Mr. Chairman and Members of the Commission thank you for the opportunity to address the issue of “The Impact of U.S. Sanctions with Respect to Cuba.”  The U.S.-Cuba Trade and Economic Council has already been pleased during the last months to have provided your staffs with requested commercial and economic information about the Republic of Cuba; and we look forward to continuing to assist your efforts.

Perhaps, though, I have been mistaken in that my understanding of the intention of the United States International Trade Commission was to analyze the “impact of U.S. Sanctions with Respect to Cuba” not, as would seem to be the general theme of statements at this hearing thus far today, to analyze “whether to maintain U.S. Sanctions with Respect to Cuba.”

Since the U.S.-Cuba Trade and Economic Council does not take positions with respect to United States-Republic of Cuba political relations, nor accept government funding, my value to you today may be limited given today’s general theme.

There are evident answers to some of the questions to which the United States International Trade Commission seeks answers.  For example: 1) Have United States sanctions toward the Republic of Cuba had a negative impact upon the United States economy?  Yes.  2) Have United States sanctions had a negative impact on the Republic of Cuba economy?  Yes.  3) Have United States-based exporters, importers, service providers, and investors lost opportunities?  Yes.  4) Have Republic of Cuba-based exporters, importers, service providers, and investors lost opportunities?  Yes.

Subject to debate is the significance of the impact, both within the United States and within the Republic of Cuba, and whether this impact has provided a positive cost-benefit relationship to the goal of each sanction by the United States toward the Republic of Cuba.

The answers are neither to be determined principally by evaluating historical trade data nor by opinions as to what “would have been” had opportunities existed.  Whatever the result of the analysis by the United States International Trade Commission, portions of the analysis will be based upon fact and qualitatively reviewed and portions of the analysis with be based upon educated guesses.

As the United States International Trade Commission continues to gather information to be analyzed, permit me to share some suggestions as to how such information might be considered, with a focus upon food products.

Between 1980 and the end of 1992, for example, the value of United States-owned foreign subsidiaries' trade, licensed by the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury and by the Bureau of Export Administration (BXA) of the United States Department of Commerce, with enterprises within the Republic of Cuba, was US$4.563 billion, a relatively small percentage of the Republic of Cuba’s total trade during the twelve-year period.

Of the US$4.563 billion, US$2.637 billion was the value of licensed United States-based company foreign subsidiaries' exports to the Republic of Cuba and US$1.926 billion was the value of licensed United States-based company foreign subsidiaries' imports from the Republic of Cuba.  There were 2,938 licenses issued by the OFAC to more than 100 United States-based companies between 1980 and the end of 1992.  There were few license applications rejected by the OFAC.

The implementation of the Cuban Democracy Act in October of 1992 eliminated the continuation of most United States-based company foreign subsidiaries' trade, more than 90% of which was composed of food products, with enterprises within the Republic of Cuba; while repositioning the continuation of healthcare product exports to Republic of Cuba government-operated entities.

Foundation and Future

To prepare estimates of the past and for the future, there need be a understanding of the genesis of the 1959 revolution within the Republic of Cuba, which had as a fundamental goal exterminating the status quo as exemplified by then President Fulgencio Batista, who represented, in large measure, the imagery of the United States.  The extermination of President Batista was expected to result in a reduction and, perhaps, extermination, of the commercial, economic, political, societal, and philosophical influences of the United States.

The elimination of restrictions by the government of the United States on exports to, imports from, the provision of services to, and investments within the Republic of Cuba would not result in an immediate shift or in a substantial shift by the government of the Republic of Cuba from its traditional commercial relationships.  Those who believe so have the courage of their ignorance.

In 1999, Republic of Cuba government-operated Alimport (under the auspice of the Ministry of Foreign Trade of the Republic of Cuba) purchased approximately US$750 million in food products for distribution to the 11.2 million citizens of the Republic of Cuba.  In 1999, Alimport also purchased approximately US$250 million in food products and fertilizers for use by 1) Republic of Cuba government-operated U.S. Dollar retail stores 2) Republic of Cuba government-operated companies 3) Republic of Cuba-based joint ventures and 4) the tourism sector.

