all segments of the U.S. rice
industry. Rice is grown in seven States, including Arkansas,
California, Louisiana, Texas, Mississippi, Missouri, and
Florida. Nearly half of the U.S. crop is grown in eastern
Arkansas. The industry markets rice in all 50 States and to 125
countries worldwide. USA Rice is a founding member of the U.S.
Agricultural Coalition for Cuba, a broad-based group of U.S. ag
and food organizations seeking to reestablish Cuba as a market
for U.S. food and ag exports.
My objective today is to discuss the past and potential
trade relationship between the U.S. and Cuba, a future that I
believe holds great promise for U.S. rice farmers and U.S.
agriculture.
The United States exports about half of the rice produced
annually, so maintaining existing markets, as well as
developing new markets, are key components to the industry's
success. Therefore, the U.S. rice industry wholeheartedly
supports the opportunity to move to normal commercial relations
with Cuba.
Prior to the U.S. embargo on Cuba more than 50 years ago,
the island was the number one export destination for U.S. rice.
Annual rice shipments reached as much as a quarter of a million
metric tons in the 1950s, and the U.S. accounted for more than
half of Cuba's rice imports.
Prospects brightened with passage of the Trade Sanctions
Reform and Enhancement Act of 2000, when U.S. agriculture and
food exports to Cuba were granted, or what many of us believed
at the time to be, a broad exemption from the embargo.
In November 2001, I had the opportunity to make the first
sale of U.S. rice to Cuba since the embargo was imposed. It was
an incredibly intense and interesting negotiation as we
developed contract terms and quality specifications for a
country which, at that time, had not purchased goods from the
U.S. in more than 40 years.
I found the leadership of the Cuban buying organization
informed, shrewd, and very professional. I was also in Cuba to
witness the first shipment of U.S. rice when it arrived in the
Port of Havana. It was an unforgettable experience for me to
see how excited they were with the quality of rice they had
been able to purchase for the people of Cuba. I saw what can
happen when barriers are removed and people are allowed to meet
and find common ground for cooperation and trade.
The success of rice and other U.S. agriculture products in
Cuba was seriously curtailed in large part following a change
by the Office of Foreign Assets Control in the definition of
``cash in advance'' in 2005. U.S. rice exports to Cuba dropped
to zero following this regulatory change.
Currently, most of Cuba's rice imports come from Vietnam.
With the port of New Orleans located less than 700 miles from
Havana, the U.S. is in a better position to serve the rice
needs of the Cuban people in terms of transit time and cost of
freight.
With the lifting of the embargo and the restoration of
trade and travel with Cuba, we estimate that the U.S. could
regain 20 to 30 percent of the Cuban rice business within 2
years, or an estimated 90,000 to 135,000 metric tons of new
demand for U.S. rice farmers based on USDA's estimate of Cuba's
annual import needs. We would anticipate the U.S. share of this
market would exceed 50 percent within 5 years and could reach
as high as 75 percent or more within 10 years.
On January 15, 2015, OFAC made changes to the regulations
on trade with Cuba that allowed for the definition of ``cash in
advance'' to revert to the pre-2005 wording. We applaud this
measure, as well as other actions by the Obama administration
to facilitate trade. However, there are still obstacles to
conducting normal trade with Cuba.
I stated earlier that we are seeking normal commercial
relations with Cuba. This means allowing U.S. citizens to
travel and spend money in Cuba without restrictions as well as
allowing Cuba to export their goods to the U.S. as they do to
most countries around the world so they can gain the resources
and increased demand to import U.S. food and ag products. It
also means permitting the full range of commercial banking and
financial relationships to facilitate trade based on individual
exporter assessments of the risk of doing business.
The U.S. rice industry and Riceland Foods is committed to
building the Cuba market for our product. Our company has made
numerous trips to Cuba to meet with Cuba's national importer of
rice and food. USA Rice has spent just under $900,000 in rice
industry promotion funds since 2003 to promote the high quality
and efficiency of U.S. rice in the Cuba market. We intend to
continue those activities.
To give U.S. rice the chance to compete in Cuba, the rice
industry seeks the ultimate lifting of the embargo and the
elimination of all restrictions on tourism and trade with Cuba.
This, of course, requires congressional action.
Thank you.
[The prepared statement of Mr. Harris can be found on page
52 in the appendix.]
Chairman Roberts. Thank you, sir.
