Review of International Business and Trade Law

Download 262.38 Kb.
Date conversion12.05.2016
Size262.38 Kb.
  1   2



Copyright (c) 2008 Asper Review of International Business and Trade Law

Asper Review of International Business and Trade Law

Asper Review of International Business and Trade Law
8 Asper Rev. Int'l Bus. & Trade L. 147
LENGTH: 15383 words
NAME: Michael Margulies*
* J.D. (NYU); A.M. (University of Chicago); B.A. (University of Wisconsin-Madison). I would like to thank Professor Sylvia Law for her guidance, assistance and comments with earlier drafts. I would also like to thank the 2007 NYU Cuba Legal Studies Group. I am grateful to my family and Debbie for all of their support throughout the process of drafting this article. Finally, I would like to dedicate this article to my Zaydi.

Michael Margulies received his J.D. in May 2008 from the New York University School of Law. He previously received his B.A. in History from the University of Wisconsin - Madison, and his M.A. in Social Sciences from the University of Chicago. While in law school, Mr. Margulies served as an Articles Editor for the N.Y.U. Environmental Law Journal and participated in the Brennan Center for Justice clinical program. Mr. Margulies is currently working in New York for the law firm of Kasowitz, Benson, Torres and Friedman LLP.


... Comments by legislators who drafted and supported TSRA are an indication that the OFAC clarifications do not reflect the Congressional intent when TSRA was passed; rather it is a sign of the Bush Administration flying in the face of deliberate Congressional action to ease trade restrictions between the United States and Cuba. ... Alimport stated that the "OFAC rule and its consequent uncertainties about US supply, compelled us to resort to alternative sellers in other foreign countries for $ 300 million in food and agricultural purchases that had originally been planned from the US." ... PERSPECTIVE Since the latter part of the 1990s, beginning with the lobby for the passage of TSRA, various states and industries have placed increasing pressure upon the U.S. government to ease trade and travel restrictions and end the embargo. ... The relative success of TSRA is yet another indicator that it is possible for trade relations to exist between the United States and Cuba, despite the feelings that a large population of south Florida residents harbour towards Cuba - and the Castro regime in particular. ... Should all the requisite factors fall into place on the U.S. side in order to ease or lift the existing trade restrictions against the export of agricultural commodities - or even allow other forms of trade - there is no guarantee that Cuba will seize the opportunity to enter into such an enhanced relationship with the United States.



The United States' trade restrictions against Cuba have been a well-known fact of life for Cubans and Americans alike for over 45 years. Whether known as "the embargo" or "el bloqueo," the prohibition has had an impact upon various factions in both populations. Though lesser known, there have been hundreds of millions of dollars of trade between the two countries for over five years as a result of the Trade Sanctions Reform and Export Enhancement Act (TSRA), which authorizes the export of U.S. agricultural products to Cuba under strict restrictions.

This paper provides an analysis of the history and politics of TSRA, a description of trade relations under this Act, and the Cuban and U.S. perspective of the authorized agricultural trade. Beginning with the political climate and events that have led to the current state of trade relations between the two countries, the article proceeds to identify the possibility for enhanced trade. The subject of the TSRA is important in its own right and may serve as an indicator of what potential exists for future U.S.-Cuban relations. Though such a relationship may prove to be economically beneficial for both the United States and Cuba, there is much more at stake from a historical, political and ideological perspective, which may impede the development of normalized trade and travel relations between the neighbouring countries. The article concludes with the realization that while the economic experience and current political climates may support a policy shift in both the United States and Cuba, the political difficulties may be too great to overcome.


Dating back to the Castro-led Cuban revolution and its defeat of the existing Batista regime on 1 January 1959, there has been an on-going deterioration of relations between the United States and its Caribbean neighbour. As the freshly minted Cuban state quickly implemented its defining policy reforms and aligned itself with Communist Russia, tensions between the proximate nations grew. Exacerbating this troubled relationship, on 17 April 1961 President John F. Kennedy ordered an invasion upon Cuban soil at the Bay of Pigs. This unsuccessful attempt at overthrowing the Castro regime resulted in the death and capture of more than 1,500 U.S.-resident Cuban exiles and the escalation of an already distressed relationship. Determined to cut off all support for the Castro regime, the U.S. government swiftly took actions that would stifle the potential for any future connectivity between the U.S. and Cuba, displacing what had once been a flourishing trade relationship.

In February 1962, President Kennedy issued Presidential Proclamation 3447, initiating the existing U.S. embargo against Cuba, banning nearly all trade between the neighbouring countries. n1 Thirty years later, in 1992, with the prohibitions still intact, President Clinton transformed the Presidential Decree into Congressional Act by signing two pieces of legislation -- the Cuban Democracy Act n2 and the Cuban Liberty and Democratic Solidarity (Libertad) Act. n3 These Acts codified previous laws restricting commercial trade between the United States and Cuba, setting forth specific conditions to be met by the Cuban Government prior to any waiver of the embargo by the U.S. Government. n4 [*149] The intent of the embargo, and subsequent codification of the trade restrictions, was to pressure Cuba to facilitate a multi-party, democratic election process and force Fidel Castro to alter his position regarding "internationally accepted standards of human rights." n5

Since its inception, the embargo has served as the source of great controversy in the United States, Cuba and the global community. n6 It has been widely criticized for its failure to function as an impetus for regime change in Cuba and was even noted as a potential factor in Fidel Castro's ability to retain power for nearly half a century, only then to pass it off to his brother Raul. n7 It can be argued that the embargo has had the exact opposite effect on the Cuban Government and the Castro Regime than what the U.S government had intended when initiating the trade restrictions. n8 More recently, the trade sanctions have been harshly criticized for their impact upon various U.S. economic sectors, specifically the loss of significant earning potential that could result from open trade relations between the United States and Cuba. n9

In 1999, the House Committee on Agriculture held a hearing to address the detrimental effects that unilateral U.S. sanctions on trade with Cuba imposed on U.S. agriculture. n10 Two themes ran through the testimony of Representatives and witnesses from agricultural entities and [*150] governmental agencies. First, a disservice was being done to the larger Cuban population. n11 There were concerns that food and medical supplies were being utilized as a tool to achieve foreign policy goals. The restrictions were seemingly intended to limit any contributions to the success of the Cuban government and stimulate social upheaval by the Cuban populace against the Castro regime. n12 This tactic met both strong popular and political opposition for its inhumane nature and failure to meet its objectives. n13 One representative concluded that the sanctions had a "debilitating effect, not on the leadership, but on the citizens." n14 The sanctions were ineffective in initiating a change in the polity of the Cuban state.

