[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
EXAMINING THE STATUS OF U.S. TRADE WITH CUBA AND ITS IMPACT ON ECONOMIC
GROWTH
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON COMMERCE, TRADE,
AND CONSUMER PROTECTION
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
APRIL 27, 2009
__________
Serial No. 111-32
Printed for the use of the Committee on Energy and
Commerceenergycommerce.house.gov
----------
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COMMITTEE ON ENERGY AND COMMERCE
HENRY A. WAXMAN, California, Chairman
JOHN D. DINGELL, Michigan JOE BARTON, Texas
Chairman Emeritus Ranking Member
EDWARD J. MARKEY, Massachusetts RALPH M. HALL, Texas
RICK BOUCHER, Virginia FRED UPTON, Michigan
FRANK PALLONE, Jr., New Jersey CLIFF STEARNS, Florida
BART GORDON, Tennessee NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois ED WHITFIELD, Kentucky
ANNA G. ESHOO, California JOHN SHIMKUS, Illinois
BART STUPAK, Michigan JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York ROY BLUNT, Missouri
GENE GREEN, Texas STEVE BUYER, Indiana
DIANA DeGETTE, Colorado GEORGE RADANOVICH, California
Vice Chairman JOSEPH R. PITTS, Pennsylvania
LOIS CAPPS, California MARY BONO MACK, California
MICHAEL F. DOYLE, Pennsylvania GREG WALDEN, Oregon
JANE HARMAN, California LEE TERRY, Nebraska
TOM ALLEN, Maine MIKE ROGERS, Michigan
JAN SCHAKOWSKY, Illinois SUE WILKINS MYRICK, North Carolina
HILDA L. SOLIS, California JOHN SULLIVAN, Oklahoma
CHARLES A. GONZALEZ, Texas TIM MURPHY, Pennsylvania
JAY INSLEE, Washington MICHAEL C. BURGESS, Texas
TAMMY BALDWIN, Wisconsin MARSHA BLACKBURN, Tennessee
MIKE ROSS, Arkansas PHIL GINGREY, Georgia
ANTHONY D. WEINER, New York STEVE SCALISE, Louisiana
JIM MATHESON, Utah PARKER GRIFFITH, Alabama
G.K. BUTTERFIELD, North Carolina ROBERT E. LATTA, Ohio
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
DORIS O. MATSUI, California
DONNA CHRISTENSEN, Virgin Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
BETTY SUTTON, Ohio
BRUCE BRALEY, Iowa
PETER WELCH, Vermont
Subcommittee on Commerce, Trade, and Consumer Protection
BOBBY L. RUSH, Illinois
Chairman
JAN SCHAKOWSKY, Illinois CLIFF STEARNS, Florida
Vice Chair Ranking Member
JOHN P. SARBANES, Maryland RALPH M. HALL, Texas
BETTY SUTTON, Ohio DENNIS HASTERT, Illinois
FRANK PALLONE, Jr., New Jersey ED WHITFIELD, Kentucky
BART GORDON, Tennessee CHARLES W. ``CHIP'' PICKERING,
BART STUPAK, Michigan Mississippi
GENE GREEN, Texas GEORGE RADANOVICH, California
CHARLES A. GONZALEZ, Texas JOSEPH R. PITTS, Pennsylvania
ANTHONY D. WEINER, New York MARY BONO MACK, California
JIM MATHESON, Utah LEE TERRY, Nebraska
G.K. BUTTERFIELD, North Carolina MIKE ROGERS, Michigan
JOHN BARROW, Georgia SUE WILKINS MYRICK, North Carolina
DORIS O. MATSUI, California MICHAEL C. BURGESS, Texas
KATHY CASTOR, Florida
ZACHARY T. SPACE, Ohio
BRUCE BRALEY, Iowa
DIANA DeGETTE, Colorado
JOHN D. DINGELL, Michigan (ex
officio)
C O N T E N T S
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Page
Hon. Bobby L. Rush, a Representative in Congress from the State
of Illinois, opening statement................................. 1
Hon. George Radanovich, a Representative in Congress from the
State of California, opening statement......................... 3
Hon. Phil Gingrey, a Representative in Congress from the State of
Georgia, opening statement..................................... 5
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, prepared statement........................ 92
Hon. Jim Matheson, a Representative in Congress from the State of
Utah, prepared statement....................................... 94
Hon. Joe Barton, a Representative in Congress from the State of
Texas, prepared statement...................................... 95
Witnesses
Walter Bastian, Deputy Assistant Secretary for the Western
Hemisphere, International Trade Administration, Department of
Commerce....................................................... 6
Prepared statement........................................... 9
Matthew S. Borman, Acting Assistant Secretary for Export
Administration, U.S. Department of Commerce.................... 11
Prepared statement........................................... 13
Adrean Scheid Rothkopf, Vice President, Western Hemisphere
Affairs, U.S. Chamber of Commerce.............................. 28
Prepared statement........................................... 31
Geoff Thale, Program Director, Washington Office on Latin America 41
Prepared statement........................................... 43
Kirby Jones, President, U.S.-Cuba Trade Association, and
President, Alamar Associates................................... 56
Prepared statement........................................... 59
Ambassador James C. Cason, President, Center for a Free Cuba..... 72
Prepared statement........................................... 75
EXAMINING THE STATUS OF U.S. TRADE WITH CUBA AND ITS IMPACT ON ECONOMIC
GROWTH
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MONDAY, APRIL 27, 2009
House of Representatives,
Subcommittee on Commerce, Trade,
and Consumer Protection,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 2:07 p.m., in
Room 2123, Rayburn House Office Building, Hon. Bobby L. Rush
[chairman of the subcommittee] Presiding.
Present: Representatives Rush, Sarbanes, Castor,
Radanovich, Gingrey and Scalise.
Staff Present: Angelle Kwemo, Counsel; Christian Tamotsu
Fjeld, Counsel; Michelle Ash, Counsel; Valerie Baron, Special
Assistant; Shannon Weinberg, Minority Counsel; Brian
McCullough, Minority Senior Professional Staff; and Chad Grant,
Minority Policy Analyst.
OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Rush. The subcommittee will come to order.
This is a subcommittee hearing on examining the status of
U.S. trade with Cuba and its impact on economic growth, and the
Chair will recognize himself for 5 minutes for the purposes of
an opening statement.
I want to thank the members of the subcommittee for
participating in the first trade hearing on Cuba in the 111th
Congress. I recently visited Cuba with my colleagues in the
Congressional Black Caucus. We met with President Raul Castro
and Chairman Barbara Lee, and I personally met with former Cuba
President Fidel Castro, along with Congresswoman Julia
Richardson from California. A lot has been said and written
about that trip to Cuba and about that meeting.
Because of travel restrictions, many Americans don't know
what Cuba has become, but I witnessed a very compelling need to
call this hearing to assess U.S. trade policies towards Cuba. I
believe our current policy with Cuba is a failure. We must
reevaluate our trade policy's impact on both the Cuban and the
American people.
I strongly believe that expanding and diversifying our
exports to Cuba will be beneficial for both countries. Some
argue the current embargo should be maintained as a political
tool that has proved to be effective, as was the case with
South Africa. However, I must say that the current embargo on
Cuba is not a multilateral embargo, and we are in a different
political and economic environment today.
Unilateral sanctions are usually problematic and
ineffective. Cuba has opened its doors to the entire world, and
the world has walked steadily in. All nations in the Americas
except the U.S. have resumed diplomatic relationships with
Cuba. All of our economic competitors, including China and
Brazil and Mexico and Japan, Canada and the European Union, are
currently trading with Cuba.
Cuba has also made it clear that the same doors are open to
the U.S., and our policy should not permit American companies
from doing business with the Cuban people. We are looking for
new markets to penetrate. Our companies want to compete
normally, and our unemployed workers want jobs. Now is not the
time to ignore all the opportunities that are presented to us,
and I believe that Cuba should be treated like other trading
partners with similar political and economic and conditions.
Liberalizing trade with Cuba is not without precedent and
has already proven beneficial to both the U.S. and the Cuban
people. In 2000, when I and other Members of Congress voted to
approve a modest opening of trade, the overall exports from
Cuba rose from $7 million in 2001 to $404 million in 2004.
However, I must add the so-called ``cash in advance'' rule
initiated by the previous administration in 2005 has
complicated an already difficult process and caused Cuba to cut
back on its imports from the U.S. Nonetheless, the United
States has been Cuba's largest supplier of food and
agricultural products, with almost $2.7 million in total sales.
Having said all this, I am not naive nor am I blind to
Cuba's challenges. It is undeniable that Cuba has serious
political, economic, financial and social problems. Like many
developing countries, Cuba has many regulatory hurdles. To be
sure, political and economic reform must be initiated by Havana
inside Cuba's borders. However, it is also undeniable that some
progress has been made, and that the embargo in many instances
has actually increased the suffering of the very people we are
trying to assist.
Since the fall of the Berlin wall, approximately 28 nations
have undergone transitions from Communist regimes. Countries
that were less isolated from the West achieved more successful
and prosperous democracies than those that were isolated. I
believe that Cuba can make a similar transformation if we fully
engage the island nation in the global economy.
I commend our President for his leadership in easing the
current restrictions on Cuba. This is the first step in the
right direction. I support a more rapid move towards
normalization of our trading relationships with Cuba. Today's
hearing is just a beginning in a series of steps that I intend
to take to do all I can to both open up markets for U.S.
commerce, especially for small minority and women-owned
businesses, while also at the same time to help bring liberty
and prosperity to the Cuban people.
And I yield back the balance of my time.
And now I recognize the Ranking Member of this subcommittee
Congressman Radanovich for 5 minutes for the purposes of
opening statements.
OPENING STATEMENT OF HON. GEORGE RADANOVICH, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Radanovich. Thank you, Mr. Chairman, for calling this
important hearing to examine our trade relations with Cuba. I
appreciate it.
This subcommittee's jurisdiction includes nontariff
barriers to trade. As we saw in an earlier hearing in the
subcommittee that examined ways to promote our exports to help
our economy, increasing our trade exports to revive our economy
is a path that we should pursue. We manufacture many world-
class goods and services the world will buy if given a chance.
Today we examine quite a different topic: Cuba and our
special situation with that country. Our embargo on trade with
Cuba, except for food and medicine, is a longstanding policy I
support due to the Castro regime that has been in power for
over 50 years. President Obama has indicated a desire to go
down a path to change that policy, including incremental
changes to permit remittances and travel by Cuban Americans
back to Cuba to visit their family. Other pundits have
suggested that we go further to normalize relations.
I believe that that would be a mistake until the people of
Cuba are free. If that time comes, I would fully support a
change in the policy. Our agricultural exports would find a
receptive market particularly in Cuba where about 80 percent of
its food supply is imported, and the country would be a natural
destination for our fruits and vegetables, among other
products.
Unfortunately, the tyrannical oppression continues, and to
pursue trade with Cuba is a major affront to those who have
given their lives for the freedom of this Caribbean nation. I
cannot justify in good conscience a change in policy that may
produce marginal increases at best to our economy, and those
benefits are quite questionable.
It is true that the embargo has not yet affected the
bipartisan policy goal of regime change, but it is equally true
that foreign investment and normal trade relations with Cuba by
other developed nations has not produced any change. If we turn
the blind eye and set aside our leadership as the world's
promoter of democracy and freedom to follow in the footsteps of
others, what do we expect will occur?
Thus far, the Castros have been able to use trade with
other countries to further their own goals and enrich
themselves without benefit to the people that they proclaim to
care so much about. The Castros care so much, they do not
tolerate political dissident, they suppress free speech and
limit religious expression, including the establishment of
religion-based schools. Since they assumed power, religion has
been suppressed because it was counterrevolutionary. In short,
a Cuban citizen has limited control over his own being because
that right has been taken by the Castro brothers.
In one of the truly humanitarian exchanges after Raul
Castro took over, Cuban citizens were permitted greater freedom
to move within their own country. Can anyone here imagine not
being able to travel freely without borders or send your child
to a school of your choice? Well, maybe we can imagine that,
given the administration's recent decision to eliminate school
vouchers for children in D.C. If you have the money to send
your children to an elite private school, I guess that you
don't have to worry about vouchers for others.
Many would like to see the travel ban to Cuba lifted
completely from a purely substantive point regarding its effect
on our economy that will provide little or--would provide
little to our GDP and may even hurt our own domestic travel
industry. Let us remember travel and tourism to the United
States is one of our better exports that generates many jobs.
Taking steps that would permit a one-way street permitting
travel to Cuba without reciprocity would adversely hinder our
balance of trade as we import more tourism. Add to that the
substitution effect of diverting travel to Cuba that might
otherwise have flowed to Florida or other domestic
destinations, and I can only see us losing economically. In
short, increased travel and tourism may not only hurt our
domestic tourism industry without benefit to the Cuban people,
while simultaneously filling the coffers of the Castros.
Telecommunications is also viewed as a possible avenue to
export more products, but doing business in Cuba requires a
joint venture with the Castro government. Whether the net
effect would be positive is debatable. Certainly other
countries that do not maintain a trade embargo with Cuba have
been free to expand their markets in Cuba; however, democracy
advocates have yet to see the benefits of those ventures. This
may be due in part to the very limited financial resources of
the average Cuban citizen and the affordability of
telecommunication services. Why anyone thinks that this will
change if a company providing the service as a U.S. company
rather than their current provider escapes me.
