[House Hearing, 114 Congress] [From the U.S. Government Publishing Office] TRADE WITH CUBA: GROWTH AND OPPORTUNITIES ======================================================================= HEARING BEFORE THE SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE OF THE COMMITTEE ON FOREIGN AFFAIRS HOUSE OF REPRESENTATIVES ONE HUNDRED FOURTEENTH CONGRESS SECOND SESSION __________ MARCH 15, 2016 __________ Serial No. 114-150 __________ Printed for the use of the Committee on Foreign Affairs [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Available via the World Wide Web: http://www.foreignaffairs.house.gov/ or http://www.gpo.gov/fdsys/ ______ U.S. GOVERNMENT PUBLISHING OFFICE 99-468PDF WASHINGTON : 2016 ----------------------------------------------------------------------- For sale by the Superintendent of Documents, U.S. Government Publishing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC 20402-0001 COMMITTEE ON FOREIGN AFFAIRS EDWARD R. ROYCE, California, Chairman CHRISTOPHER H. SMITH, New Jersey ELIOT L. ENGEL, New York ILEANA ROS-LEHTINEN, Florida BRAD SHERMAN, California DANA ROHRABACHER, California GREGORY W. MEEKS, New York STEVE CHABOT, Ohio ALBIO SIRES, New Jersey JOE WILSON, South Carolina GERALD E. CONNOLLY, Virginia MICHAEL T. McCAUL, Texas THEODORE E. DEUTCH, Florida TED POE, Texas BRIAN HIGGINS, New York MATT SALMON, Arizona KAREN BASS, California DARRELL E. ISSA, California WILLIAM KEATING, Massachusetts TOM MARINO, Pennsylvania DAVID CICILLINE, Rhode Island JEFF DUNCAN, South Carolina ALAN GRAYSON, Florida MO BROOKS, Alabama AMI BERA, California PAUL COOK, California ALAN S. LOWENTHAL, California RANDY K. WEBER SR., Texas GRACE MENG, New York SCOTT PERRY, Pennsylvania LOIS FRANKEL, Florida RON DeSANTIS, Florida TULSI GABBARD, Hawaii MARK MEADOWS, North Carolina JOAQUIN CASTRO, Texas TED S. YOHO, Florida ROBIN L. KELLY, Illinois CURT CLAWSON, Florida BRENDAN F. BOYLE, Pennsylvania SCOTT DesJARLAIS, Tennessee REID J. RIBBLE, Wisconsin DAVID A. TROTT, Michigan LEE M. ZELDIN, New York DANIEL DONOVAN, New York Amy Porter, Chief of Staff Thomas Sheehy, Staff Director Jason Steinbaum, Democratic Staff Director ------ Subcommittee on Terrorism, Nonproliferation, and Trade TED POE, Texas, Chairman JOE WILSON, South Carolina WILLIAM KEATING, Massachusetts DARRELL E. ISSA, California BRAD SHERMAN, California PAUL COOK, California BRIAN HIGGINS, New York SCOTT PERRY, Pennsylvania JOAQUIN CASTRO, Texas REID J. RIBBLE, Wisconsin ROBIN L. KELLY, Illinois LEE M. ZELDIN, New York C O N T E N T S ---------- Page WITNESSES C. Parr Rosson, Ph.D., head of department, Agricultural Economics, Texas A&M University................................ 5 Mr. Ray Stoesser, president, Texas Rice Council.................. 17 Mr. Jason Marczak, director, Latin American Growth Initiative, Atlantic Council............................................... 36 Mr. Mauricio Claver-Carone, executive director, Cuba Democracy Advocates...................................................... 43 Richard E. Feinberg, Ph.D., professor, School of Global Policy and Strategy, University of California, San Diego.............. 53 LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING C. Parr Rosson, Ph.D.: Prepared statement........................ 7 Mr. Ray Stoesser: Prepared statement............................. 19 Mr. Jason Marczak: Prepared statement............................ 38 Mr. Mauricio Claver-Carone: Prepared statement................... 46 Richard E. Feinberg, Ph.D.: Prepared statement................... 56 APPENDIX Hearing notice................................................... 78 Hearing minutes.................................................. 79 Written responses from Mr. Mauricio Claver-Carone to questions submitted for the record by the Honorable Edward R. Royce, a Representative in Congress from the State of California, and chairman, Committee on Foreign Affairs......................... 80 TRADE WITH CUBA: GROWTH AND OPPORTUNITIES ---------- TUESDAY, MARCH 15, 2016 House of Representatives, Subcommittee on Terrorism, Nonproliferation, and Trade, Committee on Foreign Affairs, Washington, DC. The subcommittee met, pursuant to notice, at 1:30 p.m., in room 1334 Longworth House Office Building, Hon. Ted Poe (chairman of the subcommittee) presiding. Mr. Poe. The subcommittee will come to order. Without objection, all members may have 5 days to submit statements, questions, extraneous materials for the record subject to the length limitation in the rules. At this time I will make my opening statement. Then I'll recognize members if they wish to make them as well. In 1962, the United States imposed a trade embargo on Cuba. Fifty-four years later, Cuba is still communist and the Castros are still in charge. But it has succeeded--this policy--in hurting U.S. agricultural business. In December 2014, the administration announced that the U.S. would take steps to normalize the U.S.- Cuba relationship. Cuba was removed from the state sponsor of terrorists list. A U.S. Embassy was opened in Havana. The Department of Treasury and Commerce rolled out three rounds of trade reforms. In fact, a new round of travel and trade reforms was announced today. But it is Congress alone than can lift the embargo on Cuba. This hearing gives us a timely opportunity to examine the changes made so far to the U.S. trade policy toward Cuba and question how the relationship will move forward. The United States used to be one of Cuba's most important agricultural trading partners. Before the embargo, Cuba bought more than half of the U.S. annual long grain rice. Rice exports to Cuba counted for over one-third of the total U.S. rice exports. However, this market has disappeared. The U.S. has not exported rice since 2009 because the United States has changed its cash on demand policy. As opposed to paying at the dock, now they have to pay cash before they leave. Rice farmers were not the only ones hit by the drop of exports to Cuba. Wheat farmers haven't exported to Cuba since 2011. In 2014, the U.S. share of Cuban market was a measly 16 percent, down from a high of 42 percent in 2009. As I mentioned, one of these reasons was the U.S. Treasury Department's interpretation of the rule that made it more difficult to be a reliable trading partner with Cuba. The distance between Cuba and the United States is less than 100 miles, as we all know. The distance between the Gulf Coast and Cuba is about 900 miles. The distance between Vietnam--that also sells rice, also a communist country--to Cuba is 9,000 miles. Exporting to Cuba requires no infrastructure because American exporters have a strong foothold in the Caribbean and Latin American markets but not Cuba. The Port of Houston would be a natural gateway for trade with Cuba because it already exports a lot of products that Cuba needs. Although some restrictions on trade with Cuba have been eased, there's still a small number of hurdles that put U.S. farmers at a competitive disadvantage. In Texas, my state, I've seen firsthand how the decline in exports to Cuba have affected American farmers. I'm thankful we have one of those farmers, Ray Stoesser, with us today. He's not a political philosopher. He works the soil and grows rice. Ray, thanks for coming. U.S. exporters should have an advantage over their foreign competitors because of the lower shipping costs and transit times, and the product is better. Unlike Cuba's current rice suppliers such as Brazil and the communist country of Vietnam, U.S. farmers can provide year- round availability of high-quality rice that Cuban consumers prefer. However, the United States is not the only option in town for the Cubans. As the U.S. slowly struggles to sort out what our trade policy is, competitors such as the European Union, China, and other Latin American states are stepping up to get in on the action. Our competitors don't wait for the United States to make up its mind what it's going to do. It says that the Castro brothers are discriminating against American businesses as a form of leverage. People disagree on that but it could be possible. We know that the Cuban Government forces American farmers to sell their goods to a state-owned company called ALIMPORT. Although trade relations have opened up, the Cuban Government has been overly hesitant to actually sign business deals with the United States because our own Government is doing things that are holding U.S. companies back. For example, U.S. farmers cannot offer terms of credit to Cuban buyers. That means Cuba has to make all the payments up front in cash when purchasing agricultural commodities. My opinion is the United States Government should revoke this policy and allow the shipper--the agricultural shipper assume the risk in dealing with credit issues with Cuba and not have the U.S. Government prevent the financial transactions from taking place. In theory, our farmers have the freedom to export to Cuba but in practice the U.S. Government prevents it. It's time maybe to reassume and change the rules to allow our agricultural businesses to assume financial risk. The U.S. has the potential to be a strong contender in the Cuban market. According to some studies, lifting the embargo could potentially bring as much as $4.3 billion to the United States through exports and may create as many as 6,000 jobs. I look forward to this hearing and seeing from our witnesses how we can establish a better trade relationship with Cuba that benefits primarily American businesses but also Cuba. I will now yield to the ranking member from Massachusetts for his opening statement. Mr. Keating. Thank you, Chairman Poe, for conducting this afternoon's hearing. I'd like to thank our witnesses. The configuration of this room is such that you seem very far away. In fact, Cuba is probably closer--but bear with us. We're pleased to have you here and you truly bring some expertise to us. You're specialists representing the front lines of U.S. exports and trade, academia, advocacy organizations, and I welcome the conversation that we're going to have as the hearing progresses. The subcommittee previously held a hearing in September 2015 which examined agricultural trade with Cuba with a panel of administration officials. Since then, the Commerce and State Departments, along