Senate Hearing on Expanding U.S. Agricultural Trade with Cuba

On April 21st the U.S. Senate Committee on Agriculture, Nutrition and Forestry held a hearing, “Opportunities and Challenges for Agriculture Trade with Cuba.”[1]

 Chairman’s Opening Statement

Senator Pat Roberts
Senator Pat Roberts

The Committee Chair, U.S. Senator Pat Roberts (Rep., KS), opened the hearing by stating, “At the beginning of this Congress, I was hopeful that trade would be one area where we could work across the aisle to find agreement. I am still hopeful that is the case. . . . International trade of American agriculture products is critical…critical to the nation’s economy and critical to our Kansas farmers and ranchers. I have long fought to eliminate barriers to trade, and I believe that we should continue to work towards new market access opportunities for our agriculture products.”

“The United States and Cuba have a long history full of contention and instability. There is no shortage of opinion from members of Congress about the relationship between our two countries, both present and future. Some are concerned about human rights, others about socioeconomic ideology. But those concerns are not what this committee will focus on this morning. Today we are here to discuss the role of agriculture – opportunities and challenges – in Cuba.”

“This is not an issue that we are going to be able to fix overnight. It will take efforts in addition to bills in Congress to truly normalize trade with Cuba. The decisions that are made regarding increased trade with Cuba must be made carefully.”

“Four months ago the President announced a major shift in U.S. policy towards Cuba. It is my hope that in the future, the President will work with Congress to determine the best path forward. Foreign policy does not happen in a vacuum. We have to take a realistic approach and work out a step-by-step plan towards lifting the embargo. This is a goal that should include Congress.”

“Today we will hear from an impressive panel of experts, from the regulators responsible for writing our policies toward Cuba, to the producers who seek to grow the market for their products. I understand that, like myself, many of our witnesses here have traveled to Cuba to see first-hand what challenges and opportunities exist.”

“Agriculture has long been used as a tool – not a weapon – for peace and stability. It is my hope that Cuba will embrace the practices of free trade, enterprise and commerce, so that both countries will gain from increased relations.”

“Earlier this year, the U.S. Agriculture Coalition for Cuba was launched. They have shared a statement and additional information in support of our work today, [which was] entered into the record.”

Ranking Member’s Opening Statement

Senator Debbie Stabenow
Senator Debbie Stabenow

Senator Debbie Stabenow (Dem., MI), the Ranking Committee Member, said, “Improving trade with Cuba represents not only a great opportunity for America’s farmers, ranchers, and manufacturers, but a meaningful way to help rebuild trust between our nations.  After more than 50 years of stalemate, it’s time for a new policy on Cuba.”

“When I visited Cuba earlier this year – just days after President eased some trade restrictions – I saw firsthand the eagerness of Cubans who want to develop a more effective relationship with the [U.S.] But we can only get there if we begin to take meaningful steps to soften many of the barriers that exist between us.”

“And America’s farmers and ranchers are uniquely positioned to lead the way. Consider this – in 2014, the U.S. exported just over $290 million in agricultural goods to Cuba. That’s a good start, but for a country only 90 miles off our coast, we can do much more. Cuba’s own import agency estimates that it will receive approximately $2.2 billion (in U.S. dollars) worth of food and agricultural products this year alone.”

“That type of economic potential deserves a chance to succeed – and is one reason why many of the largest producer groups, trade associations, and companies from within agriculture have come together to push for increased engagement.”

“Many on this Committee have pushed for increased engagement and have taken the opportunity to visit Cuba in recent months. I’d like to recognize Senators Leahy and Klobuchar, as well as Senator Boozman and Heitkamp, for their bipartisan leadership on this issue.”

“The commitment to democratic ideas and human rights we share as Americans are best realized through engagement. Our bedrock principles accompany every product farmers and ranchers send to Cuba.”

“Last week’s action by the President [in rescinding the designation of Cuba as a “state sponsor of terrorism”] is a step forward toward in normalizing our relationship and will test the commitment of the Cuban government to this process.”