As long as the Castros maintain a regime which oppresses
individual freedom, oppresses dissenting political views, and
expresses hostility towards religious expression, while at the
same time maintaining a state-controlled economy to the benefit
of the Castro family and their adherents, further trade
relations beyond humanitarian aid in the name of making a buck
is an injustice to the Cuban people and their brave freedom
advocates.
Thank you, Mr. Chairman. I yield back.
Mr. Rush. The Chair now recognizes the fine gentleman from
Maryland Mr. Sarbanes for 5 minutes for purposes of an opening
statement.
Mr. Sarbanes. Thank you, Mr. Chairman. I certainly don't
need 5 minutes. I am in a learning mode today. I am looking
forward to the hearing. I appreciate your convening it.
Obviously the economic embargo on Cuba is a delicate topic.
It seems to become more delicate every day, and more people are
coming to the discussion. You have rightly acknowledged the
human rights concerns that exist, but you also noted the
arguments for modifying or even eliminating that embargo, and I
am looking forward to hearing the discussion today.
I yield back my time. Thank you.
Mr. Rush. The Chair now recognizes my friend and gentleman
from Georgia Dr. Gingrey for 5 minutes.
OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF GEORGIA
Dr. Gingrey. Mr. Chairman, thank you. I want to thank you
for calling the hearing today on this important issue of the
current trade embargo with Cuba and its economic impact on our
country.
In the face of our current economic struggles, our
responsibility is to bolster the United States economy by
expanding trade in a fair and open way that creates jobs
domestically. And, of course, we look for every opportunity to
do that. However, trade policy is not just economic, as we all
know, but, of course, it is also foreign policy.
In the case of Cuba, the lure of trade with the United
States must be heavily conditioned on the improvement of human
rights in that country. In fact, the oppressive Communist
Castro regime has a widespread history of human rights
violations and is currently listed as a state sponsor of
terrorism by our State Department. Therefore, I have supported,
and I will continue to support, the embargo. And I do not
believe that the United States should lift this embargo until,
until Cuba makes significant reforms that expand freedom and
civil liberties for its citizens.
Over the past decade, there have been some concessions that
have been made for humanitarian purposes, including remittances
for family members of Cuban Americans as well as restricted
travel for immediate family. Most recently the Fiscal Year 2009
Omnibus Appropriations Act made some more modifications to
existing travel restrictions, and the Obama administration has
called for additional changes to remittances. But these need to
be closely monitored so that they benefit the people of Cuba
and not just the Castros and the Castro government.
In the nearly 50 years that this embargo has been in place,
there is one question that remains: Will Cuba trade with the
United States improve political and economic conditions for the
Cuban citizens, or will it simply reward and endorse the
oppressive Communist government run by both Fidel and Raul
Castro?
In the intervening time, we have seen a number of our
allies in the Western Hemisphere--this has been said by the
Chairman and Ranking Member--and Europe as well openly trade
with Cuba, yet Cuba has made very little improvement in human
rights conditions despite this open trade. For these reasons, I
believe the Federal Government, and this subcommittee in
particular, needs to proceed very cautiously as we hear
testimony today and we debate future ramifications of trade
with Cuba.
I look forward to hearing from both panel of witnesses, and
at this time I yield back the balance of my time, Mr. Chairman,
and I look forward to having an opportunity to question the
witnesses.
Mr. Rush. The Chair certainly thanks the gentleman from
Georgia.
And now it is my pleasure and honor to welcome to this
committee's hearing two fine public servants, both who are
employees of the Department of Commerce. The one, Mr. Walter
Bastian, is a Deputy Assistant Secretary for the Western
Hemisphere, International Trade Administration.
Mr. Bastian, I want to welcome you, and I want to thank you
for appearing before this subcommittee and taking time out from
your busy schedule to share your thoughts with us.
Our next witness on this first panel is Mr. Matthew Borman,
a fine gentleman from the Department of Commerce Bureau of
Industry and Security. His former title is the Acting Assistant
Secretary for Export Administration.
Mr. Borman, again, my thoughts are certainly gracious, and
we want to thank you so much for being here and participating
in this hearing.
We would ask, if you will--it has been a new policy on this
subcommittee that you be sworn in for the purposes of giving an
opening statement and participating in the hearing. So would
you please raise your right hand--stand and raise your right
hand.
[Witnesses sworn.]
Mr. Rush. Please take your seats.
Please let the record reflect that all of the witnesses
there answered in the affirmative.
Mr. Bastian, we would ask that you provide us with an
opening statement, and you can restrict your statement, if you
will, to 5 minutes. I would say more or less 5 minutes. Thank
you.
TESTIMONY OF WALTER BASTIAN, DEPUTY ASSISTANT SECRETARY FOR THE
WESTERN HEMISPHERE, INTERNATIONAL TRADE ADMINISTRATION,
DEPARTMENT OF COMMERCE; AND MATTHEW S. BORMAN, ACTING ASSISTANT
SECRETARY FOR EXPORT ADMINISTRATION, U.S. DEPARTMENT OF
COMMERCE
TESTIMONY OF WALTER BASTIAN
Mr. Bastian. Thank you, Mr. Chairman.
Chairman Rush, Ranking Member Radanovich----
Mr. Rush. And please pull the mic towards you, if you will,
and----
Mr. Bastian. Sorry. There we go.
Chairman Rush, Ranking Member Radanovich and distinguished
members of the committee, thank you for the opportunity to
speak with you today concerning recent events in our
relationship with Cuba. I welcome your interest in this topic.
Today's hearing is entitled ``Examining the Status of U.S.
Trade with Cuba and Its Impact on Economic Growth,'' but I can
imagine that the interests of committee members extend not only
to that subject, but also the President's recent statements
regarding his beliefs that we can move the U.S.-Cuba relations
in a new direction. It is my hope that Members will take no
offense if I do not take this opportunity to expand upon nor to
interpret the words and messages that the President so capably
laid out during the successful Summit of the Americas in
Trinidad and Tobago.
We meet at a fluid moment in U.S. policy, and, as members
of this committee know, setting U.S. policy towards Cuba is not
within the province of the Department of Commerce.
On April 13th of this year, the President directed the
Secretaries of Commerce, Treasury and State to take actions
necessary to lift restrictions on family visits to Cuba, remove
restrictions on remittances to family members, authorize
greater telecommunications links with Cuba, and expand the
scope of humanitarian donations eligible for export. These
changes in our Cuba policy are designed to encourage greater
contact between family members, ease the flow of remittances to
Cuban families, and promote the flow of information to the
Cuban people.
The Bureau of Industry and Security, BIS, at the Department
of Commerce and Treasury's Office of Foreign Assets Control,
OFAC, are hard at work implementing these policy changes. My
colleague from the Bureau of Industry and Security will discuss
these changes in more detail in his testimony.
Reaching out to the Cuban people in this way is a
demonstration of our interest in sending our relations with
Cuba on a more productive and positive course. The actions we
are taking will directly benefit the well-being of Cuban
citizens and will remove barriers between families in both
countries.
Mr. Chairman, I understand that you recently returned from
a visit to the island, and that you, as well as a number of
your colleagues, are interested in greater commercial
interchange with Cuba. As you know, the United States maintains
extensive legal restrictions on the ability of U.S. firms to
trade with Cuba. The President has indicated his belief that
the embargo should remain in place as a source of leverage for
positive change in Cuba.
I will very briefly delineate the mix of legislation that
governs our trade relations with Cuba. The United States
maintains a comprehensive trade embargo with respect to Cuba
under numerous laws. That embargo was first announced by
President Kennedy in Presidential Proclamation 3447 in 1962,
under the authority of the Foreign Assistance Act of 1961.
Implementing regulations issued by the Department of Commerce
and the Department of Treasury to carry out the trade embargo
on Cuba relied on general authorities of the Export Control Act
of 1949 and the Trading With the Enemy Act. The trade embargo
in Cuba has been further shaped over the years by various
pieces of legislation, including the Export Administration Act
of 1979; the Cuban Democracy Act of 1992; and the Cuban Liberty
and Democratic Solidarity, otherwise Libertad, Act of 1996; and
the Trade Sanctions Reform and Export Enhancement Act, TSRA, of
2000.
TSRA limits Congress' ability to promote and support U.S.-
Cuba trade. Under TSRA, the Department is prohibited from
providing the routine export assistance to U.S. exporters to
Cuba that our U.S. and Foreign Commercial Service regularly
provides to other U.S. firms. Despite the broad restrictions on
trade with Cuba, U.S. producers exported more than $700 million
in agricultural goods to Cuba in 2008, making the U.S. the
largest source of food to Cuba, and making us Cuba's fifth
largest trading partner.
Conclusion. President Obama indicated at the Summit of the
Americas that the United States seeks a new beginning in its
relations with Cuba. The measures announced on April 13th were
intended as a signal to the people of Cuba and to the
Government of Cuba that the United States is prepared to pursue
policies that will strengthen the ties between the people in
our countries and bolster progress towards a free and
democratic Cuba.
Thank you, Mr. Chairman. I am pleased to answer any
questions that you or the other members of the committee may
have.
Mr. Rush. Thank you, Mr. Bastian.
[The prepared statement of Mr. Bastian follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Rush. And now I'll recognize Mr. Borman for 5 minutes,
more or less.
TESTIMONY OF MATTHEW S. BORMAN
Mr. Borman. Thank you, Mr. Chairman.
Mr. Chairman, Ranking Member Radanovich and distinguished
members of the subcommittee, I would also appreciate the
opportunity to appear before the subcommittee today to discuss
the Bureau of Industry and Security's role in implementing the
U.S. Trade embargo on Cuba. I also ask that my written
statement be included in the record.
Mr. Rush. So ordered.
Mr. Borman. As my colleague Mr. Bastian has already
outlined, there are a welter of laws and regulations that
govern our trade with Cuba, and I won't enumerate them again. I
would point out in particular the Libertad Act, among other
things, codifies the trade embargo on Cuba, and it requires
that the embargo would remain in effect unless certain
conditions are met, most notably either there is a transition
government in place, or there has already been a democratically
elected government. So the Libertad Act codifies much of the
current embargo.
Having said that, of course, though, the President and all
Presidents retain some discretion to make exceptions to the
embargo. And as a result of that, that discretionary authority,
the Commerce Department has the authority to issue licenses for
particular transactions or general authorizations for
particular types of transactions under certain conditions. And
as Mr. Bastian has already noted, the Bureau of Industry and
Security regulates the export of commodities, software and
technology to Cuba, while the Office of Foreign Assets Control,
Department of Treasury, regulates all transactions with Cuba,
including the financing related to exports. So we at BIS handle
things going to Cuba, and Treasury handles essentially
everything else, all other interactions between the U.S. and
Cuba. We do ours through the Export Administration regulations.
Treasury has a separate set of their own regulations.
Now, pursuant to the laws and regulations, almost
everything in the U.S. economy needs a license and individual
authorization to go to Cuba, and there is currently a general
policy of denial for most items going to Cuba under the
existing embargo. Notwithstanding the general policy of denial,
however, in 2008, we at BIS processed 358 applications for
licenses to export to Cuba. And of those 358 applications, 235
were approved, 114 were returned without action, and 8-9 were
denied. The total dollar value of those approved licenses was
about $1\1/2\ billion.
And in addition to those individual licenses, we also
processed 151 notices of agricultural exports to Cuba. This is
a particular license exception we have implemented pursuant to
the Trade Sanctions Reform Act, or TSRA, as we call it. Of
those 151 that we processed last year, 143 were approved, and
they were worth about $3.2 billion, and the remaining 8 were
returned without action. So those were the authorizations that
we at BIS authorized individually and under the TSRA exemption.
One other thing I would point out is that these
authorizations include about $95 million of exports that we
authorized in the last quarter of 2008 for hurricane relief
specifically, and we did those in an average processing time of
5 days, which, as you can imagine in a government bureaucracy,
is quite fast.
Mr. Rush. I am quite impressed.
Mr. Borman. Now we are worried about the pending revisions
to our regulations at BIS, based on the President's
announcement. As Mr. Bastian noted, the President directed the
Secretary of Commerce in particular to further expand the scope
of the license exception; that is, the general authorization
regarding gifts, gift parcels to Cuba. A wider variety of items
will become available to be included in the gift parcels. The
dollar value for the gift parcels will go up from $400 to $800.
And the universe of recipients will be expanded, although there
will still be no gift parcels permitted to either high
government officials, Communist Party members, or institutions
or organizations controlled by either the government or the
party.
We will also establish a new license exception for consumer
communications devices, cell phones, satellite phones, personal
digital assistance, digital camera, again to further the free
flow of information between the United States and the Cuban
people and among the Cuban people.
And the last change that we will implement as a result of
the President's decision is to lift the personal baggage
limitation. Currently there is a limit of 44 pounds per person
to take with them to Cuba. When we finalize our regulation
implementing the President's directive, that limitation will be
removed. So that is what we are doing to implement the
President's directive.
In conclusion, I would just say again that what we do is
largely governed by statute as well as regulations, and we
continue to work with our interagency partners, principally the
State Department, in this area to implement the President's
directive to meet the basic human needs of the Cuban people and
facilitate contacts between the American people and the Cuban
people.
And with that I conclude my oral statement, and also I am
happy to answer questions.
[The prepared statement of Mr. Borman follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Rush. The Chair thanks the gentleman, and indeed the
Chair thanks both of the witnesses for their fine statements.
The Chair now recognizes himself for 5 minutes for the
purposes of questioning these witnesses.