with other agencies, have continued toward normalizing relationships with their Cuban counterparts. In January, the administration announced authorized trade with state-owned companies, which run the majority of the country's commerce, and later this month the President will schedule and make a landmark visit to Cuba, which will be the first visit to Cuba by a sitting U.S. President since 1928. While this trip will cover many topics, the focus on business opportunities and trade will be front and center. It will be important to hear from our witnesses about their views on the pros and cons of trade reforms that could help U.S. businesses. I understand the desire for a different relationship with Cuba surrounding new commercial opportunities in the Cuban market. Currently, Cuba imports about 80 percent of its food, next to the European Union, China and Brazil, the country's two highest suppliers. There's no denying that there are substantial opportunities for U.S. businesses, particularly in the agricultural industry. However, I remain cautious with regard to how well-intended policies may impact those hurt most by the regime's policy--the Cuban people. Opponents claim we have demanded too little from Cuba, particularly in the area of human rights. It should be emphasized that any economic gains made between the United States and Cuba should also accompany gains in civil and the civil society, free media and the ability for political discourse by the Cuban people. The jury is still out on Cuban Government's efforts to grant additional freedoms. After all, conditions on the island have not changed appreciably. The Cuban Government continues to jail political dissidents without just cause, engages in other human rights abuses and fails to respect the rule of law. As we continue to reassess our policy toward Cuba, it's fundamentally important that we strive to strike the right balance between economic prosperity and personal freedoms for both countries. Thank you, Mr. Chairman. I yield back. Mr. Poe. Chair will recognize members for their opening statements. Without objection, the Chair will recognize Mr. Crawford from Arkansas for a 1-minute opening statement. Mr. Crawford. Thank you, Mr. Chairman, and I'd like to thank you and the ranking member for holding this important hearing to discuss trade opportunities. We're currently missing out with Cuba. I also want to thank you, Chairman, for inviting me to be here. I appreciate your indulgence and I appreciate your partnership in efforts to open up the Cuba market for ag exports. I'd like to encourage my colleagues who favor a more incremental approach to Cuba trade to take a look at legislation that I've introduced--H.R. 3687, the Cuba Ag Exports Act. This bill simply allows our producers to sell food into the Cuban market just like we're able to do with virtually every other nation in the world. Yield back. Mr. Poe. Chair recognizes the gentlelady from California, Ms. Bass, for an opening statement. Ms. Bass. Thank you, Mr. Chair. First of all, I really appreciate your leadership on this issue and in particular your comments that you made regarding barriers between our two countries. The U.S. and Cuba have made historic diplomatic progress following President Obama's announcement to begin normalizing relations with Cuba in December 2014. I note the impressive bilateral steps we have taken regarding law enforcement, counter narcotics, mail claims, travel, commerce, intellectual properties and global health. While it is necessary to commend the significant steps we have taken, it is also important to note that there is still room for growth in areas of agricultural trade but also in one area I'm particularly interested in and that is health care and what we both have to learn from each other's countries. And I will mention specifically during the Q and A but there are a couple of areas--one, lung cancer and a vaccine around lung cancer, and another one related to diabetes, and I yield back the balance of my time. Mr. Poe. I thank the gentlelady. Without objection, all the witnesses' prepared statements will be made part of the record. I ask that each witness keep your presentation to no more than 5 minutes. As a side note, we will have votes again in approximately 2 hours. We want to finish this hearing before that. I will introduce each witness and then give them time for their opening statements. Dr. Parr Rosson is a professor at the department head of the Agricultural Economics Department at Texas A&M University. His research interests focus on international trade, international marketing, economic impacts of trade, trade agreements and trade policy. Mr. Ray Stoesser is the president of the Texas Rice Council and a board member of the U.S. Rice Producers Association. He's a third-generation rice farmer who lives on the family farm in Dayton, Texas. Mr. Jason Marczak is the director of the Latin American Economic Growth Initiative at the Atlantic Council's Latin American Center. He is at the forefront of the center's analysis on issues such as trade and commerce, U.S.-Cuba relations, China-Latin America energy. Mr. Mauricio Claver-Carone is the executive director of the Cuba Democracy Advocates in Washington, DC. His nonpartisan organization is dedicated to the promotion of human rights, democracy and the rule of law in Cuba. Dr. Richard Feinberg is the professor of international political economy at the University of California, San Diego's graduate school of public policy and strategy. Previously, he served as senior director of the National Security Council's Office of Inter-American Affairs. Dr. Rosson, we'll start with you. You have 5 minutes. The Aggies go first. STATEMENT OF C. PARR ROSSON, PH.D., HEAD OF DEPARTMENT, AGRICULTURAL ECONOMICS, TEXAS A&M UNIVERSITY Mr. Rosson. Good afternoon, Chairman Poe, Ranking Member Keating and esteemed subcommittee members. I want to thank all of you for the opportunity to testify here today on agricultural trade with Cuba. I have conducted the economic analysis related to this topic for about 15 years and continue to monitor the conditions there in order to facilitate U.S. agricultural exports and business interests trying to operate in the country. What we found is that one U.S. job is created for every $76,000 in U.S. exports and furthermore an additional $170,000 in business activity is also created. Cuba's market for imported foods approaches roughly $2 billion annually. U.S. agricultural exports have averaged about $365 million annually since 2002. But our exports have been highly erratic. They've ranged from a low of about $141 million in 2002 to a high of just over $700 million in 2008. More recently, our exports have declined sharply to $149 million in 2015. This product mix of U.S. exports has also changed. From 2002 through 2012, we exported a wide variety of food and agricultural products--corn, soybeans, rice, wheat, animal feeds, cotton, frozen chicken and turkey, pork, beef, dairy products, dry beans, snack foods, canned fruits and vegetables, grapes, pears, apples, condiments, drinks and treated poles. So our product mix was very diverse and highly varied during that period. More recently, however, U.S. exports have been concentrated in three primary product areas and that relates to frozen chicken, the soy complex--primarily beans and meal--and finally, corn. These products together accounted for about 99 percent of our exports in 2015. This change in product mix and the subsequent decline in U.S. exports can be attributed to several factors. First of all, Cuba has found other suppliers for many of their product needs, particularly rice, wheat, corn and some higher value foods. We see competition from Brazil, Canada, Argentina, Mexico, Spain and Vietnam, and this competition gains market share at the expense of U.S. exports. Very often, the competition provides credit and very lenient shipping terms, thereby displacing our products. Second, our cash in advance payment policy has made our products more expensive to Cuba, leading to delays in shipping and very often costly demurrage charges which are borne by the Cuban Government through ALIMPORT, the food import agency. Third, a stronger U.S. dollar and subsequently higher priced U.S. products has also had a negative impact on our exports, making them more expensive to Cubans and higher priced compared to the competition. Fourth, during the global recession, Cuba's earnings from tourism declined along with earnings from other important exports such as nickel. Remittances from Cuban-Americans living in the United States and other countries declined as well, leaving Cuban consumers with less disposable income. Finally, Cuba is a centrally-planned economy with a portion of food purchases made by ALIMPORT, the central-planned food import agency. Competitors do not have to go through ALIMPORT to export their products and therefore they are lower cost and more competitive. Now, despite these constraints, we believe that Cuba has potential for growth to become a larger market for U.S. exporters. Based on our recent research, we believe that U.S. exports to Cuba have the potential to reach somewhere between $1 billion and $1.2 billion annually and that is because Cuba's demographics are favorable for market growth. With a population of about 11 million people with a literacy rate of about 99 percent, Cuba has a highly trainable work force of more than 5 million people. In addition, those aged between 25 and 54 represent 47 percent of the population and therefore in their peak consumption years. These characteristics are comparable to those of the Dominican Republic, which in 2015 was about a $1.1 billion market for U.S. food and agricultural products. For this potential to be realized, however, several things are important. The first is impound growth, the second is improvement of infrastructure and logistics and the third is continued growth in tourism and the continued flow of remittances. Consistent, transparent and facilitative trade policies will also help us stimulate exports as well. Thank you again for this opportunity to testify. I look forward to your questions. [The prepared statement of Mr. Rosson follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] ---------- Mr. Poe. Mr. Stoesser, you