
A Pennsylvania farm
Today's New York Times outlines the difficulties President Obama will face in achieving the goal, articulated in the State of the Union Wednesday, of doubling export growth over the next five years. This page had already noted that if America wants to create farm and jobs through exports, Cuba would not be a bad place to start: the Cuban market is near and Cuba recognizes the quality of American products. But no, that can't happen; not with the die hard opposition to Cuba policy reform in Congress, right?
But compared to the other challenges the President faces on his export growth goal, Cuba may not be such a heavy lift after all.
The first obstacle the Administration faces will be what the Times calls "a fight to the death with the liberal wing of his own party." The trade agreements the President said he'd pursue with South Korea, Panama and Colombia will also necessarily entail the risk of cheap imports that imperil American jobs.
Suddenly Cuba is looking a lot more attractive -- sure, it involves a political battle, but compared to the difference in trade philosophy the Cuba opposition is a side show. And more important, the trade with Cuba is all one way. There are no down sides for American exporters or consumers -- only jobs and profits. And the jobs created by Cuba reform are too numerous to ignore. With minor regulatory fixes and an end to the ban on travel by Americans to Cuba, the US could generate as many as 40,000 jobs. (For more on those numbers, read this working paper from the U.S. International Trade Commission, this forecast by the Brattle Group, and this report by Texas A&M professor Parr Rosson.)
That's a lot of jobs. A 2009 update to an earlier USITC report shows that although US farmers have sold an average of about $400 million worth of products in Cuba the last few years, that figure could grow by up to 64 percent. But not if we don't deal with the two kinds of obstacles that hurt U.S. agriculture sales to Cuba: restrictions on the transactions themselves and limits on U.S. travel to the island, which reduce demand for U.S. exports. The report is very clear: if the US wants to reap the full potential of the Cuba market, the travel ban must go.
Members of Congress -- particularly from states suffering unemployment and low wages, which is all of them -- are willing to face the music of the hard-core pro embargo side if all they have to do is pass a couple of apparently minor trade provisions -- minor because they accomplish two things that probably shouldn't even be necessary:
(1) the first allows Cuba to pay the US directly for its purchases, rather than going through third country banks. Obviously, by allowing the payment to go directly to the bank account of the US seller, there's an important savings that makes the transaction that much cheaper. Furthermore, the Obama Administration already made changes last year that allow telecommunications companies to get paid directly by Cuba. There is no reason -- especially during a massive recession -- to penalize American agriculture by making farmers go through extra hoops to compete.
(2) The second provision is a simple clarification of a term used in the Trade Sanctions Reform and Export Enhancement Act, passed in 2000: "cash in advance." Why is it necessary to clarify that? Because the Bush Administrations Office of Foreign Assets Control determined in 2005 that "cash in advance" means Cuba's money had to be received by the seller BEFORE any goods can even leave port. In other words, they didn't use the term the way the rest of the world (and the Congressional Research Service) does. The problem for Cuba was serious: Since American plaintiffs have convinced US courts that Cuba owes them millions for confiscated property, Cuba runs a huge risk that, once they pay their cash in advance, the US can take the money and seize the goods. A well-founded fear, and another hurdle neither buyer nor seller needs.
What lots of people in Congress don't readily see is that the regulatory fix is only a part of the issue of exports. The other part is that Cuba has very little cash to pay its vendors -- in advance or otherwise. If American tourists are visiting and spending money, that equation changes. They've got 11 million people to feed, and their system -- whatever we think of it -- depends on the government's delivering on a promise of food and basic services. So by depriving the government, we're really depriving innocent people, and using food as political leverage.
If all three things happen: cash in advance clarification, direct payment to US banks, and free travel for all, then and only then will the US reap the full benefit outlined in the International Trade Commission update, and hoped for in the President's remarks.
The President said, "...the more products we make and sell to other countries, the more jobs we support right here in America. So tonight, we set a new goal: We will double our exports over the next five years, an increase that will support two million jobs in America. To help meet this goal, we're launching a National Export Initiative that will help farmers and small businesses increase their exports, and reform export controls consistent with our national security."
It is difficult to imagine a market that fits more snugly within these parameters than Cuba. It starts with American travel to the island; that creates the demand and furnishes the revenue.