Because of Cuba's--let me restart that. Because of the
U.S.'s unilateral embargo, we sometimes assume Cuba's economy
is cut off from the world. That has certainly not been the
case, from my understanding. Investors from all over the world
are offering joint ventures in Cuba. Countries like Venezuela,
Brazil, China, Vietnam extend credit to Cuba. And indeed, a
Spanish company is leading an effort to drill for oil in Cuba's
territorial waters this year, if I am not mistaken. And I
believe that the American companies should be afforded the same
investment opportunities in Cuba.
Let me ask both of the witnesses, what do you foresee
happening if the U.S. normalizes its trade relations with Cuba?
Can you indicate what markets would be ripe for entry in the
U.S.--for the U.S.? What markets are there that American
companies might be able to penetrate most readily and most
thoroughly if, in fact, we were to normalize trade
relationships?
Mr. Bastian, would you please begin?
Mr. Bastian. Thank you, Mr. Chairman.
As you might imagine, we don't have an awful lot of
information on the specific needs of Cuba insofar as business
is concerned. We don't share information with our trading
partners, other trading partners, principally because we don't
trade with Cuba to begin with. But I think it is a pretty safe
assumption to say that in the areas of infrastructure, I think
we have already covered as an example briefly
telecommunication. But I think if you took a look at general
infrastructure, transportation equipment, port-handling
equipment, things of that nature, ports, railroads, airplanes,
things of that nature, they could offer some significant,
probably, opportunity to U.S. business, certainly things that
we would be taking a look at.
But keep in mind also that at the moment we do--we are the
fifth largest supplier to Cuba of product; not manufactured
goods necessarily, except maybe some in the medical field, but
basically agricultural goods. But I think if we took a look
initially at those sectors, how do you move goods across the
island to reach the Cuban people, I think those would be
essential to look at.
Mr. Rush. Mr. Borman.
Mr. Borman. In addition to what Mr. Bastian said, I think
based on the data available to us, some of the other areas that
would have some potential would be food processing, handling
distribution. And as he said, in the medical area last year we
licensed about 47 individual transactions for medical sales to
Cuba worth about $64 million. So I think that would be another
area.
Mr. Rush. Do you have an estimate for the lost business
opportunities that have occurred as a result of the embargo?
How many U.S.--how many business opportunities has U.S.
companies lost as a result of the embargo? Have you got an
estimate?
Mr. Bastian. Mr. Chairman, I think the really short answer
is no, we don't. Again, we clearly are not approached by U.S.
companies that are--you know, that said, I could have sold so
much to Cuba that we have not gotten. So I think you could
probably take a look at maybe--there was a really old study
done, I think, by the ITC back in about--I think around 2001,
in that timeframe there. But the data, of course, in that case
is 8 years old, but it might give you an indication. But beyond
that, I am not aware of any information that is out there that
talks about sales foregone.
Mr. Rush. OK. Mr. Borman.
Mr. Borman. I don't have any other information on that, Mr.
Chairman.
Mr. Rush. All right. If the embargo were lifted, what do
you believe would be the impact in Cuba when the Cuban people
see a difference in their daily lives if the Cuban Government
still controls the distribution of goods? And secondly, how can
we be assured that the Cuban Government will grant the
appropriate licenses and other authorizations to American
companies to do business? Do you have any information? Can you
help us along with--in answering those questions? Mr. Bastian?
Mr. Bastian. Thank you, Mr. Chairman.
Speculation is very difficult and sometimes a pretty
dangerous thing to get into, but I think it did mention
something that is absolutely key, and that is this is a two-way
street. The President, as an example, has announced some
measures, is interested in pursuing those, and what we need to
do is find basically a partner for that dance that will make--
show a willingness to continue this course of action. I think
that would probably be my response.
Mr. Borman. The only thing I would add to that, obviously a
lot of the impact would be dependent upon the funds available
to the Cuban people to actually purchase U.S. goods on a
commercial basis. So that is a bit unknown at this point.
Mr. Rush. OK. My time is up. And now I will yield for the
purposes of questioning 5 minutes to the Ranking Member.
Mr. Radanovich. Thank you, Mr. Chairman.
And again, welcome to the subcommittee.
Mr. Bastian, I wanted to--I just noticed in your testimony
on the amount of agricultural exports that occurred in trade
between the U.S. and Cuba in 2008 was $700 million. Can you
give me an idea how much that might be--that amount might be
due to an increase in commodity prices? As you will recall,
last year some of those export prices were rather high.
Mr. Bastian. I don't have the exact number off the top of
my head. I will get it for you. But I think that you are
absolutely right, because it was a significant jump in dollar
amount over the last couple of years, due in large measure to
commodity prices.
Mr. Radanovich. If there were a way to get the information
to the committee to measure increase in exports in something
other than dollars----
Mr. Bastian. I understand, sir. We will get that back to
you.
Mr. Radanovich. All right. Thank you.
Also, the Castro regime confiscated many businesses and
took intellectual properties such as trademarks when they took
over power, and claim they now--claim that they now own those
properties. How does the U.S. address trade policy with
countries that don't honor property rights?
Mr. Bastian. I do believe that that is a question that
really does need to be directed to State Department on that.
If I might, you do bring an interesting point, which is
lifting the restrictions on Cuba on trade is part of what needs
to be done. I think the other part of the things you referred
to, I think you mentioned in the beginning an interest in
nontariff barriers, and I think there is a whole host of issues
that we need to take a look at if we are going to get the
maximum benefit for U.S. companies.
Mr. Radanovich. Perhaps you can ask this. I would like to
ask it. How should we deal with Cuba regarding our companies'
intellectual property, given the profits Cuba has made selling
confiscated property of former Cuban companies, usually in the
form of rum or cigars?
Mr. Bastian. I think we would have to take a real hard look
at that. And these are some of the issues, among others, that
we would have to take a look at and get resolution to it, I
think, before we can move forward.
It also brings up the whole question of intellectual
property, about the security for, you know, potential future
investors in the island. There are a host of issues that we
need to take a look at, the ones that you deal with.
Mr. Radanovich. Thank you, Mr. Bastian.
Mr. Borman, the BIS is working on a regulatory change to
implement the directive to permit license exemptions for
donations of personal communications devices to Cuban citizens,
but not to the Cuban Government. How can we ensure that the
donations are not confiscated or redirected to the government?
Mr. Borman. Well, that really will depend on the knowledge
people have of the individuals getting it and then various ways
of feedback we have. You know, we don't have a way to go and
necessarily check on the individual items once they are there,
but there are a variety of other information sources we have
that will help us assess that.
Mr. Radanovich. OK. Have you defined what a personal
communications device is?
Mr. Borman. Yes. It is something that is really a retail
sale. So, as I mentioned, it is things like personal digital
assistance, mobile phone, satellite phones, laptop, desktop
computers, digital cameras. Certainly nothing above a personal
consumer level, nothing that businesses or governments would
really use in any significant way.
Mr. Radanovich. OK. About one-third of license applications
that you received in 2008 were returned without action. Why
were the applications returned?
Mr. Borman. For one of two reasons. In some cases the
licenses were not actually needed. There is a narrow strata of
items like agricultural exports that we don't need an
individual license. And the other group would be ones that
there are simply not enough information on. So, for example,
the license application, there is just not enough information
on the proposed end user in Cuba for the U.S. Government to
make an informed decision. And so we return that saying
essentially you can't ship unless you come in and give us more
information.
Mr. Radanovich. Mr. Bastian, one last question. As long as
the embargo is the official U.S. policy, where do the companies
that are permitted to export agriculture and medical products
receive export assistance?
Mr. Bastian. They don't. We are talking about sales of
agricultural commodities, which is basically cash in advance
from Cuba.
Mr. Radanovich. Thank you very much.
I yield back the balance of my time.
Mr. Rush. The Chair thanks the gentleman.
The Chair now recognizes the gentleman from Maryland Mr.
Sarbanes for 5 minutes.
Mr. Sarbanes. Thank you, Mr. Chairman.
Mr. Rush. We will allow you 5 minutes.
Mr. Sarbanes. Thank you.
I guess the U.S. embargo is the most restrictive trade
embargo on Cuba in the world, right?
Mr. Borman. Well, we do have fairly restrictive trade
policies in some other countries, Iran, Syria, North Korea.
Mr. Sarbanes. No, but, I mean, there is no other country in
terms of imposing an embargo against Cuba that comes near to
what----
Mr. Borman. Compared to other countries.
Mr. Sarbanes. Right.
What is the next most restrictive trade policy imposed on
Cuba by another country that you would--is there any----
Mr. Bastian. I don't know.
Mr. Sarbanes. OK.
Mr. Borman. Yes, I am not aware of what other countries'
policies are.
Mr. Sarbanes. We have talked about this distinction between
the government and the people and steps that can be taken to
try to ease some of the--or promote more interaction with the
people of Cuba as opposed to with the government, which is
tricky. It is tricky when we try to make that distinction in a
lot of places, and I can think of a number of other examples.
But are there--and some of this has to do with just allowing
dollars and resources to flow straight to residents of Cuba.
But are there--is there any kind of NGO infrastructure or other
ways of getting resources to the people as opposed to the
government? And after you comment on that, could you describe
the impediments that the government might present to having
that happen?
Mr. Borman. Well, certainly on the NGO side there are some
NGOs that have a fairly established track record of operating
with Cuba. In fact, particularly on the medical side, the
medical donations we authorize are really through those
organizations.
And I suppose there is always a possibility that the
government will decide to do things differently, but I think
there is enough information flow in and out of Cuba that it
will be fairly apparent if the government decides to do things
in a more restrictive way than they are currently doing in
terms of letting those NGOs receive things from donors in the
U.S. and distribute them directly to the people.
Mr. Sarbanes. Are there restrictions on the NGO activity
that you know of now that exists, that where if they ease
those, that would be kind of the leading indicator that the
government is dealing in a different way with that kind of
humanitarian assistance and other assistance?
Mr. Borman. That I don't have an answer to, but we can
check on that and get back to you on that.
Mr. Sarbanes. OK. I appreciate it.
And the steps that the President took or asked people to
take just recently in terms of lifting certain restrictions,
are any of those ones that had been eased in the past and then
tightened again, or would you view them all as new in either
kind or degree?
Mr. Borman. On the gift parcels and the baggage, those were
effectively changes to tightenings that were made in the
previous administration. The donations of consumer
communication devices, that is a new license exception.
Mr. Sarbanes. OK. Thank you.
I yield back my time.
Mr. Rush. The Chair thanks the gentleman.
Now the Chair recognizes the gentleman from Georgia Dr.
Gingrey for 5 minutes.
Dr. Gingrey. Mr. Chairman, I thank you.
You know, we are going to hear from the second panel in a
few minutes, and I was just reading the testimony from the
United States Chamber of Commerce, and a statement is made, and
their conclusion, regarding the embargo that has been going on
for the past 50 years: Instead of isolating Cuba from the rest
of the world, it has isolated the United States from our
allies. The Cuban dictatorship could never have withstood five
decades of free trade, free markets and free enterprise. That
is a conjecture and stated pretty strongly.
I also want, Mr. Chairman, to read a recent--or from a
recent press release that the Diaz-Balart brothers, Lincoln and
Mario, who represent the Cuban American community mainly in and
around Miami. And they were talking about something that
President Obama said during his inaugural address on January
20th. And let me quote from President Obama: To those who cling
to power through corruption and deceit and the silencing of
dissent, know that you are on the wrong side of history, but
that we will extend a hand if you are willing to unclench the
fist. And that ends the quote.
The United States policy of state says, the liberation of
all political prisoners, the legalization of all political
parties, independent labor unions and the press, and the
scheduling of free internationally supervised elections is what
we treasure in the United States law in regard to dealing with
a country like Cuba.
Let me ask Mr. Bastian first. The Castro regime confiscated
many businesses and their intellectual properties, such as
trademarks, when they took over power and claim they now own
those properties. Now, for those who would say, well, we are
trading with China, and this is a Communist regime, I don't
know that China has ever taken over or confiscated any American
property, U.S. property, and done what Cuba did shortly after
the Castros took over.
How does the United States address trade policy with
countries that do not honor property rights? How should we deal
with Cuba regarding our companies' intellectual property given
the profits Cuba has made selling confiscated property of
former Cuban companies?
Mr. Bastian.
Mr. Bastian. Thank you, Congressman.
I think this is something that we tried to refer to
earlier, and these are some of the issues that we absolutely
need to get resolved. And we are familiar with the issues or
the specific examples, I think, that you were alluding to. So
these are the type of issues--I think this is what--it is quite
a step. It is a long step from saying, OK, we are going to do
this, we are going to establish these commercial relations with
Cuba and make it reciprocal, and then clean up a lot of these
issues we have to deal with and a lot of pressure to do that.
Dr. Gingrey. Obviously it is complicated.
Let me quickly ask Mr. Borman, BIS is working on a
regulatory change to implement the directive to permit license
exceptions for donations of personal communication devices to
Cuban citizens, but not to the Cuban Government. How do we
ensure that those donations are not confiscated or redirected
to the government? Why do they fall under the personal
communication device definition?
Mr. Borman. Well, again, because these will be donated
often by relatives, I think. It will become very quickly
apparent if the Cuban Government changes its current policy and
starts confiscating these types of things from individuals, and
we have the flexibility in our regulatory scheme to change that
if it turned out that was the case.
