[CubaNews] HOUSTON CHRONICLE: U.S.-Cuba trade has big potential

[Walter Lippmann <walterlx@xxxxxxxxxxxxx>]

HOUSTON CHRONICLE
March 1, 2008, 2:55AM
U.S.-Cuba trade has big potential
Some calling to end 46-year-old sanctions now that Fidel Castro has resigned

By JOHN OTIS
South America Bureau

RESOURCES
TALLYING IT UP

â Total, 2007: $437 million

â Total, 2006: $340 million

â U.S. exports to Cuba: Corn, chicken, wheat, soy products and rice

â U.S. visitors to Cuba: Less than 200,000 annually

â Number of visitors, if embargo is lifted: Between 550,000 and 1 million

Sources: U.S.-Cuba Trade and Economic Council; U.S. International Trade Commission

With the resignation of Fidel Castro and a new president moving into the White House next year, will one of the last Cold War relics of U.S. foreign policy finally be mothballed?

Even a recent U.S. government study acknowledged that lifting the 46-year-old economic sanctions on Cuba â the longest trade embargo in modern history â could mean a bonanza for American farmers and a surge in American tourism to the island.

President Bush, however, speaking last month on the day Castro stepped down, declared that there would be no easing of sanctions until Havana moves toward democracy, a shift that seems unlikely now that Cuba's Council of State has installed Fidel's brother, 76-year-old Raul Castro, as president.

Meanwhile, the leading U.S. presidential candidates are trying to win the votes of Cuban-Americans, many of whom support the sanctions.

As a result, "Castro's resignation will have absolutely no impact upon commercial relations between the U.S. and Cuba," said John Kavulich, president of the U.S.-Cuba Trade and Economic Council, a group that promotes closer commercial ties between the two countries.

At the presidential debate in Austin last month, Sen. Barack Obama said he would be willing to meet with Raul Castro "without preconditions."

But beyond that, Obama, his Democratic rival Sen. Hillary Rodham Clinton, and Republican frontrunner Sen. John McCain all stuck to hard-line positions similar to those of the Bush administration.

Still, some analysts believe an Obama or Clinton White House would take a long, hard look at the strategy to isolate Cuba, a policy that failed to bring down Castro and that has become a kind of poster child for the futility of unilateral sanctions.

"With Fidel gone, it removes this giant Cold War obstacle we've been unable to get over for the last 50 years," said Jake Colvin of USA-Engage, a Washington-based group that opposes U.S. trade sanctions on Cuba and other nations. "It opens the door for a better conversation."

For now, American producers will have to settle for exporting agricultural products to Cuba, sales that were legalized in 2000 after intense lobbying by agribusiness companies.

Last year, U.S. sales topped $437 million, up from $340 million in 2006, making the United States the largest supplier of agricultural products to Cuba, according to the trade council.

The main U.S. exports are corn, chicken, wheat, soy products and rice, with most purchases involving less than a dozen U.S. companies, such as Tyson Foods, Cargill and Archer Daniels Midland Co.

Difficult to do business
Cuba could buy more, but doing business with U.S. companies remains cumbersome for both sides.

American companies, for example, must apply for special export licenses from the Treasury Department. Business trips to Havana usually require at least four days because of the lack of nonstop flights from U.S. cities.

Under U.S. law, Cuba must pay in cash or through letters of credit drawn on third-country banks, creating delays and fees for currency transactions. Transportation costs are also high because of limited shipping routes, and Cuban officials charged with inspecting U.S. agricultural production facilities are sometimes denied visas.

These factors can add more than 10 percent to the price of U.S. goods, said Cynthia Thomas, president of the Dallas-based Texas-Cuba Trade Alliance. In one recent bureaucratic snafu, she said, a Cuba-bound ship filled with grain was stranded off the Port of New Orleans for a week waiting for financial paperwork to arrive from France.

"Cuba has become an important trading partner, despite all the restrictions," said Dwight Roberts, president of Houston-based U.S. Rice Producers Association. "But what could be done if we totally ease the embargo is staggering."

Big increases possible
A 2007 report by the U.S. International Trade Commission, an independent federal agency, estimated that the U.S. share of Cuba's agricultural imports could rise from one-third to between one-half and two-thirds if sanctions were lifted. The largest gains would be for fresh fruits and vegetables, including potatoes, milk powder, processed foods, poultry, beef and pork.

"There's probably a $1 billion market for U.S. farm products, and over time it could hit $1.4 billion," said Parr Rosson, a professor of agricultural economics at Texas A&M University who studies Cuba.

The Trade Commission report added that if travel restrictions to Cuba were lifted, the number of annual U.S. visitors could jump from less than 200,000 to between 550,000 and 1 million. The influx of Americans could raise demand in Cuba for more and better-quality food for tourists and provide more money for the government to buy U.S. products, the report said.

Oil equipment, services
Another potential market would be for oil equipment and services, should ongoing exploration lead to major strikes in Cuban waters, Thomas said.

But Kavulich, of the trade council, cautions that if Washington lifted the embargo, American businesses and travelers would have to move gradually.

Cuba lacks restaurants and hotel rooms to accommodate hordes of American tourists. U.S. businesses may balk at major investments because the Cuban government only allows joint ventures with foreign companies. Major economic reforms in Cuba, he added, are unlikely because they could generate pressure for political reforms.

Even so, Havana is striking new deals every month with businesses from Canada, Mexico, South America, Europe and Asia.

"The embargo has made the United States almost completely irrelevant to this process," said Geoff Thale of the Washington Office on Latin America. "We're standing on the sidelines."

john.otis@xxxxxxxxx


=========================================
     WALTER LIPPMANN
     Los Angeles, California
     Editor-in-Chief, CubaNews
     http://groups.yahoo.com/group/CubaNews/
     "Cuba - Un ParaÃso bajo el bloqueo"
=========================================


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