Senator Klobuchar.
Senator Klobuchar. Well, very good. Thank you, Mr.
Chairman. I am very pleased today to introduce Mr. Ralph
Kaehler. Ralph is a Minnesota native whose family has been
farming in St. Charles for nearly 130 years. He has been on a
number of different trade missions to Cuba, and he has a unique
perspective of someone who both understands how modernizing our
country's relationship with Cuba impacts farmers here at home,
and also understands how it could impact Cuba's culture and
people.
In February, he was one of the panelists at the Cuba forum
I referred to that Under Secretary Scuse came out for, and it
is good to see him here today. I look forward to hearing his
testimony. We are really excited to have a Minnesotan on the
panel. Thank you, Mr. Kaehler.
STATEMENT OF RALPH KAEHLER, FARMER AND OWNER, KAEHLER CATTLE
COMPANY, ST. CHARLES, MINNESOTA
Mr. Kaehler. Thank you. Chairman Roberts, Ranking Member
Stabenow, Senator Klobuchar, and all members of the Committee,
thank you for holding this panel on ag trade with Cuba.
Chairman Roberts. Mr. Kaehler, would you just take a moment
here? I understand you have two boys, Chase and Colby; two
girls, Opal Jo and Elsie. It is also my understanding--I would
like to take a moment--no, this is not correct? Wrong witness.
Sorry.
[Laughter.]
Mr. Kaehler. I have got two boys and one daughter-in-law-
to-be, so we started out right.
Chairman Roberts. I have two daughters and one----
Senator Klobuchar. These were the trick questions we were
telling you about, Mr. Kaehler, that we prepared for. Okay,
good. You did well. You did well. You did not agree.
[Laughter.]
Chairman Roberts. I think the whole world knows I have
grandchildren, and I want to ``Let It Go.''
[Laughter.]
Chairman Roberts. All right. Please proceed, sir.
Mr. Kaehler. Well, we are both fifth generation. You just
got the two mixed up.
Chairman Roberts. Feel free to summarize your comments
after my intemperate remarks.
Mr. Kaehler. No problem. I guess we are on. Well, my two
sons are the fifth generation to be operating our family farm
in St. Charles, which sits in the southeastern part of the
State. Our farm produces traditional crops, canning crops, and
livestock. We are nationally recognized beef breeding livestock
producers whose claims to fame include exporting the first
livestock to Cuba in 2002 since the enactment of the trade
embargo. Our youngest son, Seth, is going to be married in
November. He is actively involved in the cattle operation and
will be taking over the export activities. My oldest son,
Cliff, recently returned home from Wall Street to start a solar
energy company, and we are pretty excited to bring a kid back
from Wall Street into rural Minnesota.
Our initial exposure to Cuba was as an exhibitor in the
First U.S./Cuba Food and Agriculture Exposition in 2002 through
an invitation from Governor Ventura. Of the over 180 exhibitors
from 30 States, the Kaehler Farm display was the only one with
live animals--affectionately known as the ``Cuban Ark.'' It
consisted of two beef cow, two dairy cows, two pigs, two sheep,
and two bison bottle calves that we took on behalf of the North
Dakota Farmers Union. The display was intended to exhibit the
diversity of U.S. livestock producers and introduce Cuba to
what we considered was a typical farm family.
We returned home from that exposition motivated to do more.
Since then, we have led over 10 trade delegations to Cuba.
These missions have included producers from over seven States
and a bipartisan mix of State lawmakers and officials. To date,
some of the most successful exports to Cuba that we have
initiated include the shipments of the first livestock, the
first dried distillers grains, a letter of intent for powdered
milk, the first animal milk replacer, and the first texturized
calf feed, which was made by a local farmer-owned co-op.
Given the opportunity, U.S. farmers do well in Cuba. We
have a significant advantage of shorter shipping over Europe,
South America, Asia, and other major exporters. In addition,
Cuba can take advantage of our U.S. rail container service and
sizing options, which brings significant benefits to smaller
privately owned businesses like ours or the edible bean
producers in the Midwest. On top of this, U.S. producers offer
a wide variety of affordable and safe food products for the
Cubans.
Unfortunately, some of the policies currently in place
diminish the natural advantages American agriculture enjoys
over its competitors. For instance, requirements for using
third-country banks for financing adds a lot of paperwork,
time, and personalities to every transaction. Coupled with a
restrictive cash-in-advance policy--which I know the President
helped to improve in recent months--there is a very small
margin of error before a shipper faces demurrage fees. As a
family operation trying to build our business through exports,
this self-inflicted inefficiency can be really difficult to
manage.