Second, domestically, the more significant concern was the impact felt by American farmers and ranchers. n15 An estimated $ 500 million of agricultural sales were lost annually as a result of embargoes of Iran, Syria, Sudan and Cuba. n16 The trade sanctions aimed at Cuba, specifically, were noted as creating a loss of market share to competing agricultural suppliers (e.g. Canada, the European Union, and Argentina), driving up the prices at which those countries sell their products as a [*151] result of thin competition, and undermining the United States' reputation as a reliable supplier to its regular customers. n17

U.S. farmers and ranchers organized a concerted lobbying effort. It was led by the U.S. Rice Producers, the American Soybean Association, the National Corn Growers Association, etc., with the support of legislators from states dependent upon the success of their agricultural sector (including Nebraska, Michigan, Texas, North Dakota and others). n18 In 1999, Congressman George Nethercutt (R-Wa) and Senator John Ashcroft (R-Mo) proposed legislation to create agricultural trade exceptions to countries against which the United States had imposed unilateral trade sanctions. n19 Trade agreements would be permitted between U.S. agricultural entities and Cuba, allowing for the export of commodities abroad, but continuing the prohibition against the importation of any commodities from Cuba into the United States. n20 Bipartisan support for the measure was eventually achieved by appealing to humanitarian, religious, farm and commodity organizations. n21 In 2000, Congress authorized the sale of agricultural commodities to Cuba with the adoption of the Trade Sanctions Reform and Export Enhancement Act (TSRA). n22 While TSRA created trade exceptions for exported medical and agricultural commodities, it did not affect any other aspects of the existing embargo. n23 Additionally, the exports were subject to strict restrictions and prohibitions. n24

[*152] When the TSRA provisions took effect on 25 February 2001, Cuba did not immediately jump at the opportunity to purchase agricultural commodities from the United States. n25 It took nearly one year and dire circumstances for the Castro regime to accept the U.S. offer. n26 Following the disastrous effects of Hurricane Michelle in November 2001 and the subsequent food supply shortages experienced by the Cuban population, the Cuban government not only continued to reject the opportunity to import U.S. food products, but more significantly it also turned down the U.S. offer of disaster assistance. n27 It was not until later - by the end of 2001, when their food reserves had become fully depleted - that Cuba finally seized the opportunity to purchase bulk agricultural commodities from the United States. n28 The Cuban government had felt slighted by the fact that the entire embargo had not been repealed; rather the U.S. government had only opened up a specific sector with significant restrictions. n29

TSRA-authorized trade was a significant initial step, easing the trade restrictions and moving towards opening trade, social and political relations. However, it was also a sign of the difficulties that will surely be encountered in any enhanced relationship between the United States and Cuba. Cuba's reluctance to immediately enter into such a relationship with the United States, once TSRA had been passed, is a strong indication that there are not only economic factors at play in the limited trade relations between the two nations, but a multitude of other factors. Any normalization of a U.S.-Cuban trade relationship will be played out against an imposing political, historical and ideological backdrop.


Opening the door to the export of medical and agricultural commodities, while a step forward, was accompanied by a number of daunting obstacles for those wishing to take advantage of TSRA. The legislative and administrative requirements have presented a series of burdens and logistical setbacks for interested U.S. [*153] corporations, which have served as a prohibitive factor for some. Over the years, it has become exceedingly difficult for firms to take advantage of the legislation and tap into the potential benefits of trading with the Cuban state.

While the passage of TSRA allowed the export of U.S. agricultural products to Cuba, such sales are subject to extensive conditions, restrictions and prohibitions, n30 making any commercial relationship difficult to navigate and flourish. The Department of Treasury's Office of Financial Asset Control (OFAC) requires any U.S. corporation exporting exempted agricultural products to Cuba to obtain a license, specifically depending upon the product to be sold. n31 The language in the TSRA provisions detailing the licensing of agricultural exports has been described as "unclear and contradictory," generating conflicts over its application. n32

In addition to the confusion over the complex licensing mechanism, TSRA details payment and financing terms to ensure that Cuba does not receive any financial benefit from approved transactions. n33 Consistent with the existing economic sanctions, U.S. banks, private entities, and local, state, and federal governments are expressly prohibited from providing trade financing or credit to facilitate the purchase of agricultural products by Cuba or any person in Cuba. n34 Under the TSRA, payment for agricultural sales to Cuba must be made by "cash in advance" n35 or financed through a third country bank. n36 For a [*154] country that does not have much capital, n37 and a very poor credit ranking with foreign countries, n38 the TSRA payment options greatly restrict the ability for Cuba to purchase an optimal amount of agricultural commodities from the United States.

In 2004, U.S. financial institutions became so confused by the TSRA language, and the OFAC licensing procedures, that they ceased payments and sought guidance from the Department of the Treasury. n39 It was unclear whether the "payment of cash in advance" requirement intended for funds to be received by the U.S. financial institutions prior to the seller's shipment of the goods, or prior to the transfer of the goods from the seller to Alimport, the sole body authorized by the Cuban government to import food products into the country. n40 In response, OFAC clarified the phrase "payment of cash in advance" to mean that "payment is received by the seller or the seller's agent prior to shipment of the goods from the port at which they are loaded." n41 OFAC Director Robert Werner claimed that the clarification "conforms to the common understanding of the term in international trade." n42 However, this clarification has further constrained trade relations between U.S. agricultural entities and Cuba, drawing criticism from both.