“But even while we are making significant progress in rebuilding our relationship with Cuba – the policies governing trade between our countries are not yet designed to allow a steady flow of goods and services. We must find a path forward that allows U.S. financial institutions to safely and securely work with Cuban purchasers, including the extension of lines of credit. And we should work to authorize a greater range of goods, services, and supplies for export to Cuba. These measures not only make good business sense – they also will help build Cuba’s agricultural capacity and make the island a better trading partner in the long run.”

The Witnesses at the Hearing

 The witnesses at the hearing were the following: (1) The Honorable Michael T. Scuse, Under Secretary, Farm and Foreign Agriculture Services, U.S. Department of Agriculture; (2) Mr. Matthew Borman, Deputy Assistant Secretary, Bureau of Industry and Security, U.S. Department of Commerce; (3) Mr. John Smith, Acting Director, Office of Foreign Assets Control, U.S. Department of the Treasury; (4) Mr. Michael V. Beall, President & CEO, National Cooperative Business Association; (5) Mr. Terry Harris, Senior Vice President, Marketing and Risk Management, Riceland Foods; (6) Mr. Ralph Kaehler, Farmer and Owner, K-LER Cattle Company, St. Charles , MN; (7) Mr. Doug Keesling, Fifth Generation Owner, Keesling Farms, Kansas Wheat, Chase , KS; and (8) Dr. C. Parr Rosson III, Professor & Department Head, Department of Agriculture Economics, Texas A&M University.

 Witness Ralph Kaehler

Senator Amy Klobuchar
Senator Amy Klobuchar

Minnesota’s Senator Amy Klobuchar, who is a member of the Committee and the author of the Freedom to Export to Cuba Act (S.491) ending the U.S. embargo of Cuba, introduced Ralph Kaehler, whose family has been operating a livestock, row crop, and canning vegetable farm in Minnesota for nearly 130 years.

The Senator prefaced her introduction with this statement: “For too long, export and travel restrictions have prevented American farmers and ranchers from seeking opportunities in Cuba. That is why I have introduced bipartisan legislation to lift the trade embargo on Cuba, and this hearing allowed us to focus on how we can ensure that our farmers and ranchers benefit from normalized relations between our two countries.”

Mr. Kaehler testified that his farm was “an exhibitor in the First U.S./Cuba Food and Agriculture Exposition [in Havana] in 2002.” It “was the only one with live animals— affectionately known as the ‘Cuban Ark’ . . . to exhibit the diversity of U.S. livestock producers, and to introduce Cuba to the typical USA farm family.”

“Since then, the Kaehler Family has led over 10 trade delegations to Cuba. These missions have included producers from seven different states and a bipartisan mix of state lawmakers and officials. To date, some of the most successful exports to Cuba we have facilitated include shipments of livestock, dried distillers grains, powdered milk, animal milk replacer, and texturized calf feed.”

“Given the opportunity, U.S. farmers do well in Cuba. We have a significant advantage of shorter shipping over Europe, South America, Asia, and other major exporters. In addition, Cuba can take advantage of U.S. rail container service and sizing options, which also brings significant benefits to smaller privately owned businesses like ours. On top of all this, the U.S. produces a wide variety of affordable and safe food products that Cubans want to eat.”

“Unfortunately, some of the policies currently in place diminish the natural advantages American agriculture enjoys over its competitors. For instance, requirements for using third country banks for financing adds a lot of paperwork, time, and personalities to every transaction. Coupled with a restrictive cash‐in advance shipping policy . . . there is a very small margin for error before a shipper faces demurrage fees. As a family operation trying to build our business through exports, this self‐inflicted inefficiency can be tough to manage.”

Mr. Kaehler then made three specific recommendations to Congress. “First, . . . improve the trade financing rules for Cuba. . . . Second, . . . small firms like ours . . . need marketing support and assistance [from USDA] to help support our companies and figure out exactly what’s going on in markets abroad. . . . [Third,] I hope that Congress will expand the universe of people involved in U.S.‐Cuba trade by allowing a greater variety of goods and services to be traded.”