What do I hope to see for farmers in the national Cuba
debate? First, I hope farmers can work with Congress to improve
the trade financing rules for Cuba. The efficiencies gained by
doing this would be immediately beneficial. It would make
shipping cheaper for producers and food less expensive for
Cubans, both of which can only be a good thing for our trade
relationship.
Second, I have to mention the importance of the USDA to ag
exporters. Large companies have plenty of resources without
this promotion and technical assistance, but small firms like
ours do not have the luxury of extra available cash or
shareholder offsets. We need marketing support and assistance
to help support our companies and figure out exactly what is
going on in the markets abroad. I hope to see these resources
available someday soon for our small and medium-sized producers
to help us work on selling our products to Cuba.
Finally, I hope that Congress will expand the universe of
people involved in U.S.-Cuba trade by allowing a greater
variety of goods and services to be traded. I do not know much
about politics, but I have spent a lot of time in Cuba and have
built strong relationships with the farmers and their families.
Our farm has weathered many ups and downs in doing business
with Cuba, including a recession, high commodity prices, and
difficult financing rules. But we have made progress over time
and have never been shortchanged by our customers. I can only
imagine that having more interactions like these--farmer to
farmer--will help build a better understanding between our two
countries and build a better quality of life on both sides.
I look forward to answering any questions. Thank you for
this opportunity.
[The prepared statement of Mr. Kaehler can be found on page
59 in the appendix.]
Chairman Roberts. Thank you, Mr. Kaehler. I apologize for
the congressional oversight in regards to you adopting Mr.
Keesling's family.
[Laughter.]
Mr. Kaehler. Well, my folks could not get our name right
half of the time neither. No problem.
Chairman Roberts. Doug Keesling has traveled from Chase,
Kansas, America, to join us today. Mr. Keesling is representing
the Kansas Wheat Commission, where he has served since 2005.
Doug and his wife, TJ, grow wheat, corn, soybeans, milo, and
alfalfa on their fifth-generation farm. Now, Doug and TJ do
have two boys, Chase and Colby; two girls, Opal Jo and Elsie.
The whole point is I would like to take a moment here to wish
Elsie a very happy 1-week birthday. You better get back home as
soon as you can.
[Laughter.]
Chairman Roberts. Mr. Keesling.
STATEMENT OF DOUG KEESLING, FIFTH GENERATION OWNER, KEESLING
FARMS, KANSAS WHEAT, CHASE, KANSAS
Mr. Keesling. Good morning, Chairman Roberts, Ranking
Member Stabenow, and members of the Committee. Thanks for the
opportunity to testify today about the opportunities for
agricultural trade with Cuba. In particular, I would like to
thank Chairman Roberts for his kind invitation and his decades
of service to Kansas and her farmers.
My name, again, is Doug Keesling. I am a fifth-generation
farmer from Chase, Kansas, and I have been on the Wheat
Commission for the last 10 years and have been able to travel
several places because of that.
I recently returned from Cuba, where I was part of a
delegation organized by the U.S. Agriculture Coalition for
Cuba. The primary purpose of USACC is to reestablish Cuba as a
market for U.S. food and agriculture exports, and the wheat
industry fully endorses that goal.
There were nearly 100 participants on the trip representing
a wide range of agricultural organizations and companies. From
what I could see, there was a lot of potential in Cuba--
potential in its own ag sector and potential as a market for
U.S. ag exports. As a Kansas wheat farmer, that potential was
obvious every time a meal included bread. Cubans eat a lot of
it, and they are the largest wheat importer in the Caribbean,
to the tune of nearly 30 million bushels per year. That would
be over 10 percent of all the wheat grown in Kansas, going to
this one island just a couple days' sail from the U.S. ports.
Cuba is the largest country in the Caribbean and the
largest wheat importer. That is because Cubans are not only
buying-sorry.
Today the wheat imports from the United States have an
upward potential of the whole 30 million bushels. That is
because Cubans are not buying any wheat from the United States.
They buy almost all their wheat from Canada and Europe, as has
been discussed before, even though Cuban ports are much closer
to U.S. ports. That is a $200 million opportunity that passes
us by every year.