The 2004 Treasury Department's tightening of an already difficult trade structure was seen by legislators who drafted TSRA, as well as [*155] leading figures in the U.S. agricultural industry, as the Bush Administration's attempt to further restrict trade with Cuba. n43 This measure has been considered a "deliberate misinterpretation of the Trade Sanctions Reform Act," that could destroy all of the progress that had been achieved over the nearly five years since the Act was passed. n44 Comments by legislators who drafted and supported TSRA are an indication that the OFAC clarifications do not reflect the Congressional intent when TSRA was passed; rather it is a sign of the Bush Administration flying in the face of deliberate Congressional action to ease trade restrictions between the United States and Cuba. Senator Byron Dorgan (D-ND), commented that he "wrote the law that they are now misinterpreting, [which] does not require the wrong headed action they are taking today." n45 Senator Max Baucus (D-MT) referred to the "administration's attempt to keep [states] from selling agricultural products to Cuba [as] an outrage." n46 Further adding that he had "worked hard with Congressional colleagues to open up trade with Cuba... [and is] not going to let Treasury Department bureaucrats shut the door on Cuba trade that Congress purposefully opened." n47

Shortly after the OFAC "clarification" was made, Representative Moran (R-KS) and Senator Craig (R-ID) introduced H.R. 719 n48 and S. 328 n49, respectively. The purpose of the proposed legislation was to clarify and codify the Congressional intent of TSRA, "that a seller of a product authorized under [TSRA] receive payment only before a Cuban purchaser takes physical possession of that product." n50 Additionally, proposed Acts would allow "for travel to, from, or within Cuba in connection with activities undertaken in connection with sales and marketing," n51 which would more easily facilitate TSRA approved trade. However, the House and Senate bills were not reported out of their respective committees.

[*156] Aside from legislative concerns, the practical effect of the OFAC clarification of "payment of cash in advance" has created greater difficulties for the U.S. role in the Cuban economy, while allowing other competing nations to advance their own position. The longer an importer has to wait for goods to arrive, for which it has already paid, the more likely they are to look elsewhere for goods. n52 The OFAC clarification is merely another obstacle to successful trade relations, constraining the opportunity for the U.S. agricultural firms to achieve long-term market potential in Cuba, while other foreign competitors advance their own potential. n53

The most burdensome restriction to successful trade relationships between U.S. agriculture corporations and Cuba may be the stringent prohibitions on the travel of U.S. citizens to Cuba. In order for a representative of a U.S. firm to travel to Cuba to negotiate the commercial export sale of agricultural commodities, he or she must obtain an additional license through OFAC - which adds another burdensome element to the process. n54 Effective June 2004, President Bush further tightened the restrictions regulating U.S. citizen travel to Cuba. n55 The new regulations not only affect those entering into trade agreements with Cuba, but also Cuban-Americans visiting family, students participating in educational activities and any others visiting non-Cuban nationals. n56

One way for U.S. agriculture entities to avoid this hurdle is by granting power of attorney to a third party who can more easily travel to Cuba, but this creates a whole other set of potential legal complications. n57 The inability for U.S. agriculture companies to meet face [*157] to face with Alimport, n58 the Cuban state run food purchasing agency, makes it difficult for the parties to strike deals, restricting the prospects of taking advantage of the intentions of TSRA. n59 It has been estimated that lifting the travel restrictions would produce an additional US$ 126 million to $ 252 million in annual U.S. agricultural exports and create an additional 3,490 to 6,980 jobs for Americans. n60

The TSRA and OFAC restrictions make it more difficult for Cuba to enter into an agricultural trade agreement with U.S. firms compared to other countries who do not present similar hurdles. Though agricultural trade agreements may be mutually beneficial to both the Cuban population and the U.S. agricultural industry, the complex regulations, referred to by Alimport as a "maze of restrictions...[has] pushed the Cuban market away from [U.S.] competitive and professional supply and in favor of [U.S.] competitors elsewhere who are aggressively keen to deal with [Cuba]." n61 There may be economic incentives for Cuba to trade with the United States, but the extent of prohibitions and restrictions often seem to outweigh the benefits.


The United States and Cuban governments report significantly different figures on the amount of U.S. agricultural commodities purchased by Cuba. U.S.-generated figures claim that $ 1.7 billion n62 in agricultural products (i.e. those qualifying under TSRA) have been purchased by Cuba since trade relations were re-established in [*158] November 2001. n63 Alternatively, Alimport has issued a report claiming that Cuba has made $ 2.1 billion in actual cash payments for U.S. food and agricultural products for the same period. n64 However, common trends can be identified in both sets of figures.

Sales increased steadily for the first few years after TSRA was codified, as a larger number of U.S. agricultural firms became involved in trading with Alimport. n65 According to one set of figures, sales rose from $ 7 million in 2001, to $ 146 million in 2002, to $ 259 million in 2003, to $ 404 million in 2004. n66 However, after travel restrictions were tightened by the Bush administration in 2004 and the Treasury Department clarified the "payment of cash in advance" language of TSRA, sales dropped as relationships became more difficult to maintain under the new regulations. In 2005, as a result of the tightened restrictions, agricultural exports to Cuba fell by nearly 25%. n67 For the first time since the initiation of agricultural trade under TSRA, the amount of trade between the two countries decreased; in 2005 Cuba purchased only $ 369 million in agricultural commodities. n68 Though sales slightly rebounded in 2006, n69 it is not clear that the level of growth will reach the levels attained prior to the enactment of the additional restrictions in 2005. The additional restrictions have had a significant effect on the fragile trade relations. Alimport stated that the "OFAC rule and its consequent uncertainties about US supply, compelled us to resort to alternative sellers in other foreign countries for $ 300 million in food and agricultural purchases that had originally been planned from the US." n70 There is no guarantee that U.S. agricultural entities will be able to regain the share of the Cuban market that has been lost.