may make your opening statement. Fix your microphone, if you would. Push that button. Thank you. STATEMENT OF MR. RAY STOESSER, PRESIDENT, TEXAS RICE COUNCIL Mr. Stoesser. Mr. Chairman and members of the committee, I am Ray Stoesser, a third-generation rice farmer from Dayton, Texas. I am president of the Texas Rice Council and serve on the board of the U.S. Rice Producers Association. As a first-time witness before the Congress I am honored and humbled to appear here today. I will summarize my prepared statement, which has been submitted for the record. The Stoesser farm has been in production for over 100 years. I am blessed that my sons, Neal and Grant, have joined me in farming. Common sense access to the Cuban market will ensure that Neal, Grant and my grandchildren will be able to continue operating our farm into its fifth generation. After more than 50 years, it is clear that our Cuban policy defies common sense. It punishes U.S. farmers and costs U.S. jobs. Before the embargo, Cuba was our largest rice export market. In 1959, Cuba bought 51 percent of all U.S. rice exports. The 11 million people in Cuba are among the greatest consumers of rice in the Western Hemisphere. Cubans consume 125 pounds of rice per person per year. This compares to only 27 pounds per person in the United States. In 2000, Congress opened agriculture sales and Cuba became our fastest growing rice market. There's a chart that says that. In 2004, the Cubans bought $64 million worth of our rice, providing 1,400 U.S. jobs. In 2005, the Office of Foreign Assets Control restricted payment terms for ag sales to Cuba. As this chart indicates, our rice sales to Cuba plummeted to zero by 2009 and stayed there. By 2005, the Cubans had purchased a total of more than $1 billion in U.S. ag goods. Cuban buyers paid promptly and most often paid in cash, contrary to what opponents of the trade with Cuba had foretold. The only disruption of trade was brought about by the U.S. Government, not by Cuban buyers. Cuba can return to a top market of U.S. rice but no buyer can rely on food supplies if the exporting country's government may once again restrict exports without warning. U.S. agriculture has become a secondary supplier for rice and other farm goods to Cuba. Cuba's need for imported rice is enough to buy more than the entire Texas crop each year. This could generate almost $27,000 annually for every rice farmer in the United States. As Dr. Rosson explained, rice is just one of the many ag goods that Cuba must import. Based on a review by the International Trade Commission, we estimate that the restrictions on U.S. trade with Cuba cost U.S. farmers, processors and exporters at least $800 million every year. Sadly, our share of the Cuban market continues to fall. This January, OFAC reversed the 2005 rule on the term cash in advance for commodity sales to Cuba. But our reputation as a reliable supplier cannot be restored until the Cubans are confident that the U.S. Government will not void contracts or restrict trade. OFAC has relaxed sanctions to allow export financing for goods that support Cuba's agricultural production, processing and distribution. So financing can now be provided to enable Cuba to compete with U.S. farmers but not to sell U.S. food to Cuba. U.S. law also prohibits the use of credit, credit guarantees and market development and promotion funds to increase sales of our food to Cuba. We continue to lose market share to competitor countries that are free to use these other tools. Rice farmers urge Congress to return common sense to our Cuba policy. We strongly support legislation such as H.R. 3238 and H.R. 3687 to correct these discriminatory effects on U.S. farmers. We urge the repeal of the embargo. Thank you very much. [The prepared statement of Mr. Stoesser follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] ---------- Mr. Poe. Thank you, Mr. Stoesser. The Chair will recognize Mr. Marczak for his 5-minute opening statement. STATEMENT OF MR. JASON MARCZAK, DIRECTOR, LATIN AMERICAN GROWTH INITIATIVE, ATLANTIC COUNCIL Mr. Marczak. Chairman Poe, Ranking Member Keating and members, thank you very much for the invitation to testify this afternoon on trade with Cuba. It's a great honor to be here. I'll be summarizing my written testimony and will focus on the geopolitical implications of opening trade as well as how to build our commercial relations. First, to put this in context, it was only 15 months ago the United States reversed a 54-year policy that sought regime change and isolation but yet had clearly failed. It is also important to put this moment in context in the hemisphere. The pendulum is swinging away from nationalist regimes, whose claim to power partly rested on an anti-U.S. imperialist message. The Cuba rapprochement is accelerating this trend. Expanding U.S.-Cuba trade opportunities is a strategic long-term opportunity for the U.S. A stronger commercial relationship will open up opportunities for American businesses, empower the Cuban people and move forward broader U.S. foreign policy priorities. Political liberties for the Cuban people should continue to be a top priority for U.S. policy. But it's time to help the people of Cuba secure greater economic rights as well, otherwise the Cuban people will continue to face economic challenges that could drive instability and mass migration just off our shores. It was in a press conference in 1955 when President Eisenhower observed that ``trade is the greatest weapon in the hands of the diplomats.'' Trade can not only raise living standards but is an instrument of peace and a means to spread Western values. Further, opening trade with Cuba carries ramifications for U.S. relations and strategic priorities in the Western Hemisphere. Venezuela plays an important role in keeping the Cuban economy afloat, giving the autocratic regime in Caracas sway in Havana. Greater U.S.-Cuba commercial relations will chip away at Venezuelan influence on the island, making it clear to those across the region that not even Cuba recognizes that the future is with Venezuela and its anti-U.S. tirades. Instead, a deeper trade relationship with Cuba will only further strengthen our allies such as Colombia. A stronger trade relationship and the economic dividends it could pay for both sides may also reduce Cuba's need to lean toward Russia in times of economic uncertainty. Geopolitics aside, the U.S.-Cuba relationship is changing and the world is taking notice. But without congressional action, just as the U.S. is opening to Cuba, American companies are losing ground to international competitors from the U.K. to Brazil and Spain to Mexico. And just on Friday, Cuba and the European Union signed an agreement to normalize relations, allowing for closer economic ties. Losing these opportunities to our European and Latin American allies is frustrating. Losing them to competitors such as China and Russia could be reason for concern. And although the Cuban GDP is only around $77 billion, it is a market with important potential for U.S. companies in sectors such as agriculture, telecommunications and technology and travel and tourism. Expansion in trade will also benefit the Cuban people. Greater foreign investment, better access to capital and a more robust private sector will lead to fewer Cubans dependent on the government for jobs, income and resources, freeing them to seek greater rights without the fear of job loss. Although privately-run businesses are replacing the state sector in certain industries, more than 500,000 worked in the private sector, a 240 percent increase in the last 6 years. What is the way forward? Regulatory changes have largely exhausted what can be done without Congress with today's executive actions further facilitating commerce and travel. But relations expand beyond just government actions. In 2015 the Cubans were inundated by an avalanche of business executive delegations. This was a moment of building first contact and of exploring the potential trade opportunities in countless sectors. But while U.S. companies wanted to move quickly, the Cubans have taken a ``go it slow'' approach. To build trust, U.S. commercial interests should be tied both to what is possible under U.S. regulations but also to Cuba's investment priorities. Projects that do not fit both qualifications will fall on deaf ears. Now, most of the major obstacles left to achieving normalization remain in the hands of Congress. In addition to lifting travel restrictions, measured steps can be taken to remove codified rules that would have a broad economic effect without political cost. Though executive action allows financing and credit to be easier for certain industries, agricultural exports are exempt under the Trade Sanctions Reform and Export Enhancement Act of 2000. Congress is also responsible for allowing American telecommunications infrastructure to be built. Finally, Congress can legislate to remove the barriers to Cuba's entry into the international financial institutions. Amendments to the Cuban Liberty and Democratic Solidarity Act of 1996 would allow both for Cuba to join institutions like the Inter-American Development Bank as well as for funds from the institution to be spent on loans that assist Cuba. Technical support from the IDB would inject global standards in financial and economic management while providing critical assistance in transitioning to a single Cuban currency, all issues critical for emboldening the Cuban private sector and enhancing U.S. trade. Thank you once again for the opportunity to appear before the subcommittee today. I look forward to your questions. [The prepared statement of Mr. Marczak follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] ---------- Mr. Poe. I thank the gentleman. The Chair now recognizes Mr. Claver-Carone. STATEMENT OF MR. MAURICIO CLAVER-CARONE, EXECUTIVE DIRECTOR, CUBA DEMOCRACY ADVOCATES Mr. Claver-Carone. Thank you, Mr. Chairman, Ranking Member, members of the committee. It's really a privilege to be here and join you today to discuss these important and consequential issues surrounding U.S. trade policy toward Cuba. And I particularly appreciate being given the opportunity to be the sole dissenting voice in this panel, as free expression is a right enjoyed by 34 out of 35 nations in this hemisphere with one exception--Cuba. So as you are aware, pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000, the sale of ag commodities, medicine, medical devices to the Castro regime in Cuba was authorized by Congress with one important caveat--these sales must be for cash in advance. Prior to that, the export of food, medicine and medical devices to the Cuban people, I would highlight, had been authorized under the Cuban Democracy Act of 1992. I, for one, have no problem with taking cash away from the Castro regime, and that's not a point of contention in this hearing in any way. It's the consequences of expanding these cash sales to bilateral trade, financing and investment--in other words, flushing--giving the Castro regime cash. That should be a concern to us all. I'd also--I can't help but note that, you know, whatever rice sales had been lost to the Cuban people in 1959 I'm sure has been made up in multiples to the Cuban people in Miami since 1959 since those people are now in Miami as opposed to Cuba. For years we've heard of how an improvement in U.S.