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[1] A quick examination of the official websites of the Committee’s 20 members reveals that seven have made statements favoring at least some aspects of U.S.-Cuba reconciliation (Boozman (Rep., AK), Brown (Dem., OH), Heitkamp (Dem., ND), Hoeven (Rep., ND), Klobuchar (Dem., MN), Leahy (Dem., VT) and Stabenow (Dem., MI)). Only two have negative statements about that reconciliation (Grassley (Rep., IA) and Perdue (Rep., GA)). The other eleven members‘ websites do not reveal any position on Cuba (Bennet (Dem., CO), Casey (Dem., PA), Cochran (Rep., MS), Donnelly (Dem., IN), Ernst (Rep., IA), Gillibrand (Dem., NY), McConnell (Rep., KY), Roberts (Rep., KS), Sasse (Rep., NE), Thune (Rep., SD) and Tillis (Rep., NC)). A more thorough examination of the records of the last 11 would probably uncover other indications of their positions on reconciliation with Cuba.

 

Senator Klobuchar Introduces Bill To End Embargo of Cuba

Senator Amy Klobuchar
Senator Amy Klobuchar

On February 12, 2015, Minnesota’s U.S. Senator Amy Klobuchar introduced S.491: Freedom to Export to Cuba Act. Its five cosponsors are Senators Richard Durbin (Dem., IL). Mike Enzi (Rep., WY),  Jeff Flake (Rep., AZ), Patrick Leahy (Dem., VT) and Debbie Stabenow (Dem, MI). The bill was referred to the Senate’s   (a) Banking, Housing and Urban Affairs and (b) Foreign Relations Committees.

                        Comments on S.491

Senator Klobuchar’s press release said the bill would eliminate the legal barriers to Americans doing business in Cuba and thereby pave the way for new economic opportunities for American businesses and farmers by boosting U.S. exports and allowing Cubans greater access to American goods. The legislation repeals key provisions of previous laws that block Americans from doing business in Cuba, but does not repeal portions of law that address human rights or property claims against the Cuban government. [1]

This press release also stated, “It’s time to the turn the page on our Cuba policy. Fifty years of the embargo have not secured our interests in Cuba and have disadvantaged American businesses by restricting commerce with a market of 11 million people just 90 miles from our shores. There are many issues in our relationship with Cuba that must be addressed, but this legislation to lift the embargo will begin to open up new opportunities for American companies, boost job creation and exports, and help improve the quality of life for the Cuban people.” [2]

She subsequently told a Minnesota newspaper, “There’s been a sea change in terms of how people are thinking about Cuba. I think it’s really important to get people from the Midwest involved. Our interests are different than some of the other people traditionally involved in this issue. … We come at it from a production perspective, from the perspective of wanting to sell things there.” [3]

Klobuchar’s bill was endorsed by the United States Agricultural Coalition for Cuba. Its Chair, Devry Boughner Vorwerk of Cargill Incorporated, said, “We appreciate Sen. Klobuchar’s leadership to advance this bipartisan bill, modernize U.S. policy toward Cuba and boost opportunities for American agriculture. Ending the embargo will enable our agriculture sector to work in partnership with Cuba and the Cuban people, develop a meaningful trading relationship and create jobs across many sectors of our own economy.”

Internal Senate Political Concerns

As previously mentioned S.491 was referred to two committees: the Senate Banking, Housing and Urban Affairs Committee and the Foreign Relations Committee, each of which presents problems for successful passage of the bill. [4]

The Banking Committee has 12 Republican and 10 Democratic members. Its Chair is Richard Shelby (Rep., AL) while its Ranking Member is Sherrod Brown (Dem., OH). With two and maybe three exceptions, my initial impression is that the Republican majority will be opposed to the bill while the Democrats will support the bill. The two exceptions are Republican Jerry Moran (KS), who supports ending the embargo, and Democrat Robert Menendez (NJ), who opposes such action. The other possible exception is Republican Bob Corker (TN), who chairs the Senate Foreign Relations Committee and who issued a noncommittal statement about the December 17th rapprochement.[5]