Alimport would initially purchase four types of bulk food commodities from the United States: soy, rice, powered milk, and, wheat.  The total value of the bulk food commodity exports by the end of the twelfth month during which such exports are first authorized without United States government financing, but with or without United States-based private sector financing, is expected to be between US$25 million and US$45 million.  The total value of bulk food commodity exports by the end of the twelfth month during which such exports are first authorized with United States government financing is expected to be between US$75 million and US$125 million.  Neither analysis includes Alimport purchasing forward contracts to hedge against future increases in bulk food commodity costs.

Alimport is expected to purchase the four commodities from producers in the United States regardless of financing alternatives because 1) representatives of the producers of these commodities have visited the Republic of Cuba 2) representatives of Republic of Cuba government-operated companies and other Republic of Cuba government-operated entities have visited the United States as guests of the United States-based producers of these commodities 3) representatives of trade organizations representing the producers of these commodities have visited the Republic of Cuba 4) some contracts will need to executed to maintain the interest by United States-based companies as a vehicle to maintain support for expanding commerce between the United States and the Republic of Cuba and 5) Members of Congress representing the states within which these commodities are produced have visited the Republic of Cuba.  The standards used by the government of the Republic of Cuba to reward persistence will be similar to those used by other countries.

Short-term substantial exports of food products from the United States are not expected regardless of whether United States-based financing is permitted as 1) Alimport has existing contractual arrangements and 2) the government of the Republic of Cuba has commercial, economic, and political relationships with existing suppliers of food products that may, when taken together, supercede food product import decisions based solely on price differentials.

The most visible example of the latter reason is the expanding commercial, economic, political, and military relationship between the Republic of Cuba and the People’s Republic of China.  Representatives of the government of the People’s Republic of China visiting the Republic of Cuba in 2000 include: the Prime Minister; Minister of Finance and Information; Minister of Personnel; Director of Science and Technology of the Communist Party; Deputy Minister of Foreign Trade; Armed Forces; and company executives.  Representatives from the government of the Republic of Cuba visiting the People’s Republic of China during the last ten months include: H.E. Dr. Carlos Lage (a Vice President of the Council of State and Executive Secretary of the Council of Ministers); Minister of Basic Industry; Minister of Fishing Industry; Minister of Sugar; Minister of Light Industry, Science and Technology; and executives of companies.  During a May 2000 visit to the People’s Republic of China, H.E. General Ulises Rosales del Toro, Minister of Sugar of the Republic of Cuba, repeatedly expressed appreciation to the government of the People’s Republic of China for assistance with the sugar industry within the Republic of Cuba.

Since 1998, People’s Republic of China government-operated companies and Republic of Cuba government-operated companies have established joint ventures and economic associations in the following sectors: telecommunications, pharmaceutical, electronics, hotel, rice farming, textile, restaurant, and light industry.  Letters of intent have been signed in the following sectors: 1) develop and operate Republic of Cuba port facilities and 2) modernize railways.  This year, the government of the People’s Republic of China increased trade credits, including up to US$200 million in “soft” credits to purchase telecommunications equipment from People’s Republic of China-government-operated Gran Dragon Telecommunications S.A. and its joint venture within the Republic of Cuba, Gran Caiman Telecommunications S.A.

Another example is the Republic of Cuba’s relationship with the government of France, which for this year is providing approximately US$200 million in credits to the Republic of Cuba, primarily for the purchase of wheat and flour.  In 1999, the Republic of Cuba imported approximately 714,000 tons of grains from France, representing approximately 70% of the grains imported by the Republic of Cuba, with the remainder purchased from Canada and Argentina.  With respect to Canada, the country has provided the Republic of Cuba with substantial private sector and public sector investment capital, product and service export and import markets, and sources of tourists.  With respect to Argentina, the country has provided the Republic of Cuba with product and service export and import markets, and is owed approximately US$1.2 billion from transactions beginning in the 1980’s.

The government of the Republic of Cuba is not to be expected today or tomorrow, to purchase substantial quantities of rice from Arkansas, peas from Washington, wheat from Kansas, pork from North Carolina, milk from Wisconsin, or chicken from Maryland solely because of price differentials and quality differentials.  The same caution is true for non-food-related products.  There are political issues that will be intertwined amongst the dollars and cents.

The United States International Trade Commission need be cautious about using simple arithmetic to determine how much would be purchased from whom, as the resulting calculations may be too enthusiastic for reality.  Do not underestimate the significance of the political dynamic to existing decision making within the Republic of Cuba regarding commercial transactions.

Thank you.