Week In Review: Lift the Embargo? Why don’t we just ‘gum it’ to death instead?

Last Sunday, someone, somewhere marked the 54th anniversary of the U.S. embargo against Cuba.

We forgot to send a card.

But, perhaps there was a celebration in Australia.  An oil company there, MEO, bragged to its shareholders this week about the company’s goals for Cuba, where it plans to drill off-shore.

“Cuba Block 9 represents MEO’s highest priority asset for near term value creation,” says CEO Peter Stickland, who added “MEO’s established position in Cuba provides a strong early mover advantage ahead of ongoing strengthening diplomatic relations between Cuba and the U.S.”

Take that, Team USA, we got there first…and toss another shrimp on the Barbie.

Cuba has trade relations with more than 160 countries.  Its main trading partners include Venezuela, China, Canada, Spain, Brazil, Russia, and Vietnam.  These countries have no embargo against Cuba and so, while we in the U.S. talk about doing deals, while the Obama administration – bravely but incrementally – dismantles regulatory barriers to trading with the Cubans, our competitors go to the island and do what we all too often just talk about doing.

The oil company MEO can drill where U.S. oil companies can’t because the embargo bars them from doing so.  We’ve followed this issue closely for years, and watched with admiration as Dan Whittle at the Environmental Defense Fund and others fought valiantly to move U.S. policy to the point where the U.S. and Cuban governments can cooperate to defend our coasts against a spill (and there’s “a path” for U.S. companies to respond to a crisis). But, Australia’s first-mover advantage over U.S. oil companies sidelined by the embargo from drilling remains.

Telecommunications offers a similar case.  The administration has made “opening up Cuba” to U.S. telecom firms a high policy priority.  It has conscientiously urged Cuba to expand Wi-Fi access to benefit its people and the Cuban economy.  After the December 17th diplomatic breakthrough, we’ve seen and written about the young Cubans crowding together with their smartphones on the streets of Havana adjacent to the Wi-Fi hotspots added by their government which run on equipment supplied by the Chinese company Huawei.

U.S. tourism is much in the same boat.  Today, we learned “U.S. airlines could begin more than 100 daily flights to Cuba under [a commercial aviation] agreement that will be signed Tuesday in Havana,” USA Today reports.  And yes, non-tourist travel to Cuba under President Obama is skyrocketing.  But, visitors from the states must search for rooms in hotels built by competitors to U.S.-based Marriott International, Hilton Worldwide, and other familiar U.S. brands which have been left to “circle Cuba,” as Reuters wrote last year, because that’s all they can do so long as there’s an embargo.

Like losers who just get to hang around the lobby, our hoteliers can visit the island, and talk to the relevant ministry officials about someday investing and building properties on the island.  But, it is Chinese and British developers who’ve got the go-ahead to build golf resorts, and it is the Vietnamese who’ve “inked a deal” to trod the path already blazed by Canadian and Spanish hotel firms.

U.S. agriculture suppliers are slightly better off.  After Congress legalized sales of food and medicine to the island in 2000, Cuba became a promising market, and the Cuban government for a number of years lived with onerous payment requirements and became a very good customer. American farmers took a special delight in putting wholesale food at a good price on the tables of Cuban families.  The island is so close and the government imports two-thirds to eighty percent of the food their country consumes.

But, as Governor Greg Abbott learned last year, his pitch that “Texas has an abundance of (rice and other products) and a very easy ability to export from Texas to Cuba,” wasn’t an easy sell to officials who run Cuba’s new Port of Mariel.  They told him, “Cuba would buy rice from other sources, primarily Vietnam, until the U.S. allowed the communist-run island to buy on credit, a measure currently prohibited by the embargo.”

You get the picture.  Although the president’s been liberalizing the policy since 2009, as he promised to do, he and his administration have been regularly pushing out policy changes, regulatory reforms, and making promising progress with the Cubans since the 2014 diplomatic breakthrough.

Non-tourist travel and the economic activity its boosts are both clearly up.  Two U.S. mobile phone companies have scored roaming agreements.  Another company based in New Jersey signed a deal to provide direct phone service between our countries.

After the administration loosened the rules for financing certain exports to Cuba in January, as the Wall Street Journal predicted, Caterpillar said it is getting traction from the reforms.  The company announced this week “it has signed a deal with a distributor to begin the process of selling its products in Cuba, becoming one of the first U.S. manufacturers to enter the island nation that is emerging from decades-long trade restrictions.”

More news will come.  After Cuba has hosted visits for the U.S. Secretary of State, Commerce Secretary, Agriculture Secretary, and other officials, the Departments of Commerce and Treasury will next week welcome Rodrigo Malmierca, Cuba’s Minister of Foreign Trade and Investment, accompanied by other officials, for the second roundof the U.S.-Cuba Regulatory Dialogue.

We favor talk, and engagement, and the step-by-step process is producing results.   But, like our friend Bill LeoGrande, who wrote earlier this month, “Obama Needs to Stop Playing Small Ball With Cuba,” it has to be frustrating for U.S. companies to be cast as tire-kickers, browsers, and window shoppers as Cuba makes rational decisions about how, when, and with whom it does business, and they’re not really in the running.

So, what’s to be done?

First, the president retains a significant amount of authority to take additional executive actions that remove restrictions and allow U.S. firms to compete for business in Cuba.  Experts like LeoGrande, Stephen Propst (Hogan Lovells), and others have already laid out compelling proposals to lift prohibitions on U.S. investment in Cuba, easing restrictions on U.S. financial institutions processing dollar-denominated transactions, relieving enforcement concerns, and opening up the United States to exports from the island.  Did you know that the Cuban bee industry is thriving and that Cuban honey sells for a price that fetches more per liter than oil?  The president should do more.

