The numbers are an exporter’s dream: 11 million consumers in a new, untapped market. Already, Texas businesses are gearing up to provide this market with food products, information technology and even travel-related services.
So, what’s the catch?
This dream market is the island nation of Cuba, the communist dictatorship that spent more than a half-century locked in a cold war with the U.S. — one that very nearly turned catastrophically hot. And at this point, despite the recent improvement in diplomatic relations, there’s the not-so-little matter of a very strict trade embargo still in effect.
Since former President Barack Obama’s March 2016 meeting with Cuban President Raul Castro, renewed trade with Cuba has seemed close. President Obama said he expected the trade embargo to be lifted, which President Castro called “the most important obstacle to our economic development and the well-being of the Cuban people.”
But the historic meeting also demonstrated how difficult it will be to normalize relations with a communist state, with all the suspicion and red tape that involves. Even as President Obama was declaring a “new day” between the U.S. and Cuba, President Castro was asserting that his nation had no political prisoners — something few outside Cuba believe. And since the meeting, Cuba’s government has repeatedly stressed that it will tolerate no threat to its “sovereignty” in its relations with the U.S.
The suspicion runs both ways. Many Republicans in Congress believe better trade relations would benefit Cuba’s rulers rather than ordinary Cubans. President Donald Trump has expressed skepticism about trade relations with Cuba and mentioned his desire to “make a better deal” for both Cuban citizens and America.
Many Americans know of the trade embargo. Fewer, however, are aware the wall against trade has gaps. The U.S. has been quietly exporting goods to Cuba, mostly agricultural products considered humanitarian aid, for more than 15 years. Many Texas farmers hope the federal government will allow more trade in the future.
Texas Governor Greg Abbott led a large state delegation to Cuba in November 2015, meeting with officials from Cuba’s Ministry of Foreign Trade and Investment, its Port of Mariel, the Cuba Chamber of Commerce and two Cuban state companies. Abbott described Cuba as an untapped, multibillion-dollar market for Texas farmers, ranchers and energy producers.
President John F. Kennedy signed an executive order enacting the U.S. trade embargo on Feb. 3, 1962, in reaction to Cuba’s nationalization of U.S.-owned assets. Kennedy said the embargo’s purpose was to reduce the “threat posed by [Cuba’s] alignment with the communist powers.” To date, this executive order still stands.
Congress reinforced the embargo in 1992, with the Cuban Democracy Act, and then again in 1996 with the Cuban Liberty and Democratic Solidarity Act, often called the Helms-Burton Act, which spelled out very specific conditions for lifting the embargo, including the protection of property rights of U.S. nationals; the legalization of all political activity and release of all political prisoners; a transition to free and fair elections; freedom of the press; legalization of labor unions; and respect for internationally recognized human rights. The embargo can be lifted only when the president determines these conditions are being met.
The Helms-Burton Act was tempered somewhat with the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA). Under TSRA, which became effective in July 2001, Cuba can import “humanitarian” goods from the U.S., including medicines and medical devices, airline and civil aviation safety equipment, environmental protection equipment, renewable-energy or energy-efficiency goods, telecommunication products and goods and services to meet the needs of the Cuban people. All proposed exports are reviewed on a case-by-case basis.
The rules for this trade, the Export Administration Regulations, are administered by the U.S. Department of Commerce’s Bureau of Industry and Security and the Department of the Treasury’s Office of Foreign Assets Control.
Congress’s enactment of the TSRA allows for certain trade exemptions, but continues to ban federal and private financing for U.S. exports to Cuba. In other words, no U.S. governmental program or private concern can extend credit to Cuban buyers.
The result: Cuba must pay in cash, in advance, for all American goods and services. Cuba has found it difficult to acquire the hard currency needed for such transactions, and building trade without financing has proven challenging.
According to the International Trade Administration, U.S. exports to Cuba under the various exceptions written into law totaled only $145.6 million in 2002 but quintupled within five years, reaching $711.5 million in 2008 (Exhibit 1). Exports to Cuba have fallen significantly since that time, however, declining by 65 percent since 2008.
Texas exports to Cuba followed a similar pattern but declined even more sharply, peaking at nearly $96.2 million in 2008 and declining to less than $219,000 in 2016 (Exhibit 2).
In 2016, Texas accounted for only about 0.1 percent of U.S. exports to Cuba (Exhibit 3).
Source: U.S. International Trade Administration
Cuba imports up to 80 percent of its food each year, and nearly all of its imports from the U.S. are foodstuffs, particularly poultry, corn and soybean products.