-Cuba relations and easing of sanctions and increased travel to the island would benefit U.S. farmers. Well, the fact is since December 17th, 2014 the Obama administration has engaged the Castro regime and has provided a litany of unilateral policy concessions. We've seen the payment terms for agricultural sales have been eased, American travel to Cuba increased by over 50 percent, Cuba's GDP grew by over 4 percent, diplomatic relations were established and all these trade delegations have visited Havana. So surely, based on this, ag sales to Cuba would have grown exponentially, right? Wrong. U.S. ag exports to Cuba plummeted in 2015 by nearly 40 percent and that's not the only counterproductive result from President Obama's policy of unilaterally easing sanctions in December 2014. Additionally, we've seen political arrests have intensified. A new Cuban migration crisis is unfolding. The number of self-employed workers in Cuba has decreased. Internet connectivity ranking has dropped. Religious freedom violations have increased tenfold. Castro reneged on the release of political prisoners and visits by international monitors. So you may ask what do all of these facts regarding political, civil and economic rights have to do with trade with Cuba. The answer is everything, because the Castro regime is the only client business partner for foreign companies in Cuba. If we're going to have an honest debate about trade and tourism sanctions on Cuba, it's important to understand how that regime conducts business. First and foremost, from an economic perspective the very concept of trade and investment in Cuba is grounded in the misconception about how business takes place on the island. In most of the world, that means dealing with privately- owned or operated corporations. That's not the case in Cuba. In Cuba, the trade and investment is the exclusive domain of the state. There are no exceptions, and that state's exclusivity to trade and investment was enshrined in Article 18 of Castro's 1976 constitution. That exclusivity has extended to TSREEA sales and we've seen that of the $5 billion in U.S. ag and medical products that have been sold to Cuba, the unpleasant fact is that all of those sales by over 250 U.S. entities have only had one Cuban buyer--every penny--the Castro government. So we already know what lifting sanctions toward Cuba would look like. TSREEA sales have actually provided essentially the model for this. It would be Americans in the system whereby commerce is simply a tool to benefit and strengthen Cuba's totalitarian regime and let's remember what we're talking about here. The dominant force in Cuba's economy is the armed forces holding company known as GAESA. These are the same Cuban armed forces that held a stolen U.S. Hellfire missile for nearly 2 years that were caught twice smuggling heavy weaponry including the worst sanctions violation ever to North Korea, that oversee the most egregious abuses of human rights in the hemisphere, that have subverted human rights and democracy in Venezuela, export surveillance systems technology to other countries in the region, that welcome Russian military intelligence ships that dock in their ports, that share intelligence with the world's anti-American regimes, that have three senior Cuban military officers indicted in the United States for the murder of Americans. These aren't nice people in that regards. An important issue that I think it's important also here to recognize is that we need to make sure to protect American victims of stolen property. According to the American Law Review, the Castro regime's confiscation of U.S. assets was the largest uncompensated taking of American property by a foreign government in history. We need to make sure, and I urge Congress, for example, to pass legislation. If we're going to consider expanding trade and other issues with Cuba, we should consider taking away the President's waiver authority over Title III of the Libertad Act and allow Americans legal standing to pursue justice in courts. I also think it's very important that we need to uphold U.S. law and international labor norms. Some of the measures that have been recently announced have been in direct--by the Obama administration have been in direct contravention of the letter, spirit and intent of current U.S. law regardless of your position. Those should be upheld. Moreover, those deals have violated a myriad of international labor covenants including freedom of association, protection of wages, right to organize, discrimination, employment policy convention, et cetera. To conclude, there are many theories and estimates about how much more money one sector or another can make from conducting business if sanctions were eased or lifted and we're hearing many of those theories and estimates today. However, as we've learned from the drastic sale over the last year, that's hardly guaranteed and we need to make sure that those are weighed by serious factual considerations regarding the structure of Cuba's business entities run by the military, its beneficiaries, the Castro family and its cronies, the rights of its victims both Cubans and Americans and whether such practices are in our national interests. Thank you. [The prepared statement of Mr. Claver-Carone follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] ---------- Mr. Poe. I thank the gentleman. The Chair now recognizes Dr. Feinberg for his statement. STATEMENT OF RICHARD E. FEINBERG, PH.D., PROFESSOR, SCHOOL OF GLOBAL POLICY AND STRATEGY, UNIVERSITY OF CALIFORNIA, SAN DIEGO Mr. Feinberg. Mr. Chairman, thank you very much for inviting me to participate in this most timely hearing on the eve of the historic visit to Cuba by President Barack Obama. May I ask that my full text, which I will just summarize now be entered into the record? Mr. Poe. Without objection. Mr. Feinberg. Thank you. The views here are solely my own and should not be attributed to other institutions. As U.S. relations with Cuba gradually normalize, Cuba will become an interesting if modest market for the U.S. economy but of considerable value for many individual U.S. businesses large and small and I will discuss some of these market opportunities. But, as Jason Marczak has already emphasized, commerce with Cuba is about much more than the exchanges of grains and widgets. As the U.S. pivots toward a policy of positive engagement, economic exchange can be a potent political force. Commercial exchange can also support broader U.S. objectives of advancing market-friendly economic reform, a more robust and independent private sector in Cuba and a thriving and diversified foreign investment presence. Together, these changes make more likely--more likely the advance of fundamental U.S. interests in Cuba, the peaceful transition to a more pluralistic and prosperous Cuba to a Cuba more open to the world where the new normal is the free flow of goods, services, capital and ideas between our two nations. Cuba today altogether imports about $14 billion in goods and services. For a small economy, that's a low import GDP ratio of only 17 percent. Cuba cannot import more because it doesn't export to pay for those imports. But let's look ahead. Let us assume that Cuba accelerates its market-friendly economic reforms. Let us assume that as part of that reform process Cuba's rates of capital investment rise, Cuban exports become more competitive and therefore Cuba's capacity to import expands. Let's assume that Cuban import growths is about 5 percent a year over a 10-year period. If we take a compound rate of growth, sir, by 2027 Cuba will be importing $26 billion total, possibly as much as $34 billion. What does that mean for U.S. producers? Given Cuba's geographic proximity and the complementarity between our two economies it is reasonable to project that U.S. exporters could capture 40 percent, perhaps, more of that expanded market. U.S. businesses, as we've heard, are certainly well positioned to provide many of the agricultural and also industrial products that make up large portions of Cuba's current import requirements as well as the financial and professional services that a more dynamic Cuban economy will require. By 2027, therefore, U.S. businesses could be selling $11 billion to $14 billion each year to Cuba. Over the 10-year period from 2018 post-Castro to 2027 U.S. businesses could sell during that 10-year period a cumulative $86 billion to $101 billion in goods and services to Cuba. Cuba also desperately needs massive inflows of foreign investment. Cuba's domestic savings and investment ratio under 10 percent. The Latin American average is over 20 percent. Cuba must import more foreign investment to grow. The Cuban Government has recognized that. It's advertized a list of 326 investment projects with an initial investment value exceeding $8 billion. Cuba has said it has no particular objection to U.S. firms bidding on these opportunities, although it will seek a diversity of investment partners. As we've already heard, many foreign firms from Europe, Latin America, Canada, China have already invested in Cuba. U.S. regulations, of course, prohibit U.S. firms from investing