Since the beginning of the Special Period -- the period of economic crisis in Cuba, at its worst from 1990-1993, following the termination of its special trade relationship with the former Soviet Union -- Cuba has had to alter priorities within its economic infrastructure and identify a variety of new international trade partners to meet its needs. n71 Such opportunities have been created by the new geopolitical reality in Latin American nations, such as Venezuela and Bolivia, which share Cuba's opposition to "neo-liberal globalization" and capitalist imperialism. n72 In 2006, the three countries entered into the Agreement for the Application of the Bolivarian Alternative for the Peoples of Our America and People's Trade Agreement, which calls for cooperation in health, trade, education and other joint ventures to mutually benefit one another. n73

The burgeoning relationship between both Fidel and Raul Castro and Venezuelan President Hugo Chavez, in particular, has been fruitful for the two nations. A recent agreement between them has resulted in the transfer of low-cost Venezuelan oil exports in exchange for Cuban medical services. n74 The U.S. government estimates that Venezuelan oil "subsidies" reached more than $ 2 billion in 2006, while also providing upwards of $ 500 million in credit for various projects, including housing and electricity. n75 As further indication of how this relationship has flourished, in 2004 and 2005 Cuba imported more than double the amount of commodities from Venezuela than they had from any other nation. n76 In this new political climate, Cuba's continued investment in medical services and education, even throughout the Special Period, is paying off in large returns, as there is an increasing demand for such services by Latin American and Caribbean countries. n77

China is another example of a country that has improved its standing with Cuba and increased trade relations with Cuba since the [*160] dissolution of the Soviet Union. n78 Through the deferral of loan payments -which Cuba incurred during the Special Period -- and grants of credit, China has steadily increased its role in the Cuban trade market in recent years as a result of the countries' similar political regimes. n79

While TSRA has allowed the United States to play a role in the Cuban economy, American interests have not flourished quite like those of Venezuela and China. Though the United States entered the Cuban market in 2001 and steadily increased their share for nearly four years, 2005 presented a stumbling block in that growth. n80 Following the Bush administration's tightening of trade and travel restrictions, the U.S. share of the Cuban import market decreased from 8% to 6%, while Venezuela increased their share from 20% to nearly 25%, and China's share increased from 10.5% to 11.8%, surpassing Spain. n81 Today, the U.S. Department of State claims it is the fourth largest supplier of goods to the Cuban economy, behind only Venezuela, China and Spain. n82 Despite the fact that it solely provides agricultural commodities to Cuba in the face of increased restrictions, the United States has clearly made its presence felt amongst other nations competing for a position in the Cuban market.

Cuba has continually claimed that its government is open to any and all trade with the United States, explicitly placing the burden on the United States to normalize and enhance trade relations between the two countries. Alimport has issued statements reflecting the desire to normalize the regulatory business environment and continue to increase the amount of U.S. imports. n83 They have reached out to U.S. states with strong agricultural interests, as well as to U.S. agricultural firms. n84

The most significant advantage Cuba has in trading with the United States is the savings that can be achieved on transportation costs, as compared with those costs when trading with European, Asian [*161] or even South American countries. n85 Cuba annually imports approximately $ 1 billion of agricultural goods from countries other than the United States, of which transportation costs constitute nearly thirty-five percent of production costs. n86 It has been estimated that Cuba can save up to $ 100 million annually on transportation costs alone, should it import primarily U.S. agricultural products. n87 With those figures in mind, one would imagine that the savings realized would be enough to motivate Cuba to meet restrictions and regulations required by TSRA and OFAC. Consistent with this premise, the Cuban Chamber of Commerce has indicated that if the United States wishes to open a dialogue with Cuba, opening trade lines between the two countries, then Cuba would be interested. n88 The cheaper transportation costs as a result of the geographical proximity would be a very strong factor influencing Cuban trade relations with the United States over other international trade partners. n89

However, the situation is not so clean cut when viewed outside of the sheer economic lens and perspective from which the Cuban Chamber of Commerce may be approaching the situation. The state of affairs is more complex than a mere economic analysis would indicate. This is evidenced by statements made by Raul Castro, while sitting as Acting President of Cuba, shortly after assuming office. n90 In a December 2006 speech commemorating the 50th anniversary of the Cuban Revolution, Raul stated:

We take this opportunity to once again state that we are willing to resolve at the negotiating table the longstanding dispute between the United States and Cuba, of course provided they accept, as we have previously said, our condition as a country that will not tolerate any blemishes on its independence, and as long as said resolution is based on the principles of equality, reciprocity, noninterference and mutual respect. In the meantime, after almost half a century, we are willing to wait patiently until [*162] the moment when common sense prevails in the Washington power circles. n91

These statements reflect not only the state of economic and trade relations, but also to the social and political relations between the United States and Cuba; yet another indication that much more than mere economics is at play when speaking of normalizing trade relations between the two nations. Political, ideological and historical forces lie at the root of the 50 year standoff between the United States and Cuba, and trade relations cannot be expected to exist independently of these other forces. While Alimport and the Cuban Chamber of Commerce may be making significant strides in developing relationships with U.S. states and agricultural entities, the Castro government has made it clear that U.S. recognition of their regime is necessary before trade relations can flourish.


Since the latter part of the 1990s, beginning with the lobby for the passage of TSRA, various states and industries have placed increasing pressure upon the U.S. government to ease trade and travel restrictions and end the embargo. TSRA is seen as the necessary first step in the longer journey towards the total breakdown of the embargo and a changed political stance with respect to Cuba and the Castro regime. n92 However, while a segment of the U.S. public is in favor of lifting the embargo and the associated restrictions, there are also those who believe "the embargo is finally working and to lift it now would only add strength to the Castro regime and betray the faith of those Cubans who have supported U.S. policy since the revolution." n93 The pro-embargo contingency is in favor of retaining the hard-line U.S. policy toward Cuba and believes TSRA is the unfortunate catering of the U.S. government to special interests that directly benefit from the expanding trade. n94 Those same interests would see an end to the embargo while the Castro regime remains in power as the worst possible outcome. They believe catering to [*163] foreign and domestic powers opposing the embargo would equate to a complete failure of the policy pursued over the last 45 years. n95