When Congress lifted some of the restrictions on U.S. ag
exports early in the last decade, we were excited that there
would be an opportunity to reestablish Cuba as a consistent
wheat market for American farmers. For a while, it looked like
that might happen, as wheat exports slowly grew through the
decade until they peaked at 18 million bushels in 2008.
But exports tanked over the next couple of years,
eventually dropping to zero. But it has nothing to do with
economics. It is particularly very difficult for Cubans to
import wheat grown in Kansas and apparently much easier for
wheat grown in Canada or France. I can put my wheat in an
elevator in Kansas, send it by rail down to the gulf, put it on
a ship that is a couple days away from the Havana harbor, but
my wheat is still going to lose out to wheat that has to be on
a boat for a week from Canada or even 2 weeks from France.
The problem is rules and laws that make it too expensive to
compete in that market. The law requires that exporters receive
cash before they are allowed to unload in a Cuban port. If a
company wants to take the risk of providing a loan to a Cuban
buyer, they are out of luck because selling on credit is not
even an option for them. There are also shipping restrictions
that generally prohibit docking in the United States if a ship
has been in a Cuban port within the last 6 months.
As a farmer, I have to evaluate all the costs that go into
planting wheat, including seed, fertilizer, fuel, maintenance,
compliance, and financing. If it is too expensive, I will just
have to give up on wheat and plant a competing crop. Well, that
is what the Cubans face when they are trying to purchase my
wheat. It is just too expensive. But they are not going hungry.
They are just buying wheat from other countries that may be
more expensive than mine in a free market, but is now a much
better value because there are not massive compliance costs
accompanying every purchase.
It does not make any sense to me that if someone wants to
buy the wheat that I grow, they have to jump through the sorts
of regulatory hoops that they do. If Cuba is to become a
successful export market for U.S. farmers, these regulatory
obstacles need to be repealed. But more than that, we need to
see the trade sanctions in their entirety lifted. Cuba has
enormous economic potential, and while it certainly remains a
communist country, that hardly justifies the scale of the
sanctions, especially when trade relations with other communist
countries are growing deeper all the time.
U.S. agriculture is never going to realize its full
potential in Cuba as long as the trade sanctions are in place.
If they cannot sell us their tourism services, like cigars,
rum, fruit, and other products where they have an advantage, we
will always face an uphill battle in selling the products of
American soil. It is time for us to eliminate these barriers
and see how far this free trade relationship can go.
I would suggest that Congress carefully consider why there
is a compelling reason to restrict the freedom of Americans to
engage in commerce, especially for those who are just trying to
sell wholesome, American-grown food. I sure do not see one.
In conclusion, I would like to reiterate the support of
Kansas Wheat and a broader Kansas ag community for normalizing
trade relations with Cuba. Agriculture and the subsidiary
industries that support it will stand to benefit if we can open
unfettered trade with Cuba.
Thank you again for the invitation to testify this morning
and for your attention.
[The prepared statement of Mr. Keesling can be found on
page 61 in the appendix.]
Chairman Roberts. Thank you, Doug. Say hello to Elsie for
me.
Mr. Keesling. Thank you.
Chairman Roberts. We have now a welcome to Dr. C. Parr
Rosson, who is joining us today from Texas A&M University. Dr.
Rosson is professor and department head of the Agricultural
Economics Department where his extension and research interests
focus on international trade and international marketing. He,
however, is not responsible for Texas A&M leaving the Big 12
and going to that other football conference.
[Laughter.]
Chairman Roberts. Dr. Rosson received his Ph.D. and
Master's and Bachelor's all from Texas A&M, served as an
officer in the United States Army, and was a captain in the
U.S. Army Reserve. We thank you for your service, sir.
Dr. Rosson, I believe you are joined today by your wife,
Helen. Is that correct?
Mr. Rosson. No, sir. She is not here.
Chairman Roberts. I see. All right. We obviously will not
have her stand.
Let me just get right to some questions real quick--oh,
yes, you have your testimony. Pardon me.
STATEMENT OF C. PARR ROSSON, III, PH.D., PROFESSOR AND
DEPARTMENT HEAD, DEPARTMENT OF AGRICULTURE ECONOMICS, TEXAS A&M
UNIVERSITY, COLLEGE STATION, TEXAS
Mr. Rosson. Thank you. Good afternoon, Mr. Chairman,
Ranking Member Stabenow, and esteemed members of the Committee.