Dr. Gingrey. Well, I am about to run out of my time, Mr.
Chairman, but I would just say that I agree with President
Obama and the statement that he made at his inauguration. We
need to see an unclenched fist, and I don't think that we are
seeing that. And this business of saying, well, we are the only
country; all the other Western Hemispheric countries are
trading and getting this economic advantage by trading with
Cuba. That is trying to say, well, the end justifies the means.
And, you know, I think we have got a matter of principle here,
and I do agree with the Diaz-Balart brothers and Ileana Ros-
Lehtinen and others who represent Cuban Americans who suffered
and their families who continue to suffer under this brutal
Communist dictatorship 90 miles from our shore.
Mr. Rush. The Chair thanks the gentleman.
And the Chair now recognizes the gentlelady from Florida
Ms. Castor for 5 minutes of questioning of the witness.
Ms. Castor. Thank you, Mr. Chairman. Thank you very much
for holding this very timely hearing, and thanks for--thanks to
our witnessing for appearing today.
I represent the Tampa Bay area in Florida. My hometown of
Tampa has extensive historic family and economic ties to Cuba.
Prior to the revolution, there was very robust trade and
travel. There were ferries that ran from the port of Tampa to
Cuba. Cattle shipments left the port of Tampa, and many other
agricultural products. So the Tampa area has a great interest
in modernizing the relationship, and President Obama's
announcement was greeted with great enthusiasm by Cuban
American families in my hometown and across the State.
Travel agents now are absolutely overwhelmed. They don't
know--they can't keep up with the requests from family members
to travel, and the bureaucratic barrier that was previously in
place was really a shame. My office deals with these--the
family travel requests on a routine basis, and the stories of
dying grandparents, where family members now would like to go
see them--I had one case of a bone marrow transplant. The
only--the sister was in the United States; the brother was
there. She was the only match, and she had to go through all
these bureaucratic hurdles to get there.
But there is another bureaucratic hurdle in place now, and
I hope that you all can help. Currently there are only three
airports in the United States that can--that are permitted to
service charter flights or any air flight--any air travel:
Miami, New York and L.A. Meanwhile, central Florida probably
has the highest population of Cuban Americans outside Miami.
And we have requested the Treasury and Commerce to help us
quickly with getting another airport, Tampa International or
some of the others, approved on an expeditious basis. Can you
help?
I know this is an OFAC issue, but it seems to be directly
consistent with President Obama's direction. The problem is
that these families really shouldn't be subjected to a longer
waiting period or additional cost having to travel to Miami
just to get to the island.
Mr. Borman. We are in receipt of your letter to Secretary
Locke. And after looking at it, it has become apparent to us
that it is really the Department of Homeland Security Customs
and Border Protection Unit that has the principal
responsibilities. So we have already reached out to them and
made them aware.
Ms. Castor. That is very interesting, because we have
talked to the Department of Homeland Security, and they said,
no, this is Treasury. And they--you know, this is--the people
hate this about government, you know, passing the buck. Where
do we need to--where do we need to go to get this taken care
of? I am asking for your help as these families wait in line to
try to see their family members.
Mr. Borman. As I said, in looking at the response that we
have developed to the letter, it has become clear to us it is
DHS. But we will take the responsibility of making sure the
right agency comes back to you with that question and deals
with that issue.
Ms. Castor. Don't you agree, this is consistent with
President Obama's direction, and it doesn't make a lot of sense
to just have L.A., New York and Miami where--when we have other
cities across the country that are ready, willing and able to
handle travel. Yes, I will take the nodding.
Mr. Bastian. Yes. Let me just--we will take a look at it.
Keep in mind particularly that we have one of your Tampa sons,
assuming everything goes well up here, will be Under Secretary,
who will show you fervor and zeal in getting this resolved.
Ms. Castor. That is right. Mr. Chairman, a native son of
Tampa has been nominated to serve as the Under Secretary of
Commerce for International Trade, Frank Sanchez. He is
outstanding. And I look forward to an opportunity for you two
to get together.
Mr. Rush. Thank you very much. I look forward to the same
opportunity.
Ms. Castor. Thank you very much.
I will yield back.
Mr. Rush. The Chair now entertains--well, the Chair will
now--if our witnesses will continue to be with us, the Chair
will recognize a second round of questioning. We will give each
Member an additional 3 minutes to ask a question. So in that
regard, the Chair recognizes himself for 3 minutes.
Are either of you familiar with the report that was issued
by the Ranking Member of the Committee on Foreign Relations,
Senator Lugar, Richard Lugar, the Ranking Republican Member?
Are any of you familiar with that report?
Mr. Borman. I read it.
Mr. Rush. You read it? OK. And are you familiar with his
comments and conclusions on this report on page 11? Now, I am
going to read it just for reference here: In hindsight, the
U.S. embargo has not served our national security agenda since
Cuba seems to be an effective threat to the security of the
United States. In the immediate post-Cold War era, the cost of
maintaining this policy was negligible compared to the domestic
political benefit derived from satisfying Cuban American groups
in the U.S. The U.S. justified the embargo policy as an
incentive or inducement for negotiation with the Cuban
Government, the rationale being that the U.S. would lift the
embargo or parts of it in response to reform on human rights
and democracy. This narrow approach, however, will not
further--has not furthered progress in human rights or
democracy in Cuba, and it has come at the expense of other
direct and regional strategic U.S. interests.
Today it is clear that a reform of our policy would serve
security and economic interests in managing migration
effectively, in combating the illegal drug trade, among other
issues. And it goes on and on and on. And I want to ask
unanimous consent that Senator Lugar's report of February 23,
2009, be entered into the record.
Without objection, so ordered.
[The information was unavailable at the time of printing.]
Mr. Rush. Do you have any response to the Lugar report, Mr.
Borman? Have you had a chance to see it? What are some of your
commentary, your reactions to that report?
Mr. Borman. Well, I have read it. I have to say that I
don't have any commentary on it. I think this is something that
the folks in the administration that are looking at Cuba policy
at large would be looking at in conjunction with a variety of
other inputs on the Cuba policy. But we at the Department of
Commerce have not been specifically tasked to review that and
come up with a response.
Mr. Rush. Mr. Bastian, the ITC Administrator is an advocate
for U.S. businesses all over the world. In your experience,
what sort of protections and assurances do people expect from
the U.S. Government while operating overseas? And should
American companies expect the same sort of support if and when
they do business with Cuba?
Mr. Bastian. Mr. Chairman, the International Trade
Administration, particularly through our U.S. and Foreign
Commercial Service where we have a network of over 100 offices
across the United States and about that same number, I think,
overseas, abroad, provides a number of services for the
information gathering, putting buyers and sellers together,
finding agents and representatives for U.S. firms. These are
all services which we would certainly have--would make
available to U.S. companies, you know, should the situation
change, keeping in mind that at the moment the embargo
precludes us from doing anything with the U.S. business
community insofar as Cuba is concerned. But we do have the
ability to react and react quickly to changing situations,
whether it is something that comes about as a change in an
economic situation or political situation, or a natural
disaster, reacting to hurricane destruction and things of that
nature. Yes, we can do that pretty quickly.
Mr. Rush. The Chair has run out of time. The Chair now
recognizes the ranking member, Mr. Radanovich, for 3 minutes.
Mr. Radanovich. Thank you, Mr. Chairman. I've got one
question for either member of the panel regarding business in
Cuba.
There was testimony that will be given during this
committee hearing of 500 international companies represented in
Cuba, and many with substantial investment there. However,
according to the State Department, the business environment is
so unfriendly that the number of joint ventures dropped from
540 in 1982 to 287 in 2005. Because of the government's
recentralization efforts, it is estimated that one joint
venture and two small cooperative production ventures have
closed each week since the year 2000; and foreign domestic
investment dropped from 448 million in the year 2000 to 39
million in 2001 and to zero in 2002.
Are these 500 international companies independently owned
or are they joint ventures? If they are joint ventures, why the
difference between the State Department figures and your
testimony--not your testimony, but the testimony that we've
heard before the committee?
Maybe you can comment on, does the business climate work in
Cuba for companies, international companies, that are doing
business there?
Mr. Bastian. A lot of the information that we have is
anecdotal, as I mentioned before, because we don't go out and
collect information on Cuba, and we don't spend terribly much
time talking to colleagues in other governments about their
companies' experiences. We usually have other things we want to
talk to them about.
But anecdotally, I think the answer is, it's not the
easiest place in the world to do business. And we are aware of
whether the joint ventures are a direct investment--but
everything is a joint venture of some sort--that have failed,
where the foreign partner certainly--what you got going in is
not what you expected to find. So there is a lot of that.
Again, not to beat that horse to death, but it goes back to
the kinds of issues that you're interested in, the nontariff
types of obstacles that exist.
Mr. Radanovich. Thank you, Mr. Bastian.
Mr. Borman, anything to add?
Mr. Borman. No, I don't have anything to add.
Mr. Radanovich. All right. Thank you very much.
Thank you, Mr. Chairman.
Mr. Rush. The Chair now recognizes Ms. Castor for 3
minutes.
Ms. Castor. Thank you, Mr. Chairman.
Gentlemen, President Obama's announcement and the White
House document that followed were very specific when it came to
telecom companies, any telecom company in this country. What
should they be doing now to investigate economic opportunities?
Mr. Bastian. We haven't had any reaction from the Cuban
Government yet on what's happening. I'll tell you, quite
honestly, I've had--if you had asked me this question Friday at
3:00, I would have said, no company has called me on this yet.
To give you an indication, at about 3:05 I did get my first
phone call. And they weren't as interested in the specific
opportunity or condition of the market as they were in what's
just the general likelihood that this will happen at some point
in time. And I think you will probably find that there are a
number of companies that have already got some market research
that they've collected through other sources, most of them
outside the United States.
Ms. Castor. I've been contacted as well, and just, people
want to understand the process.
Mr. Bastian. That's absolutely right.
Ms. Castor. So right now we're waiting to see what the next
step from the Cuban Government is; is that correct?
Mr. Bastian. Yes, ma'am.
Ms. Castor. There's no organized effort at commerce. There
might be, maybe our next panel would have some information on
that, but as of right now, Commerce doesn't have a strategy,
but telecom companies should stay tuned.
Mr. Borman. Well, no, they can contact us on our part
because we can tell them about what specific licensing
requirements would be and how to coordinate that with Treasury.
Because, again, for us, if they are looking at opportunities
that would involve the export of hardware or software or
technology, that's what's covered by us. The financial
arrangement part of it would be covered by Treasury.
But that's what we can tell them about, how we would deal
with an application for some kind of transaction. As Mr.
Bastian said, the other part is what the Cuban Government will
do, because somehow all the telecom providers will have to deal
in some way with the Cuban Government.
But they should contact us.
Ms. Castor. Thank you very much.
I yield back.
Mr. Rush. Dr. Gingrey is recognized for 3 minutes.
Dr. Gingrey. Thank you, Mr. Chairman. As we've heard in the
testimony and some of the questioning in regard to opening up
trade to Cuba, more so than we currently have done and that it
would maybe increase human rights and be more effective than
the embargo has been, and yet we have negotiated a trade
agreement with Colombia, a country not too terribly far from
Cuba, that is working very closely with us.
I think it's a fair statement to say that President Uribe
is a friend of the United States and has done an outstanding
job in dealing with the FARC, trying to abide by every request
that our Congress has made regarding labor relations; and I
think they've made great progress.
And yet here we've been sitting on a trade agreement,
bilateral trade agreement with Colombia for over 2 years. And
it's not just about trade and the importance of having that
bilateral relationship and open our markets to them and theirs
to us, but it's a huge security issue. And why we would take
our eye off that ball and all of a sudden focus it on Cuba,
where we don't have a friend in the Castros and the amount of
trade we're talking about I don't think compares to Colombia?
I would love to hear both of your thoughts in regard to
that. Why take our eye off the main issue in regard to dealing
and ratifying that bilateral trade agreement with Colombia and
focus on Cuba? Maybe we can walk and chew gum at the same time,
but go ahead and comment on that. I would appreciate it.
Mr. Bastian. I think the issues are--maybe at first blush
they appear to be somewhat similar, but I don't think they are.
I think there are huge emotional issues, political issues and
social issues, when you come to deal with Cuba. In particular,
I think, on the emotional and political side the issues are
different than they are with Colombia.
I do agree with you that President Uribe has made excellent
strides and tried to get that agreement through and to try to
accommodate the United States. I think it's clearly a
discussion, though, that will be held between Uribe's
administration, the President himself, because he does get
involved--by that, I mean President Uribe because he does
personally get involved in these--and Ambassador Kirk at the
U.S. Trade Representative's Office to move this ahead.
Dr. Gingrey. Mr. Borman?
Mr. Borman. Trade agreements are really in Mr. Bastian's
bailiwick, so I have nothing to add to his comments.
Dr. Gingrey. Thank you, Mr. Borman.
Mr. Chairman, I yield back. Thank you.
Mr. Rush. The Chair thanks the gentleman.
The Chair now wants to again thank the witnesses for
appearing before us today. You have, with your narrow
perspective--and I do respect the fact that your perspective
had to be narrow because it could not enter into policy areas,
which are not your purview and have not been clearly defined by
the Obama administration as yet.
So I certainly appreciate your being with us to give us
this narrow perspective as it relates to your jurisdiction.
We want to again thank you so much for being a part of this
subcommittee hearing; and we ask now that the panel, first
panel, be dismissed. And thank you so very much.
