Politics

Courting Cuba

States have been wooing trade with Havana, but politics may put an end to it.
by | April 2005

Nearly a billion dollars' worth of American goods have been making their way to Cuba. The Communist-run island has been buying Maine's red delicious apples, seed potatoes and brown eggs. Vermont's dairy heifers are helping rebuild the country's depleted herds. Alabama has deals for wooden transmission poles, juices and cookies.

Florida, home to a Cuban-American community that is outspoken about isolating Cuba's leader, Fidel Castro, is one of the top five transportation points for shipping containers to Cuba. Floridians were, in fact, among the hundreds of exhibitors from state agriculture departments and U.S. food-producing businesses displaying their wares at a big 2002 trade fair in the Palacio de Convenciones in Havana.

Despite a four-decades-old embargo and the political sensitivity of doing business with Cuba, U.S. companies in dozens of states have been actively exporting agricultural products and medicines to Cuba--and are being helped by state officials. Louisiana Governor Kathleen Blanco and a contingent of elected state officials, bureaucrats and business leaders were in Havana in March to sign a $15 million deal to sell Cuba such Louisiana-produced goods as powdered milk and rice.

It is perfectly legal. The Trade Sanctions Reform and Export Enhancement Act of 2000 made it so, and in the four years since the law took effect, the amount of trade between Cuba and state producers has been growing. (Only selling to Cuba is legal; buying from Cuba is not.) Before 2000, Cuba ranked 226th as an export market for U.S. agriculture. Now it is 21st overall, the second-largest importer of U.S. rice and third-largest of U.S. poultry.

While the U.S. businesses trading with Cuba want to establish a foothold in a relatively neglected market--states and companies are pressuring the U.S. Congress to loosen the strings attached to doing business there--the U.S. Treasury Department is thwarting those efforts. In short, trade with Cuba hangs in the balance, and that is making the 38 states where businesses are actively exporting food and agricultural products to the Caribbean island fearful that they could lose an increasingly rewarding market.

TRADING BLOCKS

When Congress passed the Trade Sanctions Reform bill, it demanded that there be "payment of cash in advance" for any goods Cuba bought. That was interpreted to mean that shippers had to receive the payment before the goods would be unloaded in Cuba, and it is how business has been done with Cuba since 2000. This past February, however, the Treasury's Office of Foreign Assets Control clarified "payment of cash in advance." The money from Cuba to pay for the goods it buys from U.S. businesses must be in the bank prior to the goods being shipped from the U.S. The ruling went into effect immediately, and it could throw a damper on business relationships with the island. "Unless we're able to intercede," says Patty Judge, Iowa's secretary of agriculture, "it's going to kill any trade with Cuba."

That's not a small loss. Iowa producers, for instance, have sold nearly $80 million worth of corn and soybeans to the Cubans since the state first went to Cuba three years ago. Judge was thrilled to get a contract this past December for Iowa producers to sell pork to Cuba. "It will never be our number one market," she says. "It only has 11 million people. But it's a close market, an easy market and we ought to be able to pursue it."

Legislation was introduced in February by high-ranking members of the U.S. Congress to roll back the Treasury Department decision. The 22 mostly farm-state co-sponsors, evenly divided between Republicans and Democrats, include the chairmen of the Senate Intelligence and Foreign Relations committees.

At the time the 2000 law was passed, Cuba had struggled through a decade of economic hardship. Meanwhile, farm-state Republicans were being pressured by business and agricultural, as well as humanitarian, interests to end agriculture embargoes, not just in Cuba but around the world.

Although House and Senate leaders at the time and other critics of Castro's policies sided with lawmakers representing the anti-Castro Cuban-American community, a majority of legislators insisted that the sanctions weren't promoting the desired changes in Cuba and that American farmers were being barred from a potentially lucrative foreign market. The legislation that ensued from that debate allows the sale of food and medicine to Cuba as well as to Iran, Sudan, Libya and North Korea. Cuba, however, is the only country in which sellers are not permitted to use U.S. banks to finance their deals.

Even without the aid of U.S. banks, interest in trade with Cuba has continued to rise, especially as other traditional markets become problematic or unpredictable. Russia, for instance, sometimes quits buying poultry. Japan, concerned about the safety of U.S. cattle, has stopped buying beef. "Everyone has a different reason why they stop buying," says Ron Sparks, Alabama's commissioner of Agriculture and Industries. "It hurts us when those countries shut their doors."