The push to limit trade and travel restrictions imposed against Cuba has been spearheaded by a number of economically depressed states in the U.S. whose agricultural sectors are constantly in search of export opportunities. n96 Since agricultural trade with Cuba has been permitted under TSRA, numerous commercial agreements have been signed between Alimport and primarily Southern and Midwestern states. n97 Those states who see economic potential under the new policies have advocated greater easing of the trade and travel restrictions. Southern and Midwestern states have also been the most active in encouraging enhanced trade relations as they stand to benefit the most. n98 One study estimates that 60,000 new jobs in Southern states would be realized if uninhibited trade with Cuba resumed. n99 In Alabama alone, the Alabama Department of Agriculture and Industries reported that since TSRA was passed, sales to Cuba have had a total impact of $ 300 million on the state economy. n100 Even in the state of Florida, which has traditionally been home to the strongest opposition to opening up trade relations with Cuba and the Castro regime, n101 there has been a move to take advantage of the economic opportunities that would result from agricultural trade relations with Cuba. n102

[*164] In addition to cities and states, a variety of other entities have entered into agreements with Alimport as trade continues to flourish. Ports, primarily along the Gulf of Mexico, have struck commercial deals with Alimport for the shipping of agricultural commodities to Cuba, including: Mobile, Alabama; Corpus Christi, Texas; Manatee, Florida; Houston, Texas; Philadelphia, Pennsylvania; Lake Charles, Louisiana; and New Orleans, Louisiana. n103

Highlighting the diversity of entities seeking to take advantage of this newly emerging market by entering into trade agreements with Alimport, in 2006 the Navajo Nation in New Mexico, through the Navajo Agricultural Products Industry, signed a letter of intent to sell agricultural commodities to Cuba. n104 The Navajo President was not only enticed by the deal's recognition of the Navajo as a sovereign nation within a nation, but also the capacity to generate millions of dollars for its population. n105 The delegation that traveled to Havana to negotiate the deal with Alimport was the highest level U.S. delegation to visit Cuba since presidential power was transferred from Fidel to Raul Castro on 31 July 2006. n106

Additionally, agricultural trade associations, such as the U.S. Rice Federation, U.S. Rice Producers Association, U.S. Wheat Associates, U.S. Grain Council, and U.S. Soybean Association have entered into commercial trade agreements to export commodities to Cuba. n107 The U.S. rice industry has been outspoken regarding trade relations with Cuba, testifying at Congressional hearings and lobbying for relaxing the restrictions. Prior to President Kennedy's declaration initiating the embargo, Cuba was the U.S. rice industry's top export market. n108 From the beginning of the embargo through the adoption of TSRA, Southeast Asian countries such as China, Vietnam and Thailand had cornered Cuba's rice import market. n109 However, since late 2001, the U.S. rice industry has begun to regain a share of that market, exporting $ 64 [*165] million of rice to Cuba in 2004. n110 Other U.S. agricultural industries have followed a similar path, lobbying for less restrictive trade regulations, specifically the 2004 OFAC clarification, in order to increase their market share in the Cuban economy. Alimport has even taken an official stance, encouraging states and other entities with whom they have entered commercial agreements to lobby Washington to put an end to the embargo. n111


Since the passage of TSRA, United States legislators have come under significant and increased pressures to end the trade embargo and all related trade restrictions. The lessons learned from trade between the United States and Cuba under TSRA has highlighted the lost economic opportunities resulting from the embargo and the trading potential that exists between the two countries. One study estimates that, should the embargo be repealed and the United States pursue investments in Cuba, agricultural exports could approach nearly $ 517 million of value added annually to the U.S. economy. n112 The same study calls for an additional 10,656 jobs created in the agricultural sector. n113 States that would stand to benefit the most from value added and employment are Arkansas, Iowa, California, Texas and Nebraska. n114

The potential for such significant economic advancement, in the agricultural sector and beyond, have created a political climate ripe for governmental action to ease the trade restrictions and move closer towards ceasing the embargo. Policy specialists have identified a multitude of reasons aside from economic achievements, including human rights, education and travel, in support of a shift in U.S. policy [*166] towards Cuba. n115 In recent years, a number of new coalitions formed to lobby for a change in policy, resulting in important governmental officials increasingly supporting change and proposing legislation in Congress. n116 Politicians have utilized the success of TSRA as a springboard to advance even more progressive trade measures and policy goals.

In 2002, President Carter became the first U.S. President to travel to Cuba since 1928, as he ventured upon a mission to mend relations between the neighbouring countries. n117 The former President expressed the goals he hoped to achieve:

[A] Cuba fully integrated into a democratic hemisphere, participating in a Free Trade Area of the Americas and with our citizens traveling without restriction to visit each other. I want a massive student exchange between our universities. I want the people of the United States and Cuba to share more than a love of baseball and wonderful music. I want us to be friends, and to respect each other. n118

While this ambitious vision extends far beyond the mere opening of trade relations, President Carter recognized that the first step involves an act of Congress to lift the embargo, creating an open trade relationship and permitting unrestricted travel. n119 These words were not only a good will gesture towards the Cuban government and people, but were a plea to U.S. legislators to take action regarding existing policy towards Cuba.

[*167] More recently, in December 2006, a delegation representing the House of Representatives' Cuba Working Group traveled to Havana as the largest U.S. delegation to visit Cuba since the Revolution. n120 The 10 person delegation, a bi-partisan group led by Representative Delahunt (D-MA) and Representative Flake (R-AZ), met with foreign minister Felipe Perez Roque and economic minister Yadira Garcia to discuss various issues of U.S.-Cuba policy and improved relations. n121 This visit was another factor that has led to the recent proliferation in proposed legislation regarding enhanced relations between the two countries.

Within the first three months of 2007 alone, four bills were proposed in the House and one in the Senate with the express goal of breaking down travel and trade restrictions between the United States and Cuba. These include: the Cuba Reconciliation Act, n122 the Export Freedom to Cuba Act of 2007, n123 the Agricultural Export Facilitation Act of 2007, n124 Free Trade with Cuba Act n125 and the Freedom to Travel to Cuba Act of 2007. n126 Though the bills have varying degrees of support in their respective houses, the sheer volume of these proposals is a strong indication that there is sentiment in Congress favouring the improvement of trade and travel relations with Cuba.