Mr. Borman. Thank you, Mr. Chairman.
Mr. Rush. The Chair now calls the second panel to the desk.
It is my pleasure to introduce the outstanding witnesses on
this second panel. And to my left, your right, we have with us
Ms. Adrean Scheid, is that correct, Rothkopf. Ms. Rothkopf is
the Vice President of the Western Hemisphere Affairs Division
of the U.S. Chamber of Commerce.
And next to Ms. Rothkopf we have with us Mr. Geoff Thale,
who is the Program Director for the Washington Office on Latin
America.
And next to Mr. Thale is Mr. Kirby Jones. Mr. Jones is the
President of the U.S.-Cuba Trade Association.
And next to Mr. Jones, to his right--left, rather--would be
Ambassador James Cason. Ambassador Cason is the President of
the Center for a Free Cuba, and he's the former Principal of
the Chief of Mission for the U.S. Interests Section in Havana.
I want to welcome all of you witnesses. And it is the practice
of this subcommittee, a new practice I might add, to swear in
the witnesses, so I would ask that you stand and raise your
right hand.
[Witnesses sworn.]
Mr. Rush. Please let the record reflect that all witnesses
have answered in the affirmative and have taken their seats.
STATEMENTS OF ADREAN SCHEID ROTHKOPF, VICE PRESIDENT, WESTERN
HEMISPHERE AFFAIRS, U.S. CHAMBER OF COMMERCE; GEOFF THALE,
PROGRAM DIRECTOR, WASHINGTON OFFICE ON LATIN AMERICA; KIRBY
JONES, PRESIDENT, U.S.-CUBA TRADE ASSOCIATION, AND PRESIDENT,
ALAMAR ASSOCIATES; AND AMBASSADOR JAMES C. CASON, PRESIDENT,
CENTER FOR A FREE CUBA
Mr. Rush. We will allow you 5 minutes for the purposes of
opening statements, and we'll begin with you, Mrs. Rothkopf.
STATEMENT OF ADREAN SCHEID ROTHKOPF
Ms. Rothkopf. Thank you, Chairman Rush, Ranking Member
Radanovich and members of the subcommittee. I greatly
appreciate the opportunity to speak to you today. My name is
Adrean Rothkopf, and I am Vice President for Western Hemisphere
Affairs.
We applaud the recent moves by both Congress and the Obama
administration to ease the embargo on Cuba. The Chamber sees
recent bipartisan legislation and statements by the
administration as important first steps toward a policy more
likely to promote a transition to democracy and full civil
liberties in Cuba and to bring significant economic
opportunities to American farmers, businesses and workers.
While ultimately what we would like to see is an end to the
embargo, which we view as one of the biggest foreign policy
failures of the past half century, rather than encouraging Cuba
to democratize, the embargo has helped prop up the Communist
regime. Instead of isolating Cuba from the rest of the world,
it has isolated the United States from our allies.
Our two countries are natural trading partners, and prior
to the embargo the United States accounted for nearly 70
percent of Cuba's international trade. Cuba was the seventh
largest market for U.S. exporters, particularly for American
farm producers, but the embargo forced Cuba to seek out new
sources for its domestic consumption.
Under the Trade Sanctions Reform and Export Enhancement Act
of 2000, the sale of commercial agricultural exports was
permitted, but with a variety of restrictions and licensing
requirements, including cash-in-advance payments via third-
country banks. Despite heavy regulation, by 2004, U.S.
agricultural exports to Cuba rose from less than 1 million to
392 million, 42 percent of the Cuban market.
In 2008, U.S. exports to Cuba reached 718 million, yet the
majority of agricultural trade with Cuba is done by large
multinational companies as small- and medium-size exporters are
deterred by the complexity of regulations. Other negative
impacts on food and agricultural exports include restrictions
on the ability to travel for the purpose of establishing
commercial relationships and restrictions on visits from Cuban
officials to confer with U.S. suppliers, inspect facilities and
discuss sanitary and phytosanitary issues.
In 2001, the International Trade Commission estimated that
the embargo costs U.S. exporters up to $1.2 billion annually in
lost sales. While the U.S. Chamber recommends that an updated
study be conducted to fully evaluate the missed opportunities,
it is clear that these include agriculture. The ICC estimates
that if all restrictions on trade and travel are lifted, sales
of poultry, beef and pork could rise by 25.7 to 37.8 million.
Additionally, Cuba has the potential to become the top
foreign market for U.S. rice. A Congressional Research Service
study estimates that removing restrictions on trade would
increase rice exports by 14 to 43 million.
Tourism: Lifting the travel ban will create jobs in the
U.S. and Cuban tourism industries and will have an impact on
direct investment in tourism infrastructure, such as hotels,
shops, cruise ship ports, airports. The ICC estimates that
lifting the travel ban would increase U.S. Visitors to Cuba
from 171,000 in 2005 to between 554,000 and 1.1 million.
Additional tourist arrivals would increase U.S. Sales of
agricultural goods to the island because of the increased
tourist demand for food and because of higher Cuban economic
growth, boosting domestic demand for high-quality U.S. food
products.
Machinery: As Cuba rebuilds after widespread hurricane and
tropical storm damage in 2008, the island is an important
potential market for construction equipment and agricultural
machinery. Additionally, Cuba has a dilapidated infrastructure
system. An eventual opening or reform of the Cuban economy will
create opportunities for U.S.-made equipment to rebuild the
island's infrastructure.
Oil: There is a natural need for U.S. oil companies to
participate in the exploration of Cuban offshore oil fields.
Subsurface similarities with existing oil fields in the U.S.
Gulf of Mexico would allow U.S. companies that have experience
in the Gulf to mitigate complicated technical challenges in
local deepwater development, leading to cost, environmental and
safety efficiencies.
Additionally, Cuba's proximity to the U.S. allows for a
transportation cost premium for the U.S. market that would
serve to moderate energy prices to the United States. At the
same time, with Cuba's maritime boundary just 45 miles away
from the U.S. coastline, we ought to be concerned about who and
how Cuba's oil fields are being developed from an environmental
standpoint, as an oil spill could mean significant
environmental damage for the United States.
We believe that opening trade with Cuba will bring
political and economic change to the island, but establishing a
commercial relationship will certainly raise legitimate
business concerns on the part of U.S. companies. The Cuban
Government will have to provide certain guarantees and
safeguards in the areas of rule of law, environmental
protection, infrastructure for travel requirements, the safety
environment, intellectual property protection and incentives
for innovation and labor rights.
Additionally, there are important considerations regarding
financing. However, these concerns should not impede a lifting
of trade restrictions with Cuba. U.S. businesses can quickly
and easily benefit from open trade.
Thank you very much.
Mr. Rush. Thank you very much.
[The prepared statement of Ms. Rothkopf follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Rush. Now the Chair recognizes Mr. Thale for 5 minutes.
STATEMENT OF GEOFF THALE
Mr. Thale. Thank you, Mr. Chairman. I'm Geoff Thale, the
Program Director of the Washington Office in Latin America.
WOLA is a human rights organization, and we look at Latin
American policy and the Cuba policy from the perspective of
human rights. I've submitted written testimony, but here I
would just like to briefly summarize it.
What I would like to do is talk a little bit about whether,
from our point of view, trade can contribute to improving the
human rights situation in Cuba, and if so, how. And I would
like to end by reiterating what I think you will hear from some
of my other colleagues here about the trade opportunities and
investment opportunities we're losing.
As an organization, as an institution, we don't believe
that trade by itself in Cuba or anywhere else automatically
brings gains and increases in democracy and human rights. But
when trade is part of a broader strategy that includes
diplomatic and political engagement on human rights issues and
when they are internal and domestic pressures for the respect
of human rights, then there are possibilities to see
improvements in the human rights situation.
In the case of Cuba, we believe strongly that increased
trade, increased travel and engagement can only benefit the
human rights situation in Cuba and bring benefits to the United
States as well.
Let me just say a word about the human rights situation
itself. It's easy--it's very tempting to view the human rights
situation in Cuba from sort of stereotypical points of view.
It's extremely important not to whitewash the very serious and
very real problems. It's important not to exaggerate them as
well. I think it's really clear, if you look at the State
Department's human rights reports, there are real restrictions
on the freedom of association, on freedom of speech. It's very
clear that Cuba holds between 100 and 200 political prisoners,
depending on how you count it.
These are all clearly unacceptable violations of
internationally recognized norms. The U.S. Government should
call on the Cubans to end that, the human rights community
should, the international community should generally.
At the same time, we look at human rights in the rest of
Latin America. And if you look further at those same State
Department reports, you won't see reports of political killings
in Cuba or political disappearances or extrajudicial
executions, which we see elsewhere in the region; and you won't
see systematic accusations of torture, which is obviously an
issue we have looked at in the Guantanamo context here. So I
think, from our point of view, it's important to see the mixed
bag you see in Cuba on human rights situations.
If you ask about the United States' ability to influence
the human rights situation in Cuba itself, I think, from our
point of view, our ability is nonexistent. We've had 50 years
of an embargo--almost 50 years of an embargo--little trade with
some narrow exceptions, limited contact, limited diplomacy; and
the result is, we have very little influence and very little
leverage.
Cuba is free to ignore our views on human rights because we
don't make much significant difference to the government or its
economy or its politics or its diplomacy. And so our view is,
an engagement would change that.
By engaging through trade, by engaging through travel, by
engaging through diplomacy, we'll develop relationships in Cuba
over time and we'll develop tools over time that can be used to
dialogue with and to encourage greater respect from the Cuban
Government for human rights and democratic practices.
And I don't think that's a magical formula. We're not going
to see change overnight; we're not going to see dramatic steps
from today to tomorrow, but it's clearly a better strategy to
pursue engagement including trade, travel and diplomacy than it
is to continue the current embargo.
And I think it's important to underscore, that's a point of
view that most of the world believes. Latin America, Europe,
Asia, Africa, most of the Middle Eastern countries all engage
with Cuba. Some key allies and partners of ours, especially
Brazil and the Spanish Government, systematically engage with
the Cuban Government on trade issues and link that to dialogue
on human rights, democracy issues, political prisoners.
And, again, I don't think they expect dramatic change
overnight. They see themselves as laying the groundwork, as
preparing for the future and as developing relationships there.
And the truth is, the United States is standing on the
sidelines. And we're standing on the sidelines at a time when
we have economic reasons to engage with Cuba.
As Ms. Rothkopf noticed--mentioned, as I assume Mr. Jones
will mention as well, there are agricultural interests and
agricultural possibilities in Cuba, there are interests from
our ports on the Gulf Coast, there are tourism and travel
interests, there are medical interests and medical
opportunities, there are political energy interests. There's a
whole set of economic opportunities that we're forgoing for the
sake of a policy that's not bringing us any real benefit in
terms of human rights and democracy.
So I think our view is that we ought to move toward a
policy of engagement, that that policy ought to include moving
toward ending our embargo on trade and taking advantage of the
opportunity that brings us there. We're pleased to see that
President Obama has taken the first initial steps in that
process.
We're pleased, Mr. Chairman, to see that you traveled to
Cuba recently, engaged in the beginnings of dialogue and
diplomacy here. We hope we'll move forward in that way because
we think it's good for human rights in Cuba as well as good for
the United States.
Mr. Rush. Thank you.
[The prepared statement of Mr. Thale follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Rush. The Chair now recognizes Mr. Jones for 5 minutes.
STATEMENT OF KIRBY JONES
Mr. Jones. Mr. Chairman, members of the committee, thank
you. I appreciate the opportunity to be here, as well.
The last 47 years the cornerstone of U.S. policy toward
Cuba has been the embargo. But if one looks at the original and
subsequent reasons for this policy, it is hard, if not
impossible, to point to a single success that this policy has
had in achieving any of its objectives.
The embargo has achieved, in fact, the exact opposite of
what was originally intended and is not serving the interest of
the United States Government nor of United States citizens. No
other country in the world has an embargo on Cuba.
I have been traveling back and forth to Cuba for 35 years,
and I have seen a lot of changes in those years. It may be that
the U.S. policy has been stuck for 47 years, but Cuba has not.
A new trade and investment economy has emerged in Cuba in the
last 15 years, a mix of capitalism and socialism, and not just
a little dose of capitalism. Every sector in Cuba now has a
foreign private investor. This includes mining, energy, hotels,
beer, bottled water, port management, cosmetics, biotechnology,
real estate, agribusiness and telecommunications, just to name
a few.
Cuba has removed subsidies from almost all its former state
enterprises and merged or eliminated ministries. To undertake
its foreign business Cuba has created dozens of freestanding
holding companies. Where once totally dependent on sugar, Cuba
has greatly diversified its source of revenues now to include
nickel exports, personal services, tourism, foreign
remittances, citrus and seafood exports, worldwide sales of rum
and cigars and exports of biotechnology products. Whatever
adjectives serve those who continue to want us to believe that
Cuba is on the brink of economic collapse, the reality is
otherwise.
Having said that, like all developing countries, Cuba does
have many problems: major foreign debt obligations, foreign
currency exchange regulations are shifting, domestic pricing
policies for imported consumer food products have inhibited
market growth, labor regulations need improvement, transparency
regarding foreign investment is a longstanding concern and
limits our place on entrepreneurial expansion.