It is my pleasure to be here today, and I want to thank you
inviting me to testify on the challenges and opportunities
associated with trade with Cuba. I have been studying the Cuban
market for about 15 years. I have been there a number of times.
We continue to monitor what happens in Cuba and how that
impacts U.S. agricultural exporters.
In fact, our work at Texas A&M indicates that one U.S. job
is created for about every $76,000 in U.S. exports to Cuba, and
we think that makes it worthwhile for us to continue to stay
engaged on this important issue.
Just a little bit about background. Our exports have
averaged about $300 million annually since 2002, but they have
fluctuated widely, from about $140 million in 2002, up to $709
million in 2008, and that uncertainty has been a problem for
our businesses.
The product mix has also changed. During the first decade
of our export experiences with Cuba, we exported a wide variety
of products, such as corn, soybeans, rice, wheat, animal feeds,
cotton, along with processed foods, such as frozen leg
quarters, pork, beef, dairy products, dry beans, snack foods,
canned fruit, vegetables, bottled water, and also grapes,
pears, and treated telephone poles--so a fairly broad array of
products up until 2012, when things began to deteriorate.
The more recent export categories over the last couple of
years have really been concentrated in three areas, and that
is, frozen leg quarters, the soy complex, and corn. In fact,
last year, those three accounted for 96 percent of our exports.
In my mind, that is precariously risky. We just do not have the
diversity of our marketing base to withstand the kind of
declines we have seen over the last few years.
There are a number of things that have happened that have
contributed to these declines, and I would like to briefly go
over those.
One is that Cuba has moved away from U.S. exporters of
products such as rice, wheat, and higher-value foods to more
price-competitive competition. We have talked about Brazil,
Canada, Argentina, Mexico, Spain, and Vietnam, and I have seen
some of those products in the market--rice, for example, 25
percent cracked and broken. It has got to be sifted before it
can be served in restaurants or hotels. So it may be cheap when
it gets there, but by the time they get through handling it,
the quality deteriorates further and it becomes a much lower-
quality product when it is cooked and served.
No doubt the strong dollar over the last several years has
put some downward pressure on our exports. It has made our
products higher-priced. The Cubans also have diversified away
from us to lower-priced competition. During the global
recession, Cuba's earnings from tourism declined along with
declines in the value and the volume of their all-important
nickel and cobalt exports. Remittances from Cuban Americans
also declined during that time and put a lot of pressure on the
Government of Cuba and limited their ability to purchase
products from the U.S.
Of course, the key thing to note about the Cuban market is
that the term ``market'' today is a misnomer. As we have
talked, Alimport controls all aspects of importing food
products from the United States, and I am also of the opinion
that from time to time the Cuban Government itself gets
directly involved in some of these decisions. They influence
what is purchased, how much, and from whom.
Despite these constraints, Cuba has some potential. We have
been looking at this for a long time. It has become a much
larger market for U.S. exports. We estimate about a $1 billion
market over the next 5 years. What is important is Cuba's
demographics are favorable for growth. With a population of 11
million people, 99.8 percent of whom are literate, Cuba has a
highly trainable workforce of more than 5 million people.
In addition, those aged 25 to 54 represent 47 percent of
the population and are in their peak consumption years, and
these characteristics are very similar to the Dominican
Republic, to which we exported $1.4 billion in food products
last year.
For this potential to be realized, we must see gains in
consumer incomes in Cuba. We need to see improvements in
infrastructure and logistics, some of which have been discussed
here today. We also need to see more stable policy regimes and
policy environment that would stimulate interest on the part of
U.S. businesses.
Concluding, the Cuban market for U.S. food and agriculture-
related products has the potential to exceed $1 billion
annually, and this would create 6,000 new jobs in this country.
To be realized, however, we need to see positive changes in
income, infrastructure, and regulation.
Thank you very much.
[The prepared statement of Mr. Rosson can be found on page
65 in the appendix.]
Chairman Roberts. Well, Doctor, thank you very much for
that most informative testimony.
Doug, you mentioned that the rest of the Caribbean region,
the market share for United States wheat is over 80 percent. If
Cuba resumes the purchases of U.S. wheat, what is your
estimation of the market share of U.S. wheat in Cuba? Do you
see this level of market share staying relatively stable given
the economic volatility in Cuba?