[*168] President Bush has made it clear that he would veto any attempt by Congress to relax trade and travel restrictions with Cuba. n127 Since the beginning of his Presidency, Bush has affirmed, that "[t]he United States...will oppose any attempts to weaken sanctions against the Castro regime until it respects the basic human rights of its citizens, frees political prisoners, holds democratic free elections, and allows free speech." n128 Any change in congressional policy towards Cuba, encouraging the easing of trade and travel restrictions, would confront a veto.

One of the most significant reasons that President Bush and his executive predecessors have taken little, if any, action to improve relations with Cuba is the political influence of the Cuban-American population residing in south Florida. n129 Should the sentiment of this support base begin to shift away from its strong anti-Castro views toward a more cooperative stance, there is reason to believe the executive would be more responsive to the legislature's proposals. There is reason to believe this shift is already underway. n130


Over the years, a key factor preventing the adoption of any legislation or policy initiatives that would open trade relations with Cuba has been the presence of a strong political contingency of Cuban-Americans residing in southern Florida. From the early days of the Cuban revolution through the present, nearly one million Cubans have left their homeland for the United States for economic, political and familial reasons. A large majority of these exiles currently reside in south Florida. n131 For decades, these Cuban-Americans, both first-generation immigrants and their children, have carried strong political weight [*169] influencing not only domestic issues but also the creation and enforcement of the federal government's policies towards Cuba and the Castro regime. The Cuban Democracy Act, which created additional trade restrictions and codified the embargo in 1992, was signed by President Bush at the behest of the Cuban-Americans residing in Miami. n132 There was a strong belief amongst that population that a tightening of the embargo would trigger Castro's fall from power. n133

As witnessed in the 2000 presidential election, appealing to Cuban-Americans in any election in Florida is critical because of their sheer number and tremendous political influence. n134 Over the last decade a small number of swing states have played a pivotal role in determining the winner of closely challenged races, particularly in Presidential elections due to the Electoral College system. As a result, states like Florida, Ohio, Michigan and Pennsylvania have obtained disproportionate influence, with strong voting bases like the Cuban-American population in south Florida becoming increasingly critical. While this population base has developed considerable influence in Florida, its significance has simultaneously transcended to the national level. Hence, it is no surprise that legislators and other officials in Washington have catered to the majority Cuban-American sentiment in Miami when crafting Cuba related policy.

The majority of Cuban-Americans residing in south Florida, primarily those first generation immigrants who fled Cuba in the first wave after the Revolution, favour the U.S.-Cuban trade embargo, President George W. Bush's handling of the situation in Cuba, and the additional trade and travel restrictions imposed by the Bush administration in 2004. n135 An overwhelming majority of immigrants that [*170] arrived before and during the 1970s still support a continuation of the embargo and the Bush administration's tighter restrictions. n136 However, the same cannot be said of second and third generation Cubans or those Cuban-Americans who arrived in south Florida in the 1980s or later. n137 Though a very slight majority of those Cuban-Americans favour a continuation of the embargo, the majority oppose the Bush administration's additional restrictions. n138

These figures are an indication that a transition is occurring in this influential population's political leanings and policy aims. As the older generation of Cuban-Americans begins to pass, it is likely that the pendulum will swing. Should the trend continue, the majority sentiment in south Florida will soon be opposed to the embargo and tight travel and trade restrictions against Cuba. This fundamental change will be a very strong factor in the future of trade and travel relations between the United States and Cuba.


Though contemporary trade relations between the United States and Cuba have only existed since the adoption of TSRA in 2001, there are many lessons to be learned from these recent experiences should the U.S. government choose to make a concerted effort to expand its presence in the Cuban economy beyond severely restricted agricultural trade. In addition, the historical and political context that lead to the adoption of TSRA may well serve as an indicator of what potential exists for trade relations to normalize and even flourish between the United States and Cuba. Some analysts have suggested that we are at a critical juncture in the relations between the two countries. n139

On 31 July 2006, Fidel Castro issued a provisional resignation from his positions in the Cuban Government, appointing his brother, Raul Castro Ruiz, as his successor. Less than two years later, on 19 February 2008, Fidel issued his official resignation from his posts as President of the State Council and Commander-in-Chief of Cuba, being [*171] officially succeeded by Raul. n140 There has been speculation that Cuba might shift to a different economic model under Raul, more similar to that of China or Vietnam, but there has been little change to date. n141 However, the Cuban public's expectation for economic and policy reform may have some influence over the country's new leadership. n142

Raul has made various public offers to engage in a dialogue with U.S. leaders regarding trade reform between the two countries, n143 but those offers have been rejected by U.S. officials who maintain that the implementation of a transitional Cuban government is a precondition to any talks to ease or suspend the embargo. These officials take a hard-line stance towards the Cuban Liberty and Democratic Solidarity Act of 1996, n144 which sets forth specific conditions for the suspension of the embargo, including the existence of a transitional government that does not include Fidel or Raul Castro. With President Bush at the forefront of this charge, there is little chance that any reform will occur prior to the end of his term in January 2009.

The Executive and the Presidential Veto have served as an immovable obstacle to any such change in policy since the implementation of the embargo. TSRA has been the only exception to the embargo not opposed by the executive, since President Kennedy initiated the trade restrictions by decree. However, even TSRA has been ratcheted up by President Bush, through the Treasury Department, to ensure that the force of the embargo will remain strong until the objectives of the Cuban Democracy Act and the Cuban Liberty and Democratic Solidarity (Libertad) Act have been met. n145 Steps taken by TSRA-authorized trade to ease restrictions were quickly constricted by the President's actions. This political stalemate n146 is one looming factor - within the U.S. sphere -- that [*172] does not bode well for the prospects of enhanced trade relations. However, there is the prospect that the next President may recognize the shift in public sentiment toward Cuba and the potential benefits to the economy to be gained through policy change and an easing of trade restrictions.