Second, there are reasonable men and women of good will from both political parties who think that repealing not just the travel ban, not just the impediments to agriculture sales, but the embargo in its entirety is a cause that is just.

Members of the bipartisan trade delegation that Reps. Tom Emmer and Kathy Castor will lead to Cuba tomorrow believe that.   So, do the Republican and DemocraticGovernors who wrote the Congressional leadership last year asking for the repeal of all trade restrictions.  That is what Congressmen Jim McGovern and Rick Crawford believe – they said it to the U.S. Agriculture Coalition on Wednesday, arguing that a majority of Americans are ready to lift the embargo – if not this year, than certainly next year.

Congress can step up, but should not be asked to do so alone.  Beyond joining delegations or visiting Cuba single-file, more U.S. companies and sectors should do what agriculture has been doing for decades and step up so their voices are heard in Congress.  We were astonished last year when we read comments by a travel executive who said the “prohibition on tourism will go away” – this is a law that Congress must repeal – as if someone else was going to do it for him, elevating deus ex machina to legislative strategy.  No, sir; this takes work.

And that is what Swedish Match believes, too.  The third-largest manufacturer of tobacco pouches in the U.S. has lobbied Congress more heavily than another company on trade.  They are among the new legions of K Street diplomats for whom talk about ending the embargo justwon’t cut it anymore.  They want action, and so do we.  U.S. business must step up.

Our Recommendations

Council on Foreign Relations outlines 2016 candidates’ stances on foreign policy issues, including Cuba, Council on Foreign Relations

In this interactive guide, “Campaign 2016: The Candidates & the World,” the Council on Foreign Relations allows users to focus on each candidate by issue. With quotes from the candidates and clearly articulated summaries, we found the Cuba section to be particularly worthwhile.

U.S. expects “probable presidential transition” in Cuba in 2018, EFE / Fox News Latino

A recent U.S. intelligence report suggests that Cuba may be preparing for a “probable presidential transition” in 2018. This date would coincide with the end of Raul Castro’s current term and would reinforce a proposed maximum presidential ten-year term limit. While this report suggests an end to the Castro era, it does not necessarily mean major changes in Cuba’s political and social structures. The report made it clear that Cuban leaders will “remain focused on preserving political control,” that economic reform and reducing state influence in the economy would be “slow,” and that living conditions will continue to be “poor.”

Lawmakers Question U.S. Decision to Give Rum Trademark to Cuba, Felicia Schwartz, WSJ

A bipartisan group of 25 U.S. lawmakers (17 of whom represent Florida), have sent a letter to Secretary of State John Kerry and Treasury Secretary Jacob Lew, expressing concerns over the U.S government’s decision to grant a trademark for Havana Club rum to the Cuban government. This controversial move, which would allow the Cuban government to sell Cuban-made Havana Club in the U.S. for the first time in decades once the U.S. economic embargo on Cuba is lifted, has also raised concerns that it could undermine protections for American intellectual property rights holders.

The Havana primaries, The Economist

Havana residents are weighing in on the US 2016 election. While two Republican candidates, Ted Cruz and Marco Rubio, are the children of Cuban immigrants, they are not positively received back on the island. Some Cubans have expressed that they would rather vote for Donald Trump. On the Democratic side, Hillary Clinton appears to be Cubans’ preferred, as many are baffled by Bernie Sanders’ open support of what he calls “democratic socialism.”

Silicon Island Rebooted: Cuba’s Information & Communications Technology Revolution, Timothy Ashby, Harvard International Review

Cuba is making significant progress towards becoming a leading hub of IT innovation in the Caribbean. This technological initiative began with Fidel Castro’s announcement of a second revolution called the “Future Project.” It has evolved over the past 20 years to include new technology curricula in Cuban high schools and universities, and expanded job opportunities in the IT sector.

Cuban baseball stars, the Gurriel brothers, abandon team, Nelson Acosta, Reuters

Cuban media outlets have reported that brothers Yulieski Gurriel, 31, and Lourdes Gurriel Jr., 22, two of Cuba’s most preeminent baseball layers, have defected from Cuba. The two allegedly left the Dominican Republic hotel where they were staying with the rest of Cuba’s professional baseball team. The two hope to pursue their future careers in the United States.

Cuba’s ‘Black Spring’ Still Haunts Journalists, David Soler, Global Journalist

The article examines the lives of two exiled Cuban journalists who suffer lasting impacts from the 2003 “Black Spring” — Fidel Castro’s major crackdown on independent journalists inside Cuba. At the time, the international community’s attention was focused on the Middle East, but Cuban journalists were facing serious threats, imprisonment, and persecution just ninety miles from U.S. shores.

Blessed are the peacemakers, Sarah Stephens, Huffington Post

Blessed are the peacemakers, it says in Scripture – and the peacemakers seem to converging in Havana. This Friday, the leaders of Roman Catholicism and the Russian Orthodox Church, Pope Francis and Patriarch Kirill I, will meet in Cuba to try and advance the healing process between Eastern and Western Christianity, churches which have been in schism since 1054. In coming to Cuba to seek peace, they are not alone. After two years of a tightly held negotiation, the United States and Cuba ended six decades of hostilities, and the diplomatic effort to normalize relations rolls forward in both capitals.

Church talks help make Cuba a “perfect place for negotiations,” Andrea Rodriguez and Michael Weissenstein, AP/Washington Post

Pope Francis and Patriarch Kirill I of the Russian Orthodox Church will meet on February 12 in Cuba. The meeting’s setting is historic and symbolic, as it not only represents efforts to reconcile estranged factions within Christianity, but also sets a precedent in which Cuba can become fertile ground for peace negotiations.

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