But Cuba is also the largest country in the Caribbean with
a size comparable to Pennsylvania. According to both the CIA
and the Economist Intelligence Unit, Cuba had growth rates of
10.2 percent annually from 2005 to 2007. This has fallen to 4.4
percent in 2008 due to the worldwide recession and devastating
hurricanes. Largely unknown is that Cuba has the third largest
deposits of nickel in the world and is the ninth largest
tourist destination in the Americas without any Americans.
I first met Fidel Castro in 1974. I have known him now for
35 years. All of these changes in the way Cuba now does
business were initiated under Fidel Castro, but are now not
dependent on him or Raul Castro, for they have already
implemented much of the very transition that some still say
would come only after Castro no longer heads Cuba.
To wait to lift the embargo for some so-called ``post-
Castro era,'' as if all will change and somehow be different,
is not at all a productive business plan nor, quite frankly, is
it a productive political strategy either.
After 40 years of no trade and just over--a bit over 7
years, the U.S. now supplies, as has been mentioned several
times, more food to Cuba than any other country. In 2008, U.S.
companies received $718 million from the sale of agricultural
products to Cuba. In aggregates, since this trade began,
contracts for more than 11 million metric tons worth over $3.6
billion, including shipping and services, have been signed,
comprising 300 different products including wheat, rice, corn,
soybeans, tomato sauce, eggs, chicken, cookies, apples, wine,
ground turkey, chewing gum, utility poles, live cattle, organic
fertilizer and rice. These have been bought from 157 different
companies from 37 States; 23 different ports have been used for
more than 1,100 ship journeys of which 73.5 percent have been
made with U.S.-owned or chartered vessels.
But U.S. companies are forced to operate under a serious
disadvantage in comparison to companies from other countries.
The rulings in 2005 by the previous administration have caused
Cuba to cut back on some imports from the United States. Most
important in preventing U.S. companies from the full
realization of their current trade has been and is the
inability to offer private credits. There are some who argue
that this restriction should be maintained because they feel
Cuba is a bad credit risk; but whether or not to extend private
credit to Cuba should be a decision taken by each company, not
by the U.S. Government. If these restrictions, unique in
international commerce, were lifted, Pedro Alvarez, Chairman
and CEO of Alimport, which imports all U.S. Agricultural
products to Cuba, has stated that U.S. firms could provide over
50 percent of Cuba's food needs which annually reach almost $2
billion, which would be an increase of several hundred million
dollars a year over current levels. There have been studies
that indicate that U.S. firms have lost over $100 billion since
the early '60s because of the embargo and that the annual cost
now could be as high as $4 billion a year.
In my opinion, the key to starting a process of business
with Cuba which will benefit American workers and the U.S.
economy will be for Congress to pass and for the President to
sign H.R. 874 and S. 428, which will allow all Americans to
travel to Cuba. Two million Americans are projected to visit
Cuba in the first 2 years of open travel. Studies have shown
that this in turn will result in an injection of $1.6 billion
into the U.S. travel and support service industry, and most of
that helping the small- to medium-size travel agents, airlines,
additional food exports to feed the U.S. visitors and
advertising in promotional programs.
Virtually anything that Cuba now purchases might very well
be purchased from the United States. In this list of potential
products, I am including fertilizers and pesticides,
pharmaceutical products, textiles and apparel, steel, farm
machinery and construction equipment, power generation
machinery, electronics, plastics, tires and sporting goods;
services such as air transportation, maritime transportation,
construction service, telecommunications and travel and
tourism, and of course, a growth in the importation of U.S.
agriculture.
Mr. Rush. Mr. Jones, would you please summarize your
statement.
Mr. Jones. U.S. Firms will be able to offer what companies
from Europe, Canada and Latin America can never provide.
And finally, in addition to sales, there will be several
opportunities for investment: agribusiness, hotels, marinas,
golf resorts, housing and building renovation,
telecommunications and overall infrastructure. These are just
some of the opportunities that will be open.
I'll be glad to take any questions. Thank you, Mr.
Chairman.
Mr. Rush. Thank you very much.
[The prepared statement of Mr. Jones follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Rush. The Chair now recognizes Ambassador Cason.
Ambassador Cason, you're recognized for 5 minutes more or
less.
STATEMENT OF AMBASSADOR JAMES C. CASON
Mr. Cason. Mr. Chairman, members of the committee, thank
you very much for the opportunity to appear before you today to
discuss this topic of great importance. Until very recently I
was a career Foreign Service officer with 38 years' experience,
mostly in Latin America. One of my postings was to Cuba where I
was Chief of Mission from late 2002 to late 2005.
I am speaking here today as President of the Center for a
Free Cuba, a nonpartisan NGO and a 501(c)(3) organization; and
therefore, nothing I say here today supports or opposes any
bill before Congress, and we administer a USAID grant.
We at the Center for a Free Cuba provide humanitarian
assistance to the people of Cuba and assist civil society and
democratic activists there. We send uncensored information in
shortwave radios, among other things, to Cuba. The Center
favors licensing measures announced by the President that will
allow U.S. firms to attempt to enter the Cuban
telecommunications market. Havana limits its citizens access to
the Internet, cell phones and other information or media out of
its control. If Cuba expands the speed and availability of the
Internet, lowers the exorbitant cost of Internet cafes, Cubans
will communicate faster and more easily among each other and
with the wider world. Greater access to and use of the Internet
by average Cubans, especially the young, will promote civil
society in a democratic process there.
We support Cuban-American travel to the island on
humanitarian grounds and travel by researchers, academics and
others who make a serious effort to discover for themselves
Cuba's reality. We are opposed to tourist travel by American
citizens with no relatives on the island because such travel
will only provide funds to the Cuban security apparatus which
owns the tourist infrastructure. Such ``bathing suit tourism''
will do nothing for Cubans nor will it in any way help promote
democracy.
Mr. Chairman, I would like now to ask that a recent paper I
wrote, entitled The Case Against Travel to Cuba, be entered
into the record.
Mr. Rush. Hearing no objection so ordered.
[The information was unavailable at the time of printing.]
Mr. Cason. Thank you very much.
Just as we oppose unprincipled tourist travel to Cuba, we
do not feel that a unilateral ending of what remains of the
embargo now will promote greater economic or political freedom
in Cuba or great benefit to American companies.
Lech Walesa and Havel told the Center recently that nowhere
in the world have authoritarian regimes changed their ways
because of trade or tourism. It has been international
solidarity, constant pressure and tangible and moral support
for democratic freedom fighters that have made the difference.
When the Castros are gone, the embargo will serve as
leverage in helping the military owners of hotels realize it is
in their interest to support a democratic opening, for if they
do, we can provide millions of tourist dollars and trade
opportunities. As the Washington Post has recently
editorialized, giving away what little leverage we have for
nothing now will gain us nothing and will harm those fighting
for change on the island. Please note that all the rest of the
world trades and allows travel to Cuba, but that has not made
any difference in the totalitarian nature of the regime.
As long as Cuba refuses to allow independent labor unions
the right to exist, we oppose U.S. businesses entering into
joint venture arrangements with the Cuban Government. Havana
exploits workers and takes 95 percent of what joint venture
partners pay the government for labor. Strikes are not
permitted and many independent labor organizers have been given
long prison sentences. To invest in Cuba today is to
participate in the exploitation of defenseless Cuban workers;
and I would not be surprised if, after freedom comes to Cuba,
there is a backlash against Canadian, Spanish and other
investors who have taken advantage of docile Cuban labor to
make a fast buck.
American farmers are privileged in their dealings with
Cuba. They get cash and take no credit risk. As we've heard, we
are the largest food provider to Cuba. Why would any
agribusiness exporter want to give credit to Cuba? Why would
American citizens support such a measure when Cuba is an
international deadbeat? It has defaulted many times and owes
foreign creditors over $25 billion, not to mention another $22
billion of unpaid Cold War era debt. Its economy is moribund,
and it is in arrears everywhere. Per capita, Cuba owes $4,000
each; its debt equals 86 percent of GDP. It is the tenth most
indebted country in the world, and its Moody's credit rating is
Caa1, speculative grade, very poor. Dunn & Bradstreet rate Cuba
as one of the riskiest economies in the world.
I would note that Cuban's average monthly wage is around
$20. The average Cuban lacks money for most necessities. U.S.
food goes largely to the tourist industry or is marked up 256
percent and sold to those who receive remittances in dollar
stores. There is no consumer demand for our products and no
prospects in sight for this to change until the regime begins
to pursue free market economic policies.
There are no Cuban entrepreneurs, no free market policies,
no economic opportunity and no purchasing power. There is just
the regime, which resists change in a panicky attempt to
maintain total power for the nomenclature.
Reuters reported last week that there is a severe cash
crunch in Cuba and foreign businessmen feared Cuba could be
near insolvency. The liquidity crisis has become critical.
Small foreign businesses are reportedly desperate and are not
being paid, state companies have been ordered to stop all
imports, prices and demand for all Cuban exports are down and
nothing suggests Cuba's economy will get any better soon.
Now, recent polls conducted in Cuba reveal that only 6
percent, there, of the citizens see the embargo as a problem.
What they most want is for the government to give them a better
life, a decent job, hope for the future. They said they want
change, democracy and economic freedom. They want elections,
they want to join the world, they want to be able to travel and
run their own businesses in Cuba. Whether the U.S. trades more
with Cuba is irrelevant to their lives.
The Center for a Free Cuba opposes any loosening of
restrictions on commerce with Cuba now for the following five
reasons:
Trade and tourism will not hasten a democratic transition
there;
Cuba is a terrible credit risk and cannot pay most of its
bills;
It exploits its workers shamelessly;
It's an insignificant market for U.S. Consumer and other
goods, and only the government, not the people, benefits from
trade with us;
There are no Cuban exporters or entrepreneurs.
Mr. Chairman, only if and when a new Cuban leadership
demonstrates through deeds, not words, as the President has
said, that it is moving toward democracy and market freedoms,
then we will be among the first to say, let's deal.
Thank you very much for allowing me to testify here today.
Mr. Rush. The Chair thanks the gentleman.
[The prepared statement of Mr. Cason follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Rush. The Chair recognizes himself for 5 minutes for
questioning.
The U.S. has a long history of trading with numerous
nations with poor records on human rights and shoddy business
and credit relationships. The list is very, very long. We
import considerable amounts of oil from Nigeria, from
Venezuela, despite their shoddy records on human rights and
political freedom.
Pakistan itself is the recipient of billions of dollars in
American aid despite Islamabad's long history of repressing
political freedom. Indeed, at one point, the United States
traded with Iraq, even during the height of Saddam Hussein's
brutality against insurgents in Shiite communities.
Yet, despite all our long and continued history of doing
business with nations with questionable or even poor records on
human rights--and I might add China is a glaring example of
this--this nation of Cuba has been singled out for a trade
embargo because of its human rights issues and problems.
Is there a double standard and why is there a double
standard? Ms. Rothkopf, would you please respond to my
question.
Ms. Rothkopf. Yes. Thank you very much.
Yes, you're absolutely right, the U.S. does have a history
of engaging with many countries around the world in which human
rights problems exist or political prisoners are unjustly
deprived of their freedoms. And we have chosen another path,
engagement. From China to Saudi Arabia, from North Korea to
Afghanistan, we choose to engage to help advocate for those who
have been abused by their systems. Engaging brings more of
these stories to light; engagement brings countries more fully
into the international community where established systems and
multilateral mechanisms can work on behalf of the victims.
I think we have to acknowledge that the embargo has failed
to help the political prisoners in Cuba, and it's actually hurt
the average Cuban by damaging the economy. But it hasn't
damaged it enough to change things in the mind of the
government, it's just damaged it to hurt the innocents in the
country.
So I do say, yes, we have had a double standard.
Mr. Rush. Mr. Thale, should we subject some of these other
countries to similar embargoes? Should we stop importing oil
from Venezuela and Nigeria or even Saudi Arabia? Should we
issue a trade embargo with China, and what would the effect of
that be to the economy of our Nation?
Mr. Thale. Thank you, Mr. Chairman. I think that's actually
a really good question. I think it's a good question because it
underscores the extent to which we ought to strive to have a
single standard in how we approach trade and human rights and
diplomacy issues around the world.
I think our view is that there are limited selective
occasions where sanctions do make sense. I think, by and large,
sanctions have been effective forms of coercion against
governments with whom we have disagreements. I think Cuba is
one of the clearest examples of that; and I think the message
is, we ought to engage with countries and, as part of that
engagement, have human rights on the explicit agenda. We ought
to do that with Cuba, we ought to do it with China, and we
ought to do it around the world.
Mr. Rush. Thank you.
Mr. Jones, can you give us a perspective on the possibility
of the President's recent pronouncement as it relates to the
telecommunications industry? How do you foresee that from two
vantage points--one, from the vantage point of the American
corporations, and two, from the vantage point of the human
people.
Mr. Jones. First, just a minor point: American cell phones
won't work in Cuba. So we can send all the cell phones we want,
but it's not going to do any good. I mean, it ignores the fact
that Cuba has a 12-year now joint venture with Italy which is
in the process of redoing the whole telecommunication system in
Cuba. They've launched a cell phone system; it doesn't cover
the entire country, it covers the major population centers.
There have been installations of public phones and an upgrade
of telephone communications hardware.
So U.S. companies are going into a market where there
already is a foreign investor. Sometimes we tend to think if
we're not there, nobody is there, but that's not the case in
Cuba.