Mr. Keesling. Well, first of all, I see no reason for it
not to go up from zero. Second of all, I see no reason that it
should not be somewhere in that range of that 80 to 90 percent,
likewise in the rest of the Caribbean.
Chairman Roberts. Dr. Rosson, you have worked on projects
in Mexico, Canada, Brazil, Cuba, Guatemala, Nicaragua, Costa
Rica, Argentina, Ecuador, Australia, Japan, Iraq, Indonesia,
Singapore, Philippines, Malaysia, and Thailand. Did you sing
that country western song, ``I've Been Everywhere, Man''?
[Laughter.]
Chairman Roberts. You taught at Clemson University. You are
a Tiger as well as an Aggie. Thank you for your testimony. You
certainly have an impressive background.
We have got an opportunity to expand our competitive
position of U.S. agriculture in the Cuban market. The
distinguished Chairwoman Emeritus agrees with me, and I know
that the Senator from Arkansas does as well. But when farmers
and ranchers explore an expansion of their business
opportunities, they not only explore the benefits but also the
potential costs. What are some factors that could weaken our
competitive position of the agricultural products in the Cuban
market?
Mr. Rosson. Well, from our standpoint in Texas, one of the
things right now is a limiting factor in the movement of
container cargo, which would apply to a lot of the higher-value
food products. We do not really have service right now out of
our local ports to move directly. We have to go to Florida,
transload, then move into the Cuban market, usually by barge,
and it takes several days to move that cargo. It raises the
cost, and it endangers those products in terms of the quality,
the reliability when they get there, and the condition in which
they arrive. So I think improving our own logistical system is
one thing that needs to happen.
A second thing is within the Cuban market itself, the times
I have been there and been with companies that have exported
products, particularly perishable products to be used in food
shows, for example, we have had trouble with reliable
electrical power both at customs as well as in hotels and
restaurants, where we might go periods of several hours without
electricity. If you have a frozen dessert that goes that long
without power, when you get done, it is not exactly what you
had come in with. So those kind of logistical requirements are
an issue.
The other thing is simply that the capacity of refrigerated
warehouse space I think needs to be enhanced, which would allow
us to move more products into the market on a more reliable
basis and more steadily over time.
Chairman Roberts. I appreciate that very much. All of you
have traveled to Cuba over the years. What are some of the
supply chain challenges? I think, Dr. Rosson, you have already
testified on some of that. Would any of you like to pitch in?
Mr. Beall, do you have any commentary?
Mr. Beall. Well, I think that in terms of some of the
issues, I think you are going to see that cooperatives are
going to have to figure out ways to create some of the
relationships that we are talking about. Those relationships we
think are the piece that is going to bridge some of these
problems and gaps, and, frankly, I think we need the Government
to be able to get out of that so that these sorts of solutions
the cooperative cooperatives create can step in and fill those
gaps.
Chairman Roberts. Mr. Harris.
Mr. Harris. Again, we made the first sale of rice to Cuba
in 2001, and it was pretty seamless, quite frankly. We shipped
bulk rice there, and taking advantage of their lower-cost
labor, we actually had the rice bagged on the docks within Cuba
for distribution from there. One of the benefits that we see,
Mr. Chairman, is that when Cuba buys rice from Vietnam, they
have to buy in extremely large vessels, 25,000-, 30,000-,
40,000-ton vessels. Because of the proximity to the U.S., we
can actually load small vessels, go not only to the Port of
Havana but go to other ports like Santiago de Cuba and other
ports within Cuba. That really helps them on their storage,
their warehousing, and their distribution within country.
Chairman Roberts. Mr. Kaehler.
Mr. Kaehler. We have had a lot of interaction with the
Cuban people. One thing they need is our technology. They have
fallen behind us. They need access to more of our products,
such as farm equipment. We have some limitations as to what we
can ship to Cuba.
One thing we found, for example, we took gifts of fencing
tools and a set of wrenches down to them. Now, some of the
professionals that were in our trade delegation were not sure
if that was a very good gift to take. When we took it to the
farmers, they had tears in their eyes. They went in the
subsequent trade mission. They showed us all the fences that
were built with our tools that we took down because we
understood what their needs are.
So as we get some efficiencies in our shipping and bring
our farmer-to-farmer interaction, we will improve their
productivity, which will increase the demand for our U.S.
goods.
Chairman Roberts. Doug, do you have anything to add?