in Cuba. But eventually a new normal in cross-straits relations will witness many U.S. firms seizing these investment opportunities. And Mr. Chairman, we know that U.S. investments abroad bring U.S. exports in their wake. Therefore, as the Cuban economy accelerates and U.S. investments--and U.S. businesses invest in Cuba, U.S. exports will also grow. So therefore, my estimate of $11 billion to $14 billion in annual U.S. exports to Cuba a decade from now may prove to have been overly modest. Now, just a brief word about the Cuba private sector. This is a very important part of our strategy. To date, the Cuban Government has authorized \1/2\ million of its citizens to work in the self-employment private sector. According to my calculations, as many as 1\1/2\ million additional Cubans have at least one foot in the private sector. That's as many as 2 million Cubans, 40 percent of their workforce compose the emerging private sector. The U.S. is already a big piece of this emerging private sector in Cuba. U.S. investors are dining at private paladares, lodged at private guest homes and purchasing the creations of independent artisans, and remittances from the United States are driving many of these new businesses and they're allowing homeowners in Cuba to remodel their dwellings, employ private contractors and participate in the newly legal real estate market. Cuba's emerging entrepreneurs and middle classes and by many measures, which I don't have time to go into today, Cuba is a middle class society. These private entrepreneurs and middle class Cubans will seek a Cuba that is more normal, more like other societies in the Caribbean Basin where individuals have access to middle class consumption patterns and have ample opportunities to realize their talents, participate in public affairs and pursue their careers independent of state control. Finally, Mr. Chairman, later this week President Obama and the First Lady will step foot on Cuban soil. President Obama will attempt to nudge the Cuban Government to press forward on their economic reforms with greater vigor. But most important, I think, will be the messages that he delivers directly to the Cuban people. He will meet with the island's emerging entrepreneurs and middle class citizens. He will engage with civil society and political dissidents. Mr. Poe. The gentleman's time has expired. The rest of your statement will be made part of the record. Mr. Feinberg. Thank you, sir. Thank you very much, Mr. Chair. [The prepared statement of Mr. Feinberg follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] ---------- Mr. Poe. The Chair will now recognize himself for questions. Then we'll let the members of the panel or the dais make comments and questions. Thank you once again, gentlemen, for being here. It seems to me that the U.S. policy against Cuba, the Castro regime, as articulated by Mr. Claver-Carone, a lot of reasons why the Government of Cuba is not acting appropriately by international standards. We cannot solve all those problems here today. Maybe we can talk about one of those, which is normalizing relationships regarding the issue of trade. It seems to me that Cuba trades with everybody in the hemisphere except us. They get their rice from Vietnam. Happens to still be a communist country. And getting rice from Vietnam that they consume I do not understand how that punishes the Castro regime by not letting us sell agricultural goods to Cuba with Vietnam as a competitor. It would just seem to me that that doesn't punish the Cubans. It helps the Vietnamese and it punishes the United States. Now, Mr. Claver-Carone has talked about some changes in U.S. policy that actually, because of the changes, agricultural sales to Cuba and specifically rice dropped as opposed to increased. Now, I'd like you all to weigh in on this. Mr. Marczak, can you weigh in on this issue that Mr. Claver-Carone mentioned? U.S. changes its policy and the policy doesn't help trade. It reduces trade, and how did that affect the Cuban Government on dealing with us because of that change in policy in 2004 or 2005, whichever it was? Would you explain that specifically, please? Mr. Marczak. Chairman Poe, thank you for the question. I think that we have to look at the, first of all, the decrease in agricultural exports to Cuba, which is not a result of the President's--President Obama's actions but it's a result of a number of different factors on the island and also a result, as my colleagues on the panel have mentioned--a result of the lack of competitiveness that our agricultural---- Mr. Poe. Lack of what? Mr. Marczak. Lack of competitiveness. Mr. Poe. Okay. Mr. Marczak. That our agricultural exporters have in so far as exporting their products to Cuba when looked at comparison to other countries around the world. As you mentioned, Mr. Chairman, Vietnam is a prime example of that. It's a country that is taking advantage of the fact that the U.S. should naturally be the number-one agricultural exporter to Cuba. But because of the restrictions that lay in U.S. law including restrictions that Congress could potentially modify, the United States---- Mr. Poe. Let me interrupt a minute. We trade with Vietnam, do we not? Mr. Marczak. Yes, we do. Mr. Poe. And Vietnam, like other countries, have human rights violations that we're concerned about as a nation, correct? Mr. Marczak. That's correct. Mr. Poe. Continue. Mr. Marczak. That's correct. And I would also say that our opening with--trade with Vietnam has allowed for an opening and a degree of liberty in Vietnam. Obviously, Vietnam remains a communist country but we see the result of an opening of trade with Vietnam in so far as providing greater economic liberties and opening the door for political liberties to the Vietnamese. So, in conclusion, in answer to your question, Mr. Chairman, you know, the policy that Congress has the ability to change and policy that could be changed, I think, without a lot of political cost specifically in the agricultural sector could allow U.S. agricultural exporters to be more competitive and to also ensure that the Cubans, you know, get their agricultural products and help to create jobs here in the United States rather than creating jobs back in Vietnam. Mr. Poe. Specifically, what change could be made? I know Congress can--has to be the one to lift the embargo but what are you talking about regarding the financial situation of cash on demand as opposed to credit, letting the agricultural community assume the risk rather than prohibiting it completely? Delve into that specifically in the remaining time that you have? Mr. Marczak. Yes. Specifically, Congress could--the administration has allowed for the financing of exports in a range of sectors through executive action. But Congress has the sole authority because of Helms-Burton to be able to remove the restrictions that prohibit agricultural export financing, and without that financing and, as you suggest, that financing--the risk for that financing could be taken by the exporters themselves. But without the ability to provide financing for those agricultural products our exporters and our products are at an inherent disadvantage. Mr. Poe. All right. My time has expired. I'll recognize the gentleman from Massachusetts, Mr. Keating. Mr. Keating. Thank you, Mr. Chairman. Sunday's New York Times included an article that highlighted the United States' and Cuba's different visions of economic engagement and we touched on some of these things. But tourism has long satisfied Cuba's need for foreign currency and it's clear that there remains a stark disparity between the willingness of Cuban businesses or authorities to enter into trade with the United States companies and the desire of our domestic business people to do so. One statistic in that article that was cited by the president of U.S.-Cuba Trade and Economic Council--he said that he counted 500 visits to Cuba by American business people since December 2014, more than 140 visits by United States representatives and officials but he can count on the number of--count on his fingers, you know, just the business deals that had been reached. Meanwhile, Cuban officials repeatedly just point to the trade embargo as an example of the United States' lack of commitment to strengthen relations. I'd just like to--and we touched on some of these things but give everyone a chance--how would you explain this lagging growth of trade between U.S. and Cuba? What other things that we haven't touched on to explain that lack of growth, given the trade restrictions? Mr. Feinberg? Mr. Claver-Carone. I'll take a stab. I'd be happy to take a stab because I think it ties into both of these questions. You know, the issue here, if we were talking here about trade with the Cuban people, as a matter of fact even trade with Vietnam where there are private entities that you can be involved with trade with, it's a whole different story, you know, because it's not politicized trade. Trade with Cuba is all politicized because there's only one customer. If that were to change, my testimony would have been very different today. But the fact is our sales and what the Castro regime is doing with--particularly with what you notice is essentially trying to coerce the U.S. business community to pursue its geopolitical gains--its needs, in the same way that it took an American hostage in order to gain--to coerce the United States into releasing three spies including one that was serving two life sentences for the murder--for murder conspiracy of some Americans and now wants to coerce the business community in order to unilaterally finance its regime. And I think that that right there is the fundamental problem here--the fundamental difference with Vietnam. The fundamental also difference with Vietnam and Brazil and the sales to them is that those are essentially subsidized by the state, by entities and deals that are less than transparent in which the state is essentially financing those completely. I mean, we're not even going to be able to compete with those deals in that regards because it's all politicized and that's the problem. When that opens up, then we can have a different picture and a different story. Mr. Keating. Is there any--some people have suggested that there's a