As the election of a new U.S. President is quickly approaching, this may bring the United States and Cuba closer to a crossroads in defining future trade relations. Candidates Hillary Clinton and John McCain have assumed a conditional stance towards engaging in a dialogue with the Cuban leadership, more consistent with that of the current administration. Candidate Barack Obama, at the other end of the spectrum, has outwardly expressed an interest in shifting the U.S. policy towards Cuba. In 2004, Obama suggested that it is time to repeal the embargo and rethink existing U.S. policies toward relationships with Cuba. n147 More recently, in response to Fidel's resignation, Obama stated, "If the Cuban leadership begins opening Cuba to meaningful democratic change, the United States must be prepared to begin taking steps to normalize relations and to ease the embargo of the last five decades." n148 This suggests that any dialogue with Raul Castro would not be subject to the same preconditions detailed in the Cuban Liberty and Democratic Solidarity Act of 1996. With Raul and Obama in their respective offices, the countries would have their best chance at engaging in enhanced trade relations.

However, this complex relationship is much larger than the individuals occupying the respective offices of the presidencies. There are a multitude of factors pertaining to the U.S. political environment, the Cuban socio-political atmosphere and international trade markets that will influence future U.S.-Cuban trade relationships.

The current political and economic climate in the United States would indicate that the time is ripe for a progressive change in favour of enhancing agricultural trade relations, or even expanding trade to other sectors, so that the United States could take advantage of this potential market. Prior to the adoption of TSRA, there was a concerted effort by congressional representatives advocating for the agricultural exception to [*173] the trade embargo. n149 Economically depressed states recognized that Cuba, and other countries against which the United States had imposed unilateral trade sanctions, presented an opportunity to stimulate their economy. n150 Similarly today, a large number of representatives from states who stand to benefit from additional trade with Cuba have not only spoken out in favour of easing restrictions prohibiting trade and travel to Cuba, but have also proposed and co-sponsored relevant legislation in both congressional houses. n151

Local and state governments have also become increasingly involved in the embargo and trade relations, as they have solicited Congress and the Executive Branch to end the embargo and move towards normalized relations. Somewhat of a localized grass-roots movement has developed in support of a change in U.S. policy towards Cuba. Nearly twenty cities across the United States - including Philadelphia, Oakland, Las Vegas, and Milwaukee - have established sister-city relationships with Cuban cities. n152

Concurrently, the shift that appears to be occurring amongst the influential Cuban-American population in south Florida n153 regarding attitudes towards relations with Cuba may support a change in policy. Although this voting block has traditionally opposed the easing of trade restrictions, the second and third generations of Cuban-Americans favour a step back from the hard-line isolationist position. n154 As the shift continues to evolve, this group becomes less likely to exhibit such strong opposition to any enhanced trade policy, and potentially more likely to favour such policy. The relative success of TSRA is yet another indicator that it is possible for trade relations to exist between the United States and Cuba, despite the feelings that a large population of south Florida residents harbour towards Cuba - and the Castro regime in particular.

Should all the requisite factors fall into place on the U.S. side in order to ease or lift the existing trade restrictions against the export of agricultural commodities - or even allow other forms of trade - there is no guarantee that Cuba will seize the opportunity to enter into such an enhanced relationship with the United States. As evidenced by its initial rejection of the U.S. offer to export agricultural goods in 2001, immediately following the adoption of TSRA, n155 Cuba may be less willing [*174] to accept such an offer than an economic analysis would indicate. For Cuba, U.S. commodities - whether agricultural or of another nature - may be significantly cheaper than those offered by other trade partners, as a result of the proximity between the two countries and the related transportation costs. n156 The Cuban government, however, whether under the leadership of Fidel or Raul, has very strong ideals and convictions when it comes to relations with the United States. These may impede the expansion of any such trade.

It is well known that one of the central tenets of the Cuban Revolution and the Castro regime is a strong policy against "neo-liberal globalization," the United States and capitalist imperialism. n157 These convictions may lead Cuba to balk at the opportunity to take advantage of some forms of trade with the United States. Such selectivity has been present even under TSRA-authorized trade with Alimport. Cuba has claimed that the reduction in purchases by Alimport in 2005 came not as a result of tightened restrictions by the Bush administration and subsequent difficulties working out contracts with U.S. agricultural entities, but rather as a result of "efforts by the government of the Republic of Cuba to increase the motivation of United States-based companies, organization; state and local governmental representatives; and Members of the United States Congress to be more visible in their lobbying efforts for changes in United States policy, law and regulations." n158

While the U.S. government believes it is in a position to alter Cuban policy through the implementation of trade sanctions and the embargo, the Cuban government believes it is in a similar position to alter U.S. policy by refusing to purchase U.S. commodities. The likely outcome of these conflicting views is a political impasse, resulting in the continuation of the status quo, unless one country chooses to take decisive action toward the situation's resolution. The United States appears to be in the better position to take that first step toward resolving the standoff by further relaxing trade restrictions. n159 As evidenced by the tenure of the Castro regime, the U.S.-implemented trade restrictions have not been successful in attaining the goal of a democratic political structure in Cuba. Should the United States take the initiative and relax its existing trade policy towards Cuba, it is possible [*175] that the Cuban government would view such an act as a symbol of U.S. recognition of Cuban independence and governance. However, there is no guarantee the Castro regime would respond accordingly and tensions may continue.

Another relevant factor that may dictate the success of any future U.S.-Cuban trade relations is the state of Cuba's existing partnerships with other foreign countries. Since the Special Period, Cuba has developed strong ties with a number of international trade partners, including Venezuela, China, Spain, Canada, Holland, Brazil, Germany, Italy and Mexico. n160 Though the United States has also played a role in Cuban foreign trade since 2001, solely through TSRA-authorized exports, its share of this total market has hovered around 5%. n161 This figure may be impressive given the associated prohibitions and restrictions, but other countries are taking advantage of the Cuban market where the United States would appear to have a leg up on the competition. Alimport itself, in statements made to private entities currently trading with Cuba, noted that "[t]he opportunities available in this neighboring and traditionally friendly country are being tapped by your competition elsewhere in the world." n162 The potential share of the U.S. role in Cuba's total foreign trade, should trade be expanded and travel restrictions be eased or repealed, far exceeds its current state.