The Foreign Relations Committee has 10 Republican and nine Democratic members. Its Chair is the previously mentioned Bob Corker (Rep., TN) and its Ranking Member is Robert Menendez (Dem., NJ). With three and maybe four exceptions, my initial impression is that the Republican majority, including Marco Rubio (FL), a Cuban-American who strongly and repeatedly opposes reconciliation, will oppose the bill while the Democratic minority will support the measure. The exceptions are Republicans Jeff Flake (AZ) and Rand Paul (KY), who have supported ending the embargo, and Democrat Menendez, a Cuban-American who vehemently opposes reconciliation with Cuba, including ending the embargo. The possible exception is Chair Corker, who has issued a noncommittal statement on the rapprochement. Thus, it is conceivable that there could be a 10-9  (or even a 11-8) vote approving the bill in committee. But if it does not also get out of the Banking Committee, that probably means very little.

These internal Senate political considerations prompted Klobuchar to acknowledge to the Minnesota newspaper that the Foreign Relations Committee’s obstacles for the bill “are clearly something to be reckoned with … but it doesn’t mean that two people [Senators Rubio and Menendez] can stop the whole thing.” She added that the legislation could come up through the Banking. Housing and Urban Affairs Committee or be passed in piecemeal fashion through other bills.

Minnesota Representative Collin Peterson, who is a cosponsor of a companion bill (H.R.403) in the House of Representatives, also talked to the Minnesota newspaper about the political difficulties of passing such measures. Indeed, he called the odds of lifting the embargo this year as “thin” due to the political sway of the older generation of Cuban-Americans in certain congressional districts.

Peterson thought the elimination of the embargo will “help [Minnesota farmers] a little bit” by increasing demand and, therefore, farm prices, “but it’s marginal in the whole scheme of things.”

Conclusion

I thank and congratulate Senator Klobuchar for introducing this important bill and the six other senators for cosponsoring the bill. 

I conclude by adding the following three reasons for ending the embargo that I have not seen elsewhere:

1. Without the embargo, the U.S. would not face the annual fall nearly unanimous condemnation of the embargo by the U.N. General Assembly.

2. The elimination of the embargo might assist the U.S. in combatting the increasing Chinese and Russian influence in Latin America.

3. Cuba repeatedly has claimed that the embargo has caused damage to its economy, and at last Fall’s U.N. General Assembly meeting Cuba asserted the total damages were $1.1 trillion. That obviously is a very large amount of money. I am confident that in any litigation or arbitration over such a claim the U.S. would mount a thorough critique and arguments to rebut the claim, including evidence and argument that any alleged damages were caused by Cuban ineptitude and that the major premise of the argument (the illegality of the embargo under international law) was unfounded. Nevertheless, as is true in any disputed claim like this, there can be no 100% guarantee that the claim will be rejected in its entirety. Thus, this damage claim must be recognized as a contingent liability of the U.S., and ending the embargo will minimize the amount of that liability.

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[1] On January 15th the Congressional Research Service issued CRS Report 4388: “Cuba Sanctions: Legislative Restrictions Limiting the Normalization of Relations” In a 15-page table it “lists the various provisions of laws comprising economic sanctions on Cuba, including key laws that are the statutory basis of the embargo, and provides —on the authority to lift or waive these restrictions.”

[2] Similar press releases were issued by Senators Durbin and Leahy.

[3]  Sherry, Sen. Klobuchar leads effort in U.S. Senate to life Cuba trade embargo, StarTribune (Feb. 13, 2015).

[4] The THOMAS legislative service of the Library of Congress late on February 12th said the bill was referred to both of these committees, but on February 13th it said it was only referred to the Banking Committee. Since the embargo clearly relates to foreign relations, I assume the latter THOMAS version is incorrect.

[5] Research-backed comments and corrections on the positions regarding Cuba by the members of these committees are solicited and welcome.