The political dance around trading with Cuba is simple on one level for most farm-state leaders: They want to open markets for farmers, and Cuba is a market. But then there are political overtones.

Lieutenant Governor Brian Dubie of Vermont wants to promote understanding and friendship and open new opportunities for Vermont farmers' products but is disturbed by Cuba's record on basic human rights. On his first trip to Cuba, he felt it was important to make a statement about the denial of those rights and to meet with a dissident, which he did before getting down to the business of promoting his state's goods. He also paid for the trip out of his own pocket in case constituents had a problem with his decision to go. But he did feel strongly about going. "Vermont farmers can help feed children," he says. "Food is not a weapon. Food is food."

Alabama's Sparks made establishing a trade relationship with Cuba one of his priorities when he took office two years ago. Located closer to Cuba than to many U.S. states, Alabama can transport food from Mobile to Havana in less than 40 hours. Alabama's geographic location, its port and connections to rivers in other states all make it ideal for shipping goods to Cuba. While in Havana in December, officials from the Alabama State Port Authority, along with the agriculture department, secured an agreement to ship approximately $50 million of Southeastern goods through the Port of Mobile. The Port Authority estimates the agreement will have an economic impact of $150 million to the state.

For his part, Sparks sees a double standard in that the U.S. permits imports from China and Vietnam but does not allow imports from or most exports to Cuba. Beyond the advantages to U.S. businesses of such trade, Sparks points to the hungry people in Cuba. "Are we in this country doing the right thing by not putting food on the table of these people in Cuba?" He tells his senators and congressmen to visit Cuba for themselves. "Size up whether you want an embargo we don't have on other countries."

That said, Alabama is following the letter of the law on doing business with Cuba. "The day Congress votes I can't do it is the day I quit," Sparks says. "All I ask us to do is be fair and consistent."

That is not how the Cuban exile community in America sees things. As a group, the exiles are vehemently against trading with the Cuban dictator. "If you trade with Castro, only Castro benefits," says George Fowler, vice president and general counsel of the Miami-based Cuban-American National Foundation, the largest Cuban-American exile organization. He says there is no assurance that the food that is sold to Cuba is not resold at higher prices so the Castro government can get the hard currency it desperately needs.

Some of the states trading with Cuba are not aligned internally on their policy toward a country that the U.S. State Department considers an enemy state. Iowa's Governor Tom Vilsack, for one, postponed a trip to Cuba in 2003, saying, "I'm not going today, tomorrow or until things improve dramatically for the people of Cuba." Meanwhile, Judge, who is elected in her own right as the agriculture secretary, appreciates the governor's position but sees interaction with Cuba as the best way to help the people there. "We have allowed that situation to perpetuate itself because we have not been present," she says. The embargo is "no longer serving any purpose whatsoever other than to irritate that government."

TIP SHEET

Selling to Cuba requires knowledge about that country's market and the U.S. licensing process. State producers and officials who are promoting trade need to find out what Cuba's buying. "It's amazing how many states don't bother to do that," says John Kavulich, president of U.S.-Cuba Trade and Economic Council Inc., a private, not-for-profit corporation whose members are companies and individual entrepreneurs. His briefing on what Cubans buy boils down to a simple formula: 95 percent of their purchases are a variation on 10 things. Essentially, the country is seeking corn, wheat, rice, soy, poultry and other basic products. There is no market for high-end supermarket commodities.

If pending federal legislation to loosen trade rules works out, the states that already have done a lot of groundwork on trade see hearty prospects for future sales. "Our thinking was that if we got in at the beginning, it could lead to bigger and better things in the future," says Robert Spear, Maine's commissioner of agriculture.

Maine already ships some basic foods to the Caribbean island, but it has other products it would like to sell. "If their economy improves, they could buy our blueberries, our maple syrup, some things that may cost a little more," Spear says. "Everybody can have their philosophical differences with Castro's government, and none of us agrees with it. But if you can get by that, there are a lot of good things there and a lot of opportunities."

Ellen Perlman
Ellen Perlman  |  Former columnist
mailbox@governing.com  | 

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