deliberate effort reducing imports to the United--you know, from the United States to increase political pressure on the United States for additional sanction easing measures. Do you think there's any truth to that, Dr. Feinberg? Mr. Feinberg. So I think, first, in terms of limitations on our side, up until a few weeks ago, U.S. exporters were only permitted to export to the emerging small-scale private sector in Cuba. So we were still not allowed to export to the state-owned enterprises which still make up 80 percent of production in Cuba, okay, so that was a big no on our part. And with regard to investment, many U.S. firms when down there thinking about investment. That is totally off the table because of U.S. sanctions still to this day. Okay. So we have those restrictions on our side. Now, on the Cuban side, we have said the small-scale private enterprise we are happy to sell to you. There is where the Cubans have been dragging their feet and I would suggest a couple of reasons for that. One is ideological. They tend to prefer the state-owned enterprises as still socialists. So they don't like us preferring and giving advantage to the small-scale private sector. Now, most recently the Obama administration did say okay, U.S. firms under certain conditions can also sell to state- owned enterprises. So we'll see now when President Obama is down in Havana if he'll be able to say okay, we gave you something that you were pushing for--now open channels for U.S. firms to sell to the emerging private sector in Cuba, and I hope very much he can bring home that concession from Cuba. Mr. Keating. Well, let me take it a step further. Let's assume that result. Are they going to still--because they have this ideology, are they going to still try and limit the activity with the private side? They're going to continue to do that even more so maybe? Mr. Feinberg. Well, so they've allowed, as I mentioned, 500,000 in the private sector so far. There are still all sorts of limitations. The President will be meeting with a group of these private sector entrepreneurs, I understand. I think we'll have a--he will have a dialogue with them. He'll listen, what are your major problems. Mr. Keating. You think there's an ideology there so this is being manipulated? Mr. Feinberg. It's a combination of ideology and power. I mean, the government--power comes through the control of the economy and the state-owned enterprises. That causes them to want to limit the growth of the small-scale enterprises, without a doubt. Mr. Keating. That's interesting. Thank you. I yield back. Mr. Poe. The Chair recognizes the gentleman from Pennsylvania, Mr. Perry. Mr. Perry. Thank you, Mr. Chairman. I hate to be the guy that doesn't want to join the Cuba lovefest here but I need to associate my remarks with Mr. Claver-Carone. And then that I'm probably not going to talk about trade here. I got a couple statements to make and I know you're all interested in making money and that's great. So am I. From General James Clapper, director of national intelligence, last month, the threat from foreign intelligence entities is persistent, complex and evolving. Targeting and collection of U.S. political, military, economic and technical information by foreign intelligence services continues unabated. Russia and China pose the greatest threat followed by Iran and Cuba. I'll just remind you that something you all know, they're about 100 miles off the coast of Florida, right. Two weeks prior the U.S. military Southern Command held its annual Caribbean regional security conference. Senior members of Castro's KGB-trained spy agency were invited to participate. I find that particularly irritating and self-destructive as a person who served decades now in the United States military. I also want to remind you of the listening posts, the largest ones in the world based at Lourdes, which is sponsored by Russia and reopened after we brought Cuba to their knees financially and the Soviet Union as well and forced them to close it at some point but reopened, and the one by China at Bao Cao. I would also like to remind you that Cuba's--this is from the Cuban--the state-sponsored newspaper, Cuba's communist propaganda newspaper, Granma, has published an article claiming that President Obama's scheduled visit to Havana in March dispels decades of evidence that the Cuban Government violates the human rights of its citizens on the very weekend in which Cuban state police arrested almost 200 dissidents for peaceful marches against communism. And I'd further like to remind you of recent arrests of U.S. State Department officials--an official and his wife for over 30 years of spying at the State Department named Walter and Gwen Myers as well as Ana Montes, who worked for the Defense Intelligence Agency as a United States citizen, as a Cuban spy. While you all might like to dance with the devil to make a couple bucks, you can be--and with all due respect to Dr. Weinberg when you said they prefer the socialist model--I'll remind you, as you probably well know that socialism is an economic construct. Communism is the political construct that forces the economic construct. These folks in power have no interest at all in changing their ways and they are going to use us and our foolishness, our generosity to further their intentions. And while you all might be happy that we have a socialist running for the presidency of the United States, I find it particularly vexing that American service members spent and pledged their lives and often gave their lives in the fight against exactly that. And now we're saying yet again it's great to engage with these folks in the hope--in the hope that they will change after 40 or 50 years. I don't know what delusion you folks are under but listen, if you're under one that's great but do me this favor and I would hope that the President would do us this favor as well, which is if you're going to make a deal when a deal's been made let's find out what we're getting up front as opposed to giving everything away and then hoping that we'll get something on the other side. And so with that I will ask one question--one question only. Anybody can answer it. Everybody can answer it. What did we get--specifically, tangibly, what did we get for the deal that we just made? Mr. Marczak. I'm happy to take the first response to that. Thank you, Congressman, for your question. I think, first of all, I think I'm not trying to dance with the devil to make a few bucks here, right. I'm the director of the Latin American Growth Initiative at a nonpartisan think tank here. I have no skin in the game in so far as cash on this. But I think what we have to look at insofar as what is the--what is the best way to seek greater political and economic liberties for the Cuban people. I think that that's-- -- Mr. Perry. I'm with you. Economic is one of the powers that we have. But I wonder what we're getting, what we have gotten for the deal. Mr. Marczak. Yes. Mr. Perry. We gave in--we already gave, right? So what do we get? What do we hope to get? Mr. Marczak. Yes. Yes. I would say there's a few things that we've--well, first of all, I think there's a few things that we've gotten from the actions of the last 15 months. One is that on a geostrategic perspective we've increased the power, the positioning of the United States and our perception among our allies not just across the hemisphere-- countries that are incredibly important for us to work with. Our policy toward Cuba has been the thorn in our side insofar as seeking greater relationships across Latin America, encountering other regimes that I think that we would be in agreement with that we also want to--that are also restricting the ability of their people to express their political liberties including that regime in Caracas, Venezuela. Mr. Perry. If I may ask you, with your indulgence, Mr. Chairman, which Latin American countries have we increased our stance with by--via our position with Cuba now? Which Latin American countries? Mr. Marczak. I would say we have increased our stance with Brazil, with Argentina, with Colombia, with probably Mexico. I would say most countries in the hemisphere had gotten to the point that they could no longer defend our policy. Now, insofar as what does that mean for the Castros, right--what does this--our policy should not be one that keeps the Castros in power. Our policy should be one that seeks to provide greater liberties for the Cuban people. And I would contend that over the last five-plus decades our embargo has been the crutch and the answer for the Castro regime of why the country is continuously suffering from economic ills. Whenever there's a problem in Cuba the answer is it's because of the embargo. Now, obviously the embargo still remains in place but by chipping away at some of the--some of the restrictions in our policy we're taking away bit by bit the reasons in which the Castro regime can blame others from the outside, specifically the imperialists from the United States, for the economic problems that they have in their own country. Mr. Perry. Thank you, Mr. Chairman, I yield. Mr. Poe. The other four gentleman may submit their answer for the record in writing to Mr. Perry's question. I understand we're going to have votes very soon. So I'll recognize the gentlelady from California, Ms. Bass. Ms. Bass. Thank you, Mr. Chair. I think my questions are from a little slightly different direction there but with all due respect to my colleague over there. You know, I have had problems for many years with the U.S. policy directed to Cuba and our policy with regime change through the embargo, to me, has really hurt U.S. businesses. And I appreciate you describing from the agricultural industry ways that you could certainly expand your business if, you know, we were to remove the remaining barriers. I have also always resented the fact that my freedom was denied to travel wherever I choose to travel regardless of what regime might be in power. I have resented the fact that my own country prohibited me from travelling to where I would like to go. I had mentioned before that I wanted to talk about health care and I do have a question for you about agriculture as well. You know, the Cubans have invented a vaccine that helps with lung