While Cuba has been outspoken about the mutual benefits of enhanced trade relations with the United States, n163 it might not be willing to sacrifice the relationships developed with trade partners that have stepped up since the dissolution of the Soviet presence in Cuba. In particular, trade relations with Venezuela, Bolivia and China, because of their similar political ideals, n164 will likely flourish in years to come, making it increasingly difficult for the United States to occupy any share of the market those countries currently possess. Additionally, countries that are willing to enter into trade agreements with Cuba on the basis of credit, as well as those prepared to defer pre-existing loan payments, will [*176] have a greater opportunity to play an increased role in Cuban foreign trade. n165 Though Cuba does not have any outstanding loans with the United States, the "payment of cash in advance" requirement of TSRA n166 and the subsequent OFAC clarifications of this terminology n167 render the United States a less attractive trade partner than countries offering transactions on the basis of credit. Even if the U.S. Congress can pass legislation easing these restrictions, Cuba's poor credit rating n168 might discourage U.S. corporations and banking institutions from entering into such agreements.

Finally, Cuba's long-term development of human capital, through its investment in education and health care services, places the country in a position to give priority to partners willing to enter into trade agreements exchanging goods for services. Venezuela has eagerly taken advantage of such exchange, exporting oil and other commodities to Cuba in return for medical personnel. n169 As a result, Venezuela occupies nearly a quarter of Cuba's foreign trade market; this stronghold on the Cuban market will not likely be displaced by other trade competitors or the United States, even if the embargo is lifted. The fact that the United States does not have as pressing a need for Cuban health care services or education, one of Cuba's major new export prospects, n170 as other potential Cuban trade partners may restrict the ability for the U.S. share of Cuban foreign trade to dramatically increase.

Assessing these factors holistically, the U.S. and Cuban political environments and the existing state of Cuban trade relations with other foreign entities make it appear quite difficult for the United States to improve its standing in the Cuban foreign trade market. There are not only economic factors, but strong political, ideological and historical factors that will dictate how any such relationship will develop. We have seen this dance played out through the evolution of agricultural exports to Cuba, authorized by TSRA. The experience over the last six years during which this trade has been operating, and the years leading up to the adoption of TSRA, serve as a strong indicator of the potential that exists for a U.S.-Cuban trade relationship to flourish. However, it has also provided a snapshot of the associated difficulties given the ideological differences between the two countries, the historical tension [*177] and the complex political climate under which any future relationship would exist.
Legal Topics:
For related research and practice materials, see the following legal topics:

Estate, Gift & Trust LawPowers of AttorneyGeneral OverviewInternational Trade LawImports & ExportsGeneral OverviewTransportation LawEmbargo

n1 The proclamation, which came on the heels of the Cuban Government's confiscation of property in Cuba owned by U.S. citizens and corporations, prohibited the importation of all goods of Cuban origin, all goods imported from or through Cuba and all exports from the United States to Cuba. See Embargo on All Trade with Cuba, 27 Fed. Reg. 1085 (1962) 3 C.F.R.
n2 Cuban Democracy Act, 22 U.S.C. §§ 6001-6010 (2007) (restricting the importation and export of any goods between the U.S. and Cuba).
n3 Cuban Liberty and Democratic Solidarity (Libertad) Act, 22 U.S.C. §§ 6021-6091 (2007) (restricting any kind of foreign investment in Cuba).
n4 For the embargo to be waived, the Cuban Government must show signs that they have, "held free and fair elections...; permitted opposition parties ample time to organize and campaign for such elections...; [shown] respect for the basic civil liberties and human rights of the citizens of Cuba; [moved] toward establishing a free market economic system; and committed itself to constitutional change that would ensure regular free and fair elections...." 22 U.S.C. §§ 6007(a)(1)-(5).
n5 See 22 U.S.C. § 6001 (highlighting Congressional findings and naming Castro specifically throughout).
n6 The embargo has been criticized for at least three of the following reasons: (1) the U.S. Government's inappropriate use of food and medical supplies as a tool to achieve foreign policy goals; (2) lost opportunities for various sectors of the U.S. and global economies; and (3) providing a platform upon which the Castro Regime has maintained political authority in Cuba.
n7 See Josep M. Colomer, "Who Could End the Embargo? A Game-Theoretical Perspective" (2004) 14 Transnat'l L. & Contemp. Probs. 163 at 171. The embargo has been used as a tool to assist the Cuban leadership base, serving as an excuse when criticized for the policy failures of their communist experiment. The economic sanctions can even be viewed as an impediment to the furtherance of Cuba's political liberalization.
n8 The Cuban government has benefited from the embargo, in using it as an "alibi for its own failures and as a platform for moral condemnation of the United States." Ibid. at 163.
n9 For example, Rep. Jerry Moran from Kansas has criticized the lost economic opportunities on behalf of the constituents from his state. Rep. Jerry Moran, "Time for a Change in Cuba Trade Sanctions" Wichita Eagle (24 December 2006) at A3.
n10 U.S., Economic Sanctions and the Effect on U.S. Agriculture: Hearing Before the H. Comm. On Agriculture, 106th Cong. (1999) at 1-76 [106th Hearings].
n11 See ibid.
n12 Ibid. at 1 (statement of Rep. Larry Combest, Chairman, H. Comm. on Agriculture) ("[F]ood should not be used as a tool of foreign policy....Food should not, under most circumstances be used as a weapon."). See also Philip Peters, "U.S. Sanctions Against Cuba: A Just War Perspective" (Presented to the XVI Annual Conference of the Association for the Study of the Cuban Economy, 5 August 2006), online: Lexington Institute
  1   2

The database is protected by copyright © 2016
send message

    Main page