Mr. Keesling. I will echo onto that. I think sometimes our
biggest restriction to trade with Cuba may be us, not them. Of
course, you guys have the power to work on that, and you are,
and that is very good.
I think as far as what I saw in Cuba, their
entrepreneurship, which several of you guys have touched upon,
was outstanding. As a business owner myself that was something
that really stood out to me, and I think they are going to try
to make anything we can do work.
Chairman Roberts. Senator Stabenow.
Senator Stabenow. Thank you very much, Mr. Chairman. I
think this has been a really important discussion.
First, Mr. Beall, I just want to underscore, when you were
talking about cooperatives, in the conversations that I have
had with Cuban officials, first, they are very positive they
have created cooperatives and the ability for more decisions to
get made by farmers, although there is more to do, as you say,
to get the Government out of that position so that the farmers
are the ones really driving the train here.
It was interesting to me, as we were talking, Mr. Kaehler,
you were talking about what they are interested in terms of
equipment and tools and so on. We talked a lot about farm
equipment and tractors and the fact that the new decision that
the President made was to allow farm equipment, and the fact
that they had cooperatives, most of them did not have one
tractor, and they were making decisions as to who got a tractor
and how many tractors. So there are a lot of opportunities for
us to be able to expand, but I think cooperatives are very much
a part of this structure going forward. So I am glad to hear
your testimony.
I am wondering, Mr. Kaehler, because you have been to Cuba
so many times and have had the opportunity to really navigate
both from agriculture but looking also at Cuba's economy from a
broader trading relationship, beyond exports, in terms of
commodities, when you think about how to more fully develop the
farm economy in Cuba and what we can do, what would you
suggest? I am wondering what products or services or assistance
we are leaving out of the conversation so far. What should we
be focused on that we have not been talking about?
Mr. Kaehler. Well, when we went down, for example, the
first trip, when we were there in 2002, the nutrient compendium
that the gentleman had was from 1989. So working with some of
the magazines and universities, taking updated technical
information to help with the livestock we exported and feeding
them was our first step. Things had changed from their time of
closeness with the Soviet Union. Their professionals are all
willing to get U.S. technology and get access through the
Internet.
We took in--when we took distillers grains down and showing
them how to feed it--they are a grass-based economy. But when
they went through the drought, we got reports from a Cuban
paper of one farmer had a report he had lost two-thirds of his
livestock, and the quote in the paper was he went to the bag
and reached in and got a scoop of what we trademark Norgold in
Minnesota as distillers grain, he said, ``Without this product
from the U.S., I would have lost all my cattle.''
So we were providing technology that way, getting farm
equipment, as you mentioned, the access to modern mixing
equipment, modern milking equipment. It was only going to help
our U.S. products as we improve production and improve
efficiency for their farmers, and it will feed their people.
There is a lot of poverty in Cuba. We did not see a lot of
hunger. But they are all looking to increase their supply of
food for their families.
Senator Stabenow. Absolutely. I am wondering, Mr. Rosson,
again, we have talked about the fact of a small group of
products that we are exporting now, we want to do more. We want
to do more rice; we want to do more of everything, and that we
need more diversity in terms of our goods that we are exporting
to Cuba. How do you see the President's new rules governing
trade financing between the U.S. and Cuba as creating more
opportunities for the underrepresented Cuban market? What more
could we be doing? I know ultimately it is lifting the embargo,
and we hope we are going to be able to get that done. But what
more can we be doing right now?
Mr. Rosson. Well, I think the encouraging thing in the new
regulations is the allowance for remittances to quadruple, and
if they could go further, that would be even better because the
remittances end up, 80 percent of it, in the hands of the
Cubans--either consumers or small businesses. Those remittances
represent about--they go into about 60 percent of the
households in Cuba. So they can be quite important in terms of
stimulating consumption, and part of that consumption would, of
course, be food products, and we would hope from this country.
They can also be used for business development, for example, in
cooperatives or private business ventures. The Cuban people are
very entrepreneurial. You have been there; you have seen the
entrepreneurial spirit and the capacity that exists, but it has
been harnessed.
So I think remittances play a critically important role,
and if those could be expanded, I think it would be a very
positive impact on the people there.
Senator Stabenow. Thank you.
Thank you, Mr. Chairman. I appreciate your holding the
hearing.
Chairman Roberts. Thank you.
Senator Boozman.
