A look inside our little-known export pipeline suggests who might benefit when the embargo lifts.
The Obama administration’s sudden move to normalize relations with Cuba – including Wednesday’s announcement that the nations would open embassies in each other’s capitals — has fueled excitement in the business world at the prospect of a new market. A door long shut by the Cuban trade embargo is opening up, paving the way for U.S. companies to reap big rewards.
But though few Americans know this, U.S. firms already export hundreds of millions of dollars’ worth of goods annually to Cuba – and a look at this little-known pipeline offers a preview of some of the likely early beneficiaries of improved relations with the largest Caribbean nation.
This trade flows only one way; it’s still illegal for Americans to buy Cuban goods. But for years, American farmers have been selling millions of dollars’ worth of wheat, meat, corn and other agricultural commodities to Cuba under a special series of humanitarian exemptions. And according to records published by the Census Bureau, there’s also a modest trade in musical instruments, jewelry and stereo equipment.
Now those agricultural groups are anticipating a big payoff. Last week, a delegation of farm leaders toured the island, looking for opportunities to expand grain exports if the embargo is lifted.
That opportunity is real: In 2014, Cuba imported more than $6 billion worth of goods, including almost $500 million worth of corn and wheat. Despite being just 90 miles from the United States, the U.S. captured just 5 percent of the market.
“If [Cuba] goes to Vietnam to get their rice, you’ve got to know it’s not the best idea in the world,” said John Block, the former Secretary of Agriculture during the Reagan administration. “If we can get trade opened up—and we’re going to need legislation—and also make it possible for them to work with companies to get financing when they need it, then I think we’re going to positioned where instead of selling to Cuba $200 million worth of products, we can be over $1 billion worth of product in a year.”
The list of humanitarian exports allowed under the current law, passed in 2000, is extensive. “The way they define it is food for human and animal consumption,” said Linda Weinberg, a partner at a law firm in Washington who focuses on international trade and export issues. She added that all medicines approved by the FDA would also likely be approved for export to Cuba.
Despite the recent thaw, U.S. exports to Cuba have fallen recently. In 2008, the U.S. exported nearly $200 million worth of corn to Havana. In 2014, that number had fallen to less than $30 million.
A major impediment to trade is the rules requiring that Cuban importers pay cash-in-advance for U.S. goods. In other words, they can’t pay on credit, which particularly hurts a poor country like Cuba.
The Obama administration has already watered down that requirement slightly by changing the exact definition for cash-in-advance. But it will take an act from Congress to remove it entirely, just as it will take legislation to eliminate the embargo.
Farmers hope that such action will be forthcoming, but know that Congressional opposition still runs high in parts of the Republican Party. “There are several bills before Congress to ease the embargo,” Rob Elliot, the first vice president of the National Corn Growers Association, said in a statement. “NCGA will continue to educate Congress on the importance of the U.S.-Cuba relationship.”
In the meantime, farmers will still seek ways to export to Cuba even with the embargo in place.
As for the rest of the trade to Cuba, it’s a little more mysterious. Census figures show that the U.S. exported nearly $3,000 worth of jewelry to Cuba in 2014, and $11,000 worth of musical instruments. How is that allowed? Even experts aren’t sure, and the Census hasn’t yet responded to a request for comment. Mario Mancuso, who was the Undersecretary for Commerce from 2007 to 2009, said it might fall under a cultural exchange, which also has a humanitarian exemption. Weinberg thought it could be shipments to U.S. foreign service personnel stationed in Cuba or soldiers at Guantanamo Bay.
“I can’t think of any legal way those would get there [other than that],” she said.
By Danny Vinik, Politico
July 2, 2015