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Experts ponder the prospects for post-embargo trade
CubaNews / November 2007

By Larry Luxner

Plenty of people are raving about the possibilities of doing business with Cuba post-embargo, but Dan O’Flaherty isn’t one of them.

O’Flaherty, vice-president of the National Foreign Trade Council, says that while his or-ganization opposes U.S. sanctions against the island nation, “it would be wrong to assume there are enormous opportunities for trade” with Cuba.

“Despite the efforts of the Bush administration to tighten the embargo, there are significant trade opportunities. But these opportunities have been narrowing due to major shifts in Cuba’s external trading patterns,” he said.

For one thing, Cuba is now importing most of its rice from Vietnam and other Asian countries rather than from U.S. sources. Its commerce with China and Venezuela has shot up to the point where those two countries now account for 35% of Cuba’s foreign trade.

“They’ve reduced their foreign debt and increased reserves,” O’Flaherty said. “The Cu-bans are able to find suppliers for their import needs, as well as modest export markets elsewhere, which has led some to the conclusion that they’re able to do without us.”

He added: “At the moment, US-Cuba trade is a one-way street. Commodity exports alone are unlikely to have much effect because they only involve Cuban government purchases. And the regime has shown it can weather economic hardship.”

Both O’Flaherty and Timothy Deal, senior vice-president of the U.S. Council for Interna-tional Business, spoke at an Oct. 16 all-day seminar in Washington entitled “Impera-tives for a New U.S. Cuba Policy.”

O’Flaherty pointed out that Cuba, with its 11.2 million people, has a GDP of $39 billion and 8% growth. By contrast, the Dominican Republic, with nearly 9 million people, has a GDP of $64 billion and 9% growth.

“Given its high indicators and people skills, were the embargo to be lifted Cuba would once again become a significant export market for a multitude of products,” he said. However, “at this