Having said that, I have talked to Cuban officials who
recognize that, were 1 million Americans to come to Cuba in
free travel, they're going to have to make changes so that they
can service Americans and their cell phones, which will mean a
joint venture between some American company and Stet, the
Italian company, there to widen the cell phone coverage, to
engage in a business agreement and finances going back and
forth for the expansion of that coverage, and to install a
system where U.S. cell phones will work.
But, again, American companies will be going into a
situation that has been working for 12 years.
Mr. Rush. My time is up. I want to recognize the ranking
member for 5 minutes.
Mr. Radanovich. Thank you, Mr. Chairman.
Mr. Cason, welcome to you and everybody else here to the
committee. I do have a question regarding your testimony.
You mentioned in your testimony a Reuters report that Cuba
may be in a fiscal crisis and near insolvency, on top of the
fact that it already has $25 billion in unpaid debt and owes an
additional $22 billion in Cold War era unpaid debts.
Why are other countries still doing business, like this
Italian company, with Cuba if they're not being repaid, if
that's indeed the case?
Mr. Cason. Well, what Cuba has been doing--even when I was
there, we saw it all the time--they will take products from
foreign countries, they will wait as long as they can to pay
them and pay them a little bit to try to restructure the debt.
They did that with Mexico, for example. It's a constant
sort of kiting in the sense that they have so much debt and so
little productivity and so little of what they export that's
not already being sold, that they don't have the money they
need to provide for all these great markets that people have
been talking about.
The fact is, they are tremendously indebted. There is no
consumer demand because the average Cuban has no money, can
barely survive, so it all depends on the whims of the
government. And Fidel buys on political grounds, particularly
from the United States, because he's trying to influence votes
in Congress, or what he buys depends on a lot of calculations
he made where he's going to get the main bang for the buck.
Mr. Radanovich. Thank you, Mr. Cason.
If American business, including agribusiness, were not
required to accept cash-only terms of business and, instead,
started giving credit to Cuba, what do you see happening in
that--under that scenario?
Mr. Cason. Well, I think any company that would want to not
take cash before they even ship the goods when all these other
countries are having great difficulty getting money would be
nuts. I mean, they have the best deal going.
I think that what would happen is, we will start running up
huge debts with Cuba, and they may or may not pay us, depending
on--like they do with the rest of the world.
Mr. Radanovich. Can you tell me whether there would be more
than credit risks involved if cash was not required for
purchases of goods?
Mr. Cason. The real risk is, this is not a market that is
making decisions. This is Fidel and Raul who decides who gets
paid, who gets booted out.
When I was there, there was a move after many years to
dissuade Spanish small and medium businesses from remaining.
That's why, in those figures we heard earlier, there is a large
number of companies that have left. And it's because they have
decided that it's time for them to go, they've changed their
mind.
Mr. Radanovich. Thank you, Mr. Cason.
You have mentioned also in your testimony a point which I
would like you to elaborate on, if you would, please; and that
is that to invest in Cuba today is to participate in the
exploitation of defenseless Cuban workers and that there would
be a backlash against Canadian, Spanish and other investors,
who have taken advantage of the docile Cuban labor to make a
fast buck.
Could you expand on that, please?
Mr. Cason. I talked to a lot of people in Cuba when I was
there, and since then, who tell me that when the day comes and
when there's freedom in Cuba, the fact that the United States,
on principle, did not exploit Cuban labor the way I mentioned
it, will be seen as a favorable development for American
companies; but that the Spanish and others who have taken
advantage--that you can't strike, that you can't have labor
organizations--are going to not have the sympathy of the
general public afterwards. And how that plays out, we'll have
to see.
And I would remind you also that Lech Walesa has written a
letter to the President recently saying, please don't forget
the situation of labor rights in Cuba when you talk about
changing your policy toward Cuba. And I think that's very
important.
Mr. Radanovich. OK. Thank you, Mr. Cason.
Ms. Rothkopf, I couldn't help but notice in your testimony
on the Chamber's desire to do business in Cuba that you would
want to be able to do business.
A couple of minor things to get out of the way: That would
be that--there's a long list here--the Cuban Government will
have to provide certain guarantees and safeguards to U.S.
business in the areas of rule of law, the environmental
protection, infrastructure for travel requirements,
intellectual property protection and incentives for innovation
and labor rights, also important considerations regarding
financing.
That's quite a long list. I mean, do you care to comment on
that? That's a pretty high barrier to overcome.
Ms. Rothkopf. Sure.
I think the reason that that was included in my testimony
was to make the point that we think that opening trade with
Cuba is going to bring political and economic change to the
island, but just because we were to open and make that option
available, that doesn't mean that everybody is going to rush in
and automatically do business.
And I think that the important thing is to say that we
don't place that limit on other countries, on businesses.
Businesses will make a smart decision based on business
decisions and whether it makes sense for their company.
A company that doesn't have the safety requirements that
they need, they're going to stop operating. If they're not
getting the intellectual property protection that they need,
then they're not going to continue to do business with that
country. If infrastructure isn't there for the travel
requirements, they're not going to go in.
So basically what we're saying is, U.S. businesses are
successful because they take a smart look at the business
opportunities. And my point is that they are going to continue
to take a smart look at the opportunities and they're going to
make a smart decision based on what the Cuban Government
decides to do or not to do.
Mr. Radanovich. Thank you very much.
Thank you, Mr. Chairman.
Mr. Rush. The Chair thanks the gentleman.
The Chair now recognizes the gentlelady from Florida, Ms.
Castor, for 5 minutes.
Ms. Castor. Thank you, Mr. Chairman.
Thank you all very much for being here today.
Following President Obama's announcement that lifting of
the restriction on Cuban-American families and their ability to
travel to Cuba, it's been met at home with great enthusiasm.
And I wanted to give you one example of a newspaper headline
that followed within the week. It's from the Tampa Tribune, but
it had a similar message in many other papers: Thirst for Cuba
Trade and Travel.
And I think folks at home, they're very hopeful for the
economic opportunity that modernization of the relationship
will bring eventually--great potential in the ports in Florida,
ag products, all products, the cruise industry, et cetera. But
I think, because of the family ties and historic ties, that we
have folks who do not want economic opportunity to come at the
expense of progress and change on the island, especially on
human rights.
So now where are we? President Obama appeared at the Summit
of the Americas and made another overture, met rather
surprisingly with a response from the Cuban President that said
everything is on the table, followed up by brother Fidel Castro
who said, well, wait a minute.
If you all are advising the Obama administration and the
Congress now on how to proceed, what is the plan? It's unlikely
that it's going to come by just a lifting of the embargo. That
may not practically happen. So what is the plan? What are we
going to be seeking on human rights improvement, and where can
we make progress?
And if you all can each take about 45 seconds to answer.
Mr. Cason. Well, I think the embargo has always been a
tool. And both President Bush and, I think, reiterated by
President Obama have said that if we see evidence that the
Cuban Government is serious about engaging--it takes two to
tango, give us a sign--and begins moving in the direction of
where we want to see Cuba, which is greater freedom and
economic prosperity for the Cuban people, then everything is
open for discussion.
But Hillary Clinton said a couple of days ago in a hearing
that she has seen no response yet from Cuba, and Fidel keeps
undercutting his little brother by saying he didn't mean that,
he's still in control. And I think he's made it clear from day
one of his administration that he--he said, when this war is
over, I'll start a longer and bigger war of my own; the war I'm
going to fight against them, I realize that will be my true
destiny.
He, Fidel, will continue to do everything he can to
sabotage, I think, a closer engagement between the two
countries.
Ms. Rothkopf. I completely agree with you. We don't want
the economic opportunities to come at the expense of the
possibilities of democracy. But we actually believe that
broadening economic engagement with the island through
additional commercial and people-to-people contacts will
promote the transition to democracy and to full civil
liberties.
We very much hope to see an end to the embargo. Absent a
full end to the embargo, there are some steps that can be
taken, for example, removing the restrictions on financing,
allowing the ability to travel for the purpose of establishing
commercial relationships, allowing visits from Cuban officials
to confer with U.S. suppliers, inspect facilities and discuss
sanitary and phytosanitary issues. All of these would have a
positive effect.
Mr. Thale. Similarly, I don't expect that the process of
political opening in Cuba is going to be a tit-for-tat series
of movements by the United States and the Cuban Government back
and forth.
My view is, we will see political change there and
political openings to relaxation as the U.S. moves forward in
its relationship. I think we ought to move forward pursuing our
own interests which have to do with maintaining human rights as
a concern of ours and being very clear and public about that;
pursuing some common interests around migration, drug
cooperation and environmental concerns; and moving forward in
pursuit of our economic interests.
And I think in that process, we will see change beginning
in Cuba. But I don't think we will see a back-and-forth, tit-
for-tat kind of process.
Mr. Jones. Can I just add a couple of comments?
If there are preconditions, if we are going to say to Cuba,
we're not going to do this until you do that, that means two
things. That means, one, we have put into Cuba's hands how we
conduct our foreign policy, because we're letting them set the
conditions.
Secondly, it's a nonstarter. Cuba will not respond to any
preconditions and has said so repeatedly. President Obama did
something that no other President since John Kennedy has done,
which is to say publicly that the policy over 50 years has been
a failure. In response to that, Raul Castro said everything is
on the table, something that no Cuban President has said for 50
years. Raul Castro is President of Cuba; he has an older
brother who has no official office in managing the government.
I think it would be a mistake to take an editorial or a
column--and grandma--and interpret that as being the final word
on Cuban Government policy. I think we ought to take them up on
their word. I think there's a way to begin in terms of talking
about resurrecting the bilateral talks that the previous
administration stopped on immigration and drug interdiction, on
the environment, all to our interest; and we ought to begin the
process of talking in the same way that Ronald Reagan, in
calling the Soviet Union the ``Evil Empire,'' still kept on
talking.
Ms. Castor. Thank you.
Mr. Rush. The gentlelady's time is up.
The chairman now recognizes the gentleman from Georgia, Dr.
Gingrey, for 5 minutes.
Dr. Gingrey. Mr. Chairman, thank you. And I want to thank
all the witnesses of this second panel.
I happen to disagree with Ms. Rothkopf, Mr. Thale and Mr.
Jones, and do completely agree with Ambassador Cason. But
that's the way life is; you have your opinion and you feel very
strongly about it, and we have to go on.
I do want to commend Ambassador Cason for 38 years'
experience in the Foreign Service, mostly in Latin America, and
some time in Cuba as Chief of Mission from 2003 to 2006. I
think that gives him a pretty darn good insight into what's
going on, I think--his comments about labor and the problem in
regard to labor violations in Cuba.
I made the analogy in regard to why we didn't ratify the
free trade agreement, bilateral trade agreement with Colombia.
And that's the Democratic majority, Mr. Chairman; it keeps
blocking that just mainly over labor issues. So it seems a
little disingenuous that we would be wanting to open up trade
with Cuba when their labor record is deplorable, abhorrent.
I want to specifically ask Ambassador Cason, though: What
do you think the current creditworthiness of Cuba is and what
is on the horizon that will give us faith that Cuba can afford
to pay its debts?
If you could quickly, in about 30 seconds, answer that, I
would appreciate it.
Mr. Cason. I think the credit rating is terrible, it
couldn't get lower, and I don't think there is anything on the
horizon that is going to bring the big bucks that will allow us
to have Cuba the natural trading partner that some day it will
be when Cuba is free and has the right economic policies that
allow for growth and human ingenuity and entrepreneurs that are
repressed there.
But right now there's nothing. And so I think that it's
wishful thinking that the money will just appear, and we will
all get paid.
I would like to say that I used to run trade promotion for
the U.S. Government in southern Europe. I worked for 3 years as
the head of trade promotion, so I'm all in favor of businesses
making a buck.
I'm also interested in them getting paid and not giving up
human rights in the process just to make a buck on a market
that's extremely small, is shrinking and is not going to grow
other than by some miracle that I don't know where that's going
to come from.
Dr. Gingrey. Absolutely.
Well, let me just say this too. I think the other three
witnesses are talking about that--basically, what it sounds
like to me is, the end justifies the means and that sanctions
haven't worked. And I would suggest to them that sanctions do
work when they're implied across the board. And maybe the
people that are out of step are the other people of the Western
Hemisphere and Europe that were not willing, did not have the
intestinal fortitude to apply the sanctions.
Mr. Jones, you referenced John Fitzgerald Kennedy. You and
I are probably about the same age. We were probably in our
early 20s when Fidel Castro allowed Nikita Krushchev to put
those ballistic missiles on that island 90 miles from our shore
and aiming right at us. So I think the courage was, of course,
on the part of President Kennedy, who is probably spinning in
his grave today listening to some of this testimony.
I'm not specifically asking you a question, but if you want
to respond in just a second, I will let you. Let me go on to
Mr. Thale, though.
There is something in your testimony, Mr. Thale, that
really, really bothered me. You said a reference in a United
States State Department human rights report. In your written
testimony, it says, ``Although that report criticizes Cuba's
treatment of prisoners, the State Department human rights
report does not allege that the Cuban Government engages in
torture,'' and then in parentheses you have, ``an issue with
which we are grappling here in the United States.''
And in your verbal testimony--and if you don't recall it,
we can, Mr. Chairman, have the transcriber read it back to us--
you reference Guantanamo Bay.
Were you suggesting, Mr. Thale, that in the previous
administration, that President Bush or anybody a part of that
was endorsing torture, that we were torturing people? Is that
what you were suggesting?
Mr. Thale. Well, I was suggesting, Mr. Gingrey, that there
is a debate going on in the United States about the documents
that have just been released. There is the whole Abu Ghraib
debate, and this is an issue that is clearly under discussion
in the United States.