cancer and there is also a medical product that they have a medication that helps reduce the need to amputate for diabetics. Diabetics--the lead cause of feet amputation in the United States and probably many other countries is diabetes and the Cubans have a medication that helps with that. And so one question I have for Dr. Feinberg is do you think that the President could issue a general authorization for Cuban-developed pharmaceutical and other medical products? The problem is, as I understand it, is that we are allowing this medication, which is called Heberprot--we are allowing it to be tested--clinical trials in the United States. But we will not give a company the ability to market it and no company in the world is going to invest the expense into a clinical trial unless they have the ability to market the drug as well. So I want to know, given the current restrictions, if you think that that might--you know, that the President might be able to issue that. And then to Mr. Stoesser from the--from the Texas Rice Council, you know, one of the other things that I think our companies as well as the Cubans could benefit by is our scientific technology--our scientific knowledge, farming technology and farm equipment in terms of sales. And then I believe Dr. Feinberg said that there is already a restriction that our commerce in agriculture has to be with small farmers. I think that that's what you were saying. So those are the questions I would propose--I would pose to Dr. Feinberg and also to Mr. Stoesser. Mr. Feinberg. So just to clarify, so my general comment about U.S. sales was for all products other than agriculture. Ms. Bass. Oh, I see. Mr. Feinberg. Which has separate legislation, and some medicines. So I think when President Obama goes down there we will see the warmth of the Cuban people. Ms. Bass. Oh, by the way, I'm going on a trip. So thank you for telling me about what I'm going to experience when I'm there in terms of meeting with small farmers. Go ahead. Mr. Feinberg. Okay. Excellent. Well, I think then you also will experience the warmth of the Cuban people and their admiration and appreciation for the President of the United States and for Americans in general, and that is one result of the people-to-people diplomacy that has been going on for the last several years as a result of the relaxation of certain sanctions. As you point out, Cuba has a very active biotechnology sector. They have developed these various vaccines, as you point out. Now, for them to be marketed in the U.S., of course, they have to go through clinical trials. As you may know, the Roswell Cancer Center in New York is working on the lung vaccine, which seems promising but, of course, we have to be sure that it's effective and safe. I do completely agree with your basic point that the United States ought to say in general with regard to medicines which are, after all, lifesaving--a very obvious humanitarian product, that if they pass FDA regulations ought to be available to American---- Ms. Bass. Humanitarian for us. Mr. Feinberg. Precisely. For us, on our side. Yes. So humanitarian. Now, I think there, there is the additional element, however, that the Cuban Government has been hesitant to allow joint ventures or even licensing to not only U.S. but international pharmaceutical companies in general, and that's another area where one has to recognize that the timidity of the Cuban state--their lack of knowledge and their fear of global markets--is something that they're going to have to gradually work their way through. But we can encourage them in that regard. Ms. Bass. Thank you. Mr. Poe. The gentlelady yields back her time. Mr. Stoesser, you'll have to put that in writing, the answer to her question. The Chair recognizes the gentleman from Arkansas, Mr. Crawford. Mr. Crawford. Thank you, Mr. Chairman. To Mr. Stoesser and to Dr. Rosson, my understanding of the cash in advance rules have been rewritten again to be less restrictive. But there's been no noticeable improvement to rice exports to Cuba. Do you believe the Treasury Department's reinterpretation of the rules will have any impact on our competitiveness in Cuba or will our ag export posture remain weak until exporters are able to offer credit to Cuban importers? Mr. Stoesser. It's my understanding that commodities were not included in that recent ruling, only tractors and telecommunication things but not agricultural commodities. Mr. Crawford. Okay. Mr. Stoesser. And I think that rule needs to be changed to include commodities, of course. Mr. Crawford. Sure. Dr. Rosson, the U.S. poultry sector has seemed to find ways to have a stronger export presence in Cuba. What's keeping other ag industries from implementing a similar framework? Mr. Rosson. Well, I think when we look at the overall commodities situation globally today, things like nickel, for example, those prices are at near historic lows and that affects the ability of the Cubans to generate enough foreign exchange to purchase products. Now, what's different about much of the poultry that we export there it's largely leg quarters, which are sold at a discount relative to other cuts of poultry. So therefore they naturally have a competitive advantage. Where we tend to lose is the fact that we don't offer credit--that our payment terms are somewhat restrictive. And so by the time we transfer funds around the--between Cuba, a third country, back to the United States, we've lost time and as a result we have vessels that are held up and being charged extra money because of those delays in shipping and the Cubans bear that cost and the result is they tend to turn elsewhere for some of their supplies. Mr. Crawford. You conclude that food and ag exports have the potential to exceed $1 billion annually but even stronger exports can be achieved through further infrastructure improvement investment. To what extent do you believe that U.S. direct investment in the private Cuban agribusiness would strengthen our export posture? Mr. Rosson. I think investment is absolutely crucial. My experience of having been there several times over the last number of years port infrastructure, road infrastructure needs improvement. I've had personal experience working with companies that were exporting frozen foods into the Cuban market and we'd have a power outage and those frozen desserts would melt, then they'd refreeze and you take those out and display them at a food show and you run into problems trying to sell your product. So infrastructure is crucial. Reliable power, good infrastructure, improvements in all load, off load capability. The port is important, and then another aspect is business development. We have not been active in business development there because we've been precluded. Now we do have the opportunity to do that and by business development I'm talking about working with the private sector individually to try and improve their capacity to do business and develop their economy on a fairly small scale in the beginning but which has the potential to grow, and as that growth occurs we would see incomes rise and we would see improvement in the Cuban consumer's ability to buy food. Mr. Crawford. Mr. Marczak, do you believe that American investment in private Cuban agribusiness might help accelerate privatization in the Cuban ag sector? Mr. Marczak. Yes. I believe that the Cuban--what the Cuban private sector needs is more investment from outside, right. I think that there's a few things. One is that--you know, that includes fully lifting the remittance cap as well so the Cubans--the small businesses in Cuba can have access to the necessary financing and investment that would be--that is critical for their long-term survival and I think as well the agriculture sector, specifically the growth in the number of agricultural cooperatives, has been a real success insofar as the incremental. Again, we have to look at success in measured terms. This is only a few years after a long policy of completely closed off. But it's an area in which there is--it's ripe for further engagement from the private sector and private sector growth. Mr. Crawford. Do you think that U.S. investment might help reduce the Castro regime's role in the Cuban economy more quickly than maintain our current isolationist posture? Mr. Marczak. I believe that current--I believe that investment--the more investment from the U.S. the more jobs that creates in the Cuban private sector, the fewer Cubans are dependent upon the state for their jobs and the more Cubans can express their free will without the potential recourse of losing their only income. Mr. Crawford. Thank you. I yield back. Mr. Poe. The Chair recognizes the gentleman from Minnesota, Mr. Emmer. Mr. Emmer. Thank you, Mr. Chair, and thanks to the witnesses for being here today. Mr. Claver-Carone, when's the last time that you visited Cuba? Mr. Claver-Carone. The Castro regime, as you know, has a list of 100,000 Cubans at least that they don't allow---- Mr. Emmer. Mr. Claver-Carone, reclaiming my time. Mr. Claver-Carone. They don't--they don't give me a visa. They don't give me a visa. Mr. Emmer. When's the last time that you've been there? Mr. Claver-Carone. When I was a little kid because they don't give me a visa because people that are critical of the Castro regime don't get a visa because I think that's important to know. Mr. Emmer. Thank you. Thank you very much. Reclaiming my time. I find it interesting when you talk about what's happening in Cuba because if you had been there recently you would see that the Castros, they live in what I would describe as suburban Dallas--a nice neighborhood with boulevards and well- manicured lawns and nice big homes and the rest of the population they don't live in--well, I would say they do live in very underwhelming circumstances and that would leave one to believe when they see it firsthand and they experience that whether the embargo is in place or not the Castros are going to do just fine. It's actually more about the Cuban people when we talk about trade. This is a mutual relationship with value on both sides, and I guess I think when you talk about the issues of religious freedoms and other humanitarian concerns they're real and I don't have any doubt maybe to the degree and where