Cuba Trade Revisited
Sep 13, 2017
Prior to Fidel Castro taking over Cuba in 1959, the United States was the dominant trading partner with that island nation, which lies only 103 miles from our country at its closest distance. In the late 1950’s, the lead U.S. agricultural exports to Cuba were rice, lard, pork, and wheat flour, with a current dollar value of about $600 million annually. No other exporter shipped more than $60 million annually.
For more than 40 years, there was no legal trade in goods of any kind between the United States and Cuba, as a restrictive trade embargo was imposed in 1962, not long after the Bay of Pigs invasion by Cuban exiles supported by the United States failed.
In October, 2000, Congress passed and President Bill Clinton signed the Trade Sanctions Reform and Export Enhancement Act (TSREEA), which was added to the fiscal 2001 Agricultural Appropriations bill. This legislation allowed sale of U.S. food and medicine to Cuba. Restrictions against use of any form of federal export credit assistance remain barred, so any sales had to be made on a cash basis.
About one year later, a category 4 Hurricane named Michelle struck southern Cuba in November 2001, doing considerable damage to crops in that part of the island. Michelle was an unusual storm in some respects, forming off the Central American coast of the Atlantic Ocean rather than off the coast of Africa, as most hurricanes hitting North America or Caribbean islands do. In the aftermath of this storm, the Cuban government indicated that they preferred to buy food from the United States rather than be the recipient of direct U.S. aid.
According to data collected by the U.S. Census Bureau and reported by USDA, Cuba bought a total of $5.2 billion worth of U.S. food and agricultural products between 2001 and 2016, an annual average of $330 million. The total peaked in 2008 at nearly $700 million, and has dropped off significantly since then. The main products exported have been broiler meat, corn, soybeans, and soybean meal, accounting for 85 percent of the total. Today, the European Union and Brazil are the top suppliers of agricultural exports to Cuba.
In December 2014, President Barack Obama announced plans to begin to normalize political relations with Cuba, and open up trade to the extent he could within existing U.S. law. The steps taken which were relevant for agricultural trade included reversing the Bush administration determination on the timing of payments for exports to Cuba, easing the licensing process for permitted travel and trade under the Treasury Department, making it easier for Cuban-Americans to send funds to family members still in Cuba, and expanding the category of goods that can be shipped under TSREEA authority to include agricultural inputs, such as seeds and agricultural equipment.
U.S. data indicate that agricultural exports continued to fall off after the Obama opening with Cuba, averaging less than $190 million annually in 2015 and 2016. It seems likely that the officials of Alimport, the state trading agency operated by the national government, were holding back in the hopes that Congress would act to relax the restrictions on use of credit to assist U.S. agricultural export transactions before agreeing to buy more U.S commodities.
In June 2017, President Donald Trump announced that he was rolling back many of the steps taken by his predecessor with respect to U.S.-Cuba relations. However, the new restrictions were specifically crafted to avoid disrupting agricultural trade. For example, the rules provided an exemption to U.S. agricultural shipments being unloaded in the Cuban port of Mariel, even though that port is operated by the Cuban military, which is otherwise barred from doing any business with U.S. entities.
Bipartisan legislation has been introduced in the current (115th) Congress to relax existing restrictions on U.S. agricultural trade with Cuba. In February 2015, Senators John Boozman (R, AR) and Heidi Heitkamp (D, ND) introduced S.275, the Agricultural Export Expansion Act of 2017, aimed at allowing use of credit for such transactions. S.275 has 16 co-sponsors, and a similar bill in the House introduced by Rep. Rick Crawford (R, AR), the Cuba Agricultural Exports Act (HR. 1400), has 59 co-sponsors. No legislative action has yet been taken on either bill.
On September 8, 2017, Hurricane Irma, a category 5 storm at the time, crashed into northern Cuba, killing at least 10 people on the island. It is too early to assess damage to the Cuban agricultural sector, but it is likely significant. Most U.S. disaster assistance resources will be devoted to helping victims of Irma on U.S. soil, primarily in the U.S. Virgin Islands, Puerto Rico, and Florida, but now might be a good time to loosen restrictions on U.S. agricultural exports to Cuba. USDA just predicted bumper U.S. corn and soybean crops in the September WASDE, so we have lots to sell.