Senator Boozman. Thank you, Mr. Chairman.
Mr. Harris, there has been some concern expressed by some
Members of Congress in the sense as to what would happen, who
would be obligated if a Cuban buying organization failed to pay
or whatever. Some have concerns that perhaps the United States
Government would be on the hook. I guess the question for you
is, and the others can chime in also: If a Cuban buying
organization fails to pay for a shipment of rice or whatever,
would you expect the U.S. Government to compensate, in your
case, Riceland or whoever else for the shipment?
Mr. Harris. Senator, in my opinion, no. I mean, certainly
we would welcome GSM financing. That would be a wonderful
opportunity for the ag industry. But that is my job with the
company, risk management, and we assess that every day. So we
assume as we take that risk that risk is for Riceland Foods.
Senator Boozman. Anybody else?
Mr. Kaehler. I would expect that the rules change, it would
be the same requirements as it is for any other company--any
other country and any other business transaction. As a business
owner it is a transaction between buyer and seller, and as we
mentioned, that is risk we take, and we have to analyze our
business as we do it. As producers, we are asking for less
Government interaction, not more.
Senator Boozman. No, no, and I agree totally. Again, I
think there has been a misconception, and I really wanted to
clarify that.
You know, we have talked a lot about today--your testimony
was excellent and very helpful, as was the other panel. I guess
the bottom line is: Have the recent administrative changes
regarding trade--are they going to help your business with what
is going on right now? Mr. Harris.
Mr. Harris. I can respond on behalf of Riceland Foods. No.
It is a very small step. I can tell you that the day after the
President's announcement I contacted Alimport and told them
certainly we had an interest in doing business there, and they
thanked me very much for the call but had no interest in
purchasing U.S. rice. So, Senator, I really think that they are
looking for an eliminate of the embargo so that they can have
the ability to create foreign exchange by selling their rum and
their cigars and their citrus to the U.S. and the tourism that
they need so badly. I really think that the small incremental
moves that we are making are not swaying them to try to work
closer with us.
Senator Boozman. Would you all agree that is the major
barrier? Or what is the major barrier?
Mr. Keesling. I agree that I think the answer would be the
repeal of the embargo. As a wheat farmer from Kansas I am
looking at June to be harvesting my wheat crop. So I would be
looking--it would be at the port in July. So if the embargo is
lifted, we could be selling wheat to Cuba in July or sooner,
and this is what is holding it up.
Senator Boozman. Dr. Rosson.
Mr. Rosson. My perception is--and I have visited with the
people here at the Cuban Interest Section, both this group as
well as the previous group, and there was a lot of optimism
early on that we were going to change the rules, possibly lift
the embargo. Of course, that has not happened. I think in about
2011, 2012, they came to the realization that the carrots they
had been offering in terms of purchasing products from 38
different U.S. States had not worked, and that is when they
began to diversify away from the United States to other
countries.
I think they are waiting for--well, in our perception, this
is a very strong signal. In their minds it may not be strong
enough, and I believe they are still waiting to see what we are
going to do.
Senator Boozman. Very good. Mr. Kaehler? Okay. Very good.
Well, thank you all again for being here. I do appreciate your
testimony, and it really is very, very helpful. You all are on
the ground floor of this, and nobody understands it better than
you all. So thank you very much.
Chairman Roberts. I share the comments by the distinguished
Senator from Arkansas. In my view, it is access to credit. In
my view, it is whether or not the banks in question and
obviously the customers of those banks have an appetite for
risk, if we can use that term again. That is to be seen, and I
just want to assure you all that this Committee stands firmly
behind our efforts to see if we cannot clear up some of those
obstacles that you have talked about.
Thank you so much for coming. This will conclude the second
panel of our hearing. Thanks to each of our witnesses for being
part of Government in action--that is two words.
[Laughter.]
Chairman Roberts. The testimony provided today is valuable
for lawmakers to hear firsthand. To my fellow members who were
not present earlier, we would ask that any additional questions
you have for the record be submitted to the Committee clerk 5
business days from today, or by 5:00 p.m. next Tuesday, April
28th.
Thank you so much. The Committee is adjourned.
[Whereupon, at 12:35 p.m., the Committee was adjourned.]
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A P P E N D I X
APRIL 21, 2015
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DOCUMENTS SUBMITTED FOR THE RECORD
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QUESTIONS AND ANSWERS
APRIL 21, 2015
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