they're happening but I think we can agree that that's still real. The fact is, however, that these have existed now for 55 years and the embargo has been in place actually more than 55 years. The embargo has been in place for 55 years. It hasn't changed. The definition of insanity, I've been taught, is doing the same thing over and over and over and expecting a different result, and I'm not even going to bother to ask how you think that the current state of economic sanctions is going to change something in the next 55 years. Instead, I think I want to turn to Mr. Marczak and ask when it comes to the embargo it was initially put in place as a policy to isolate the Castro regime and to destabilize the Castro regime so that ultimately the Cuban people could self- determine once again and enter into these agreements that we're talking about, this growth opportunity. But in fact, Mr. Marczak, isn't it true that what's happened is the policy has isolated the United States. It hasn't isolated Cuba because Cuba's doing business with everybody around the world and everybody in the Western Hemisphere with the exception of the United States, correct? Mr. Marczak. Correct, Congressman, and I'm sure that you've seen when you've been to Cuba as well the number of foreign Embassies across Havana. Cuba has more foreign Embassies than any country in the Western Hemisphere outside of the United States. So Cuba has successfully used the embargo and the isolation and destabilizing intention of the embargo to claim an outsized role insofar as geopolitical posturing and insofar as its place not only in the global affairs but as a leader in the global south. Mr. Emmer. So talking about growth then--trade and growth-- right now the question is not really about whether Cuba is going to be able to do business because there are entrepreneurs from all over the world rushing into Cuba right now as we speak because of the President's unilateral action to start to relax whatever the administration can outside of Helms-Burton. The question really is whether or not the United States entrepreneurs will have that same opportunity. Isn't that correct, Mr. Marczak? Mr. Marczak. That is correct. There's a real concern that because of the--if we have this opening of regulations the rest of the world sees the writing on the wall that our policy and the embargo is eventually going to be lifted. Mr. Emmer. So lastly--I mean, I heard one of my colleagues talk about China and Russia and Iran. I mean, isn't the risk that those types of players will move in to Cuba and isn't that--isn't that really what's happened with our foreign policy since the 1950s, that our policy literally pushed this regime to Russia and don't we risk that again? Mr. Marczak. Yes. You correctly state that Russia has been the fall back for the Cubans at times of economic uncertainty. The Chinese are looking at increasing their investments in Cuba. Mr. Emmer. Thank you. Lastly, Mr. Stoesser, thank you so much for being here. I just want to clarify, you aren't just in the business of agriculture to make money with a 100-year business. I take it you have some pride in feeding the world with what you do? Mr. Stoesser. I sure do. I want my sons and grandsons to be able to do what I did because they love it, too. I love to farm. Mr. Emmer. Thank you. Mr. Stoesser. I need to have it return. Mr. Emmer. Thank you. I yield back. Mr. Poe. The Chair will recognize the gentleman from California, Mr. Sherman. We are voting so if the gentleman would be precise. Mr. Sherman. I know that another colleague asked Mr. Claver-Carone whether--when was the last time you were in Cuba. I assume that the last time you were in Cuba would have been the last time that you would be a free man. One of my colleagues tried to get me to go to the Gaza Strip and I had to explain to him that my record was not in accord with that of Hamas. Biggest opportunity for Cuba is tourism. Is there any--I would evidence that we're going to increase the total amount that Americans have to spend on their vacations or if Americans spend money on their vacations in Cuba they won't be spending it elsewhere. Mr. Claver-Carone, is there--would this just pull tourist dollars away from Puerto Rico, the Virgin Islands, Florida and other tourist destinations in the United States? Mr. Claver-Carone. I always say that first and foremost if you're looking for a tourist destination Miami Beach is basically going to help our economy a lot better or Cape Cod or California has beautiful beaches and things of that sort. So I believe we should support our economy. But I think the important thing is---- Mr. Sherman. And even if you do want to go to a foreign country you can go to how many different Caribbean countries are there who will then buy U.S. products on fair terms? Mr. Claver-Carone. Absolutely, and the whole concept that we hear so much with agricultural trade is that we want U.S. tourists to go over there so then there's a demand created for more products from here from the United States. But essentially we're feeding the same American mouth whether we feed it in Miami Beach or we feed it in Barrero Beach. I think it's essentially the same product. But I think that brings to an important point is the reason we have these travel-related, tourism-related transactions in Cuba is because it's the Cuban military and security services' number one source of income. The Cuban military is the largest hotel owners in Latin America. They own more hotel rooms than the Walt Disney World Company. We sanction tourism toward Cuba and we sanction oil to Iran for a reason, because one is the number one source of income versus that of another. Mr. Sherman. There are, I think, 6,000 certified U.S. claims where the Cuban Government has appropriated American assets. Does Cuba have any interest in settling any of those claims? Mr. Claver-Carone. Not that I'm aware of in that regards. They like to talk a lot and we see that there's a lot of talk and I think in that regards we need to consider, as I mention in my testimony, the rights of Americans. President Obama and President Bush and President Clinton before him had always waived Title III of the Libertad Act that provided a right of action for American victims of that. But now if we're going to allow investment in essentially for the Castro regime to lease back to us our own stolen property then we should perhaps consider having a prior right of action as is current law in order for the American victims of this trafficked property to be able to receive compensation. Mr. Sherman. Let me ask the other witnesses, in order to export agricultural items to Cuba will it be necessary for us to provide the financing? Mr. Feinberg. So let me say I think that, first of all, in general Cuba does state to state credits. They seek soft bland credits when possible. That's basically what lies behind, for example---- Mr. Sherman. So in order to export the Cubans are going to ask the U.S. Government to--so we have 6,000 Americans who were ripped off by the Cubans in the past and now the U.S. taxpayer is supposed to make unsecured loans to the same government that ripped off 6,000 others. Gee, fool me once, shame on me. Fool me twice, you know. Mr. Feinberg. So if that's a question, so over the last 55 years of embargo we have not succeeded in getting compensation for those Americans who did lose their properties. So I would say under the current policy of engagement we have a better chance at least of getting some compensation for those lost properties and the Cuban Government has agreed and already we had a first round of discussions with the Cuban Government on the resolution of these claims. As you may know, the Cuban constitution---- Mr. Sherman. If I could just interrupt. If we--as I understand it we allow agri-food exports to Cuba and so the question is not whether we'll have free trade in agricultural products to Cuba but whether we'll have taxpayer-subsidized---- Mr. Poe. Your time has expired. The Chair recognizes the chairman of the full committee. Chairman Royce. I'm just going to be very brief because of the vote. But I'd like to submit for the record some questions. The Obama administration has announced several regulatory changes that have allowed them to chip away at the embargo. Most recently the administration announced a regulatory loophole that will allow us to facilitate Cuba's use of U.S. dollars to make international financial transactions. How is Cuba's banking system set up and is it sufficiently transparent is the first question I put for the record. Will the Cuban people be able to partake in such transactions or would it be for state entities only? Would allowing such transactions be consistent with legislation passed by the U.S. Congress? In other words, would it be legal? And with current OFAC Cuba sanctions regulations that restrict Cuba's ability to transact in U.S. currency? And what have been the practical effects for the average Cuban citizen of the relaxing of OFAC Cuba sanctions regulations? Have U.S. negotiators secured the right of Cuban workers to collect their earned wages or does the Cuban Government continue to collect wages directly from the employer to then distribute as low as 5 percent of those wages to the corresponding worker, keeping the rest for the Cuban Government? Those are the questions I'd like to ask not only for the panel to respond to but I intend to submit that in writing to the administration as well. Thank you, Mr. Chairman. I yield back. Thank you, Ranking Member, as well. Mr. Poe. I thank the gentleman. What the chairman was saying was he's asked you those questions so now respond in writing, if you would. There were other questions Mr. Perry asked and there were some other members that asked questions as well. You will receive those questions again and respond within 10 days in writing to those questions. Thank you, gentlemen, for being here today. This has been a very thought-provoking hearing. I appreciate all of your testimony and as mentioned earlier your testimony is a part of the record. The subcommittee is adjourned. [Whereupon, at 3:45 p.m., the committee was adjourned.] A P P E N D I X ---------- Material Submitted for the Record [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] [all]