I think the general thrust of my testimony was that, if you
look at the human rights situation in Cuba, you see a set of
serious problems which have to do, as I said, with freedom of
association, freedom of the press, free expression, political
prisoners, but that there is a set of--in the universe of human
rights issues that are under debate in the world today, there
are some----
Dr. Gingrey. Well, reclaiming my time, I just want to say
in conclusion, Mr. Chairman, that I'm getting a little weary of
people that represent this government going around the country
talking about what we do and how we are guilty of human rights
violations and apologizing for the previous administration. I
think it is entirely inappropriate.
And I yield back.
Mr. Rush. Would the gentleman yield?
Dr. Gingrey. Of course I will yield to the chairman.
Mr. Rush. Dr. Gingrey, you're a good friend of mine, but I
just want to bring your attention to a matter in my home State
of Illinois where there is a fellow by the name of John Burge,
who is a former police commander. And he has recently been
indicted after about 30 years for torturing American citizens
and forcing them to confess to crimes. And some have served for
many years on death row.
Your friend, a Republican governor, George Ryan, who is
also convicted now, is a friend of mine. But one of the things
that he did that I really admired him for it, he freed all the
prisoners on death row, because a lot of them were there
because of torture.
So this does occur in all countries and so--and even in our
own country. And right now there is a current real issue in my
own State of Illinois, the city of Chicago. You're probably not
mindful of that, but I just for the record wanted to reflect
that.
Thank you so much. I yield back.
The time of the gentleman has expired, and now we will
recognize the gentleman who just joined us, Mr. Scalise, who
has joined us from Louisiana.
Mr. Scalise, you are recognized for 5 minutes for
questioning.
Mr. Scalise. Thank you, Mr. Chairman.
I would first ask--the comment that Mr. Jones made a few
minutes ago about who is calling the shots, I guess, in Cuba.
Do you really suggest that Fidel Castro is not in some way in
control of the Government of Cuba?
Mr. Jones. I am suggesting that he remains as head of the
Communist Party but he is not President of Cuba. There has been
a whole new wave of people brought in. Does that mean Raul
Castro does not consult his older brother? Absolutely, I'm sure
he does. But I think it would be a mistake to take his writings
in Granma as necessarily reflecting the absolute position of
the Cuban Government.
And I think, just as President Obama did not take the
statements of Mr. Gibbs and Mr. Restrepo, which were fairly
hardline, but he put forth a different view of what his view
was in terms of the relationship with Cuba, and I think we
should wait, the U.S. Government should wait for the official
response from Raul Castro or his ministers in terms of how they
want to proceed.
Mr. Scalise. You know, I would still doubt that Fidel is
removed from giving orders or having a direct say in how the
government is running. But I do think, as we look at and debate
this proposal to change U.S. policy, a policy that has been in
effect for decades, I think we need to look at a broad range of
issues, not just the economic issues but the political issues,
and also the impact it would have on Americans who live here
today who were literally run out of Cuba, who still have very
vivid memories of their property being taken, their families
being threatened, in some cases detained, and in all of the
things that they escaped and what this would mean to them, the
people that are contributing to our economy, who are active
citizens in their communities, who are business owners, and who
have taken offense and many have expressed very publicly the
offense they would have to assisting this Castro government.
Whether it is Fidel or Raul, it is still the Castro government
that is running and keeping the reins over the citizens there.
I don't know if any of you all have consulted the different
Cuban-American communities throughout our country to----
Mr. Jones. The only thing we know, the only thing those
people know----
Mr. Scalise. Which people? Which people?
Mr. Jones. The people who are concerned about their
property being confiscated and families and the problems of the
early '60s.
The only thing we know, after 50 years almost, is that none
of those problems have been solved with the current policy.
The confiscation of property, for example: First, not a
single trademark has been confiscated. There are 5,000
registered trademarks of U.S. brands in Cuba that are
maintained today. And I have taken companies down to the Cuban
Chamber of Commerce and other places----
Mr. Scalise. I apologize to cut you off. My time is running
out. Ambassador Cason has had his hand up.
Did you have something you----
Mr. Cason. Yes, I think the embargo was put in place, of
course, originally because of confiscation of U.S. properties.
Mr. Jones mentioned nickel. That was one of the properties that
was seized from the American Government at the time.
I would like to make the point that nobody's policies have
been able to budge Fidel Castro from the course that he has
been on. For 50 years, the rest of the world, except us, has
pursued a policy of engagement in trade and tourism. My
question is, where is the beef? They've been doing this for 50
years; we are the only ones that haven't. And people say, now,
we should do something different, and Castro will change. We
don't have magic pixie dust to make that happen. It's because
this is the nature of this guy.
It's too bad that nobody's policy has worked. But I think
when they are gone, what is left of the embargo will be a
leverage on the military, because it is a military
dictatorship. Those guys will see their vested interest in
moving the country in the right direction so that we can
liberate the hordes of American tourists that we would like to
see go there.
Mr. Scalise. And for Mr. Thale and Ms. Rothkopf, I know
China, Venezuela, other countries are doing business in Cuba
today. We've heard testimony about the average per capita
income. If you can address that, as well, and what types of
consumers are in the country that we could even be doing
business with if we went down that road.
What types of products do China, Venezuela, other countries
provide that aren't available, or what are they not providing
where there even would be a role for America to play? And then,
what type of consumer base is out there?
Ms. Rothkopf. I think the first thing that we have to think
about, in terms of what the U.S. can provide that isn't being
provided by other countries, is to think about our proximity.
And in my testimony I identified a number of areas, including
agriculture, for example. Cuba has the potential to be the top
foreign market for U.S. rice, for example. We've discussed
tourism, machinery, oil. I think we talked about biotechnology.
There is a whole host of products that we can provide,
including agricultural products and consumer products, simply
because we are closer, which will give us a competitive edge
over----
Mr. Scalise. What is the average per capita income?
Ms. Rothkopf. Was that in your testimony? It was not in
mine.
Mr. Thale. Mr. Scalise, the average--I believe the average
per capita income is about one-fifth of that of the United
States. So the per capital income of the United States is about
$40,000, and that in Cuba is about $8,000, $8,500.
So there is no question, consumer demand is not what's
going to drive trade between the United States and Cuba. What's
going to drive demand is infrastructure, wholesale commodities
and so on. And the U.S. has--it's less about filling holes. I
think there are some holes, but it's less about filling holes
than it is about the comparative advantage we have because of
the reduced shipping costs. And I think rice is the single most
dramatic example that----
Mr. Rush. The gentleman's time has expired.
Ms. Rothkopf. Right. And just to add to that, the
additional tourist arrivals, just for example, from the
increased tourist demand for food will boost domestic demand
for U.S. products, as well.
Mr. Scalise. I yield back.
Mr. Rush. I thank the gentleman.
If the witnesses will indulge us, we will go into a second
round of questioning. And we will ask the members of the
committee to restrict their questions to 2 minutes.
And the Chair recognizes himself.
Ambassador Cason, I see that you served in Venezuela and
Bolivia during your career, outstanding public service. And
have these two nations engaged in any form of nationalization
of companies and other business entities?
Mr. Cason. Yes, Bolivia most recently.
Mr. Rush. Would you suggest that we create a trade embargo
around these two nations?
Mr. Cason. No. I think that, you know, if you were starting
today and said, would the trade embargo--if we were to launch
it today, would it change Cuba's behavior, I think the answer
would be no. And I think we've seen----
Mr. Rush. Why would you suggest that we continue the trade
embargo against Cuba and----
Mr. Cason. Well, first of all----
Mr. Rush. Let me ask the question, please.
And, also, why wouldn't we also have a similar practice as
it relates to other countries that have significant human
rights violations, extraordinary human rights violations in
some instances?
Mr. Cason. As I said originally, the embargo was originally
designed as a reaction to confiscation of American properties
in Cuba, and it has evolved over the years. I think if you were
to say, with what we know about the embargo today, if you
started it fresh, would it induce somebody like Fidel Castro to
bring democracy, like every other policy in the world of every
variation that anybody else has tried, it hasn't.
So, to think that ending the embargo now would somehow
induce Fidel Castro at this late stage in his life to become a
democrat or do any of the things that we say are our endgame
for Cuba, it is just not going to happen.
Mr. Rush. Thank you. The Chair's time is up.
The Chair now recognizes the ranking member, Mr.
Radanovich, for 2 minutes.
Mr. Radanovich. Thank you, Mr. Chairman.
Mr. Jones, I do have a question for you. You testified that
there are about 500 international companies represented in
Cuba, with substantial investment there. But according to the
State Department, the business environment is so unfriendly
that the number of joint ventures dropped from 540 in 1982 to
287 in 2005.
Because of the government's recentralization efforts, it is
estimated that one joint venture and two small cooperative
production ventures have closed each week since the year 2000.
And foreign direct investment dropped from $448 million in the
year 2000 to $39 million in 2001 and to zero in the year 2002.
Are these 500 international companies independently owned,
or are they joint ventures? And if they are joint ventures, why
the difference between the State Department figures and your
testimony? Can you help bridge that?
Mr. Jones. Yes, I will try.
First, the joint ventures have actually fallen even
further, down to about 237 now. And there is a reason for that.
Cuba, when it started into the joint venture business, which
was in '94, '95, they were in a learning process. There hadn't
been a single joint venture in Cuba between 1959 and 1994. They
were learning how to do this. And things change over the times,
and they learned what they wanted, what the country needed,
which joint ventures contributed to national economy, which
they wanted to do and didn't do. And over the course of time,
they began closing and not renewing and not entertaining small-
to medium-sized joint ventures, with a concentration on larger
joint ventures of a much more strategic and nationally
important basis. For that reason, many were closed, many ended,
and the people left.
Those 500 companies--I haven't got the breakdown as to
which are representatives, which are sales agents, which are
real estate partners. All I know is that there are offices
there of non-U.S. Companies for a variety of business reasons.
Mr. Radanovich. So you're saying that Castro now permits
wholly owned private international businesses to operate
without taking a cut?
Mr. Jones. Joint ventures are generally on a 50-50 basis.
There have been some 100 percent foreign-owned joint ventures,
particularly in the power generation area.
Most of them, as I said, are 50-50, with a joint venture
partner. And the Cuban enterprise with which it has a contract
forms a board, develops a business plan, sets up a business,
joint venture. The foreign partner can take its profits after
taxes out of the country. And many, particularly in the oil,
mining, and some of the areas that I mentioned earlier, are
functioning very well.
Mr. Radanovich. Thank you, Mr. Chairman.
Mr. Rush. The gentleman's time has expired.
The Chair now recognizes the gentlelady from Florida, Ms.
Castor, for 2 minutes.
Ms. Castor. Thank you, Mr. Chairman.
Mr. Thale, in your testimony, you state that some of the
countries that currently trade with Cuba use their engagement
to promote human rights. Provide an example for us, or a few
examples, of what other countries that are currently trading
with Cuba are doing to promote human rights in Cuba?
Mr. Thale. Thank you for the question.
The two most dramatic, I think, and most high-visibility
examples are Brazil and Spain.
And in the case of Brazil, the President of Brazil visited
Cuba last January. He pledged a billion dollars in credit for
trade and investment. And it is widely believed, including by
U.S. Government officials, that he began a dialogue with the
Cuban political leadership about the release of political
prisoners and about long-term political relaxation in Cuba
itself. And I think it is generally believed that President
Lula has continued to raise those issues in all of his and his
government's subsequent interactions with Cuba. So, again, I
don't think Lula is expecting all 200 political prisoners to be
released tomorrow. But I think that is an issue on the table
for the Brazilians.
It think Spain, as it's led the European Union's policy
shift and re-engagement with Cuba, has had that issue on the
table, as well. And I think it's fairly clear that the release
of political prisoners for Zapatero and the Spanish Government
is an important question. Again, I don't think they are going
to have, sort of, ``We'll add a new trade deal; you'll release
four political prisoners'' kind of thing, but I do think you've
seen movement on this.
And I think the historic example here, Congresswoman, is
that if you look at the period in the year around the Pope's
visit to Cuba, when Vatican diplomacy focused on the political
prisoner question, there was never any explicit deal made at
all, but in that period, the number of political prisoners in
prison in Cuba was reduced by about a third.
Similarly, if you look at the period around when President
Carter reopened the U.S. Interest Section in Havana, the number
of Cuban political prisoners dropped significantly.
So I think the evidence is that you do see movement on
these kinds of issues when there is consistent engagement, when
there is real interaction, and when you're not looking for,
sort of, a precondition or tit-for-tat kind of concessions.
Ms. Castor. Thank you.
Mr. Rush. Thank you.
Ambassador Cason and the other witnesses, I really
appreciate your testimony. I must say that I spent 4 hours in
meetings with President Raul Castro, an hour and a half at the
home of Fidel Castro, and had some extensive conversations with
him. And I must agree with your other witnesses, Ms. Rothkopf,
Mr. Thale and Mr. Jones--I certainly disagree with you--about
the mind of the Cuban people and the mind of Fidel Castro and
the mind of Raul Castro as it relates to normalization. I want
to just say that, in conclusion, it was very informative for
me, a first-time visitor to Cuba.
With that, the hearing is now concluded. I want to thank
the witnesses for your presence. Thank you for appearing before
us. And this hearing is now adjourned.
[Whereupon, at 4:26 p.m., the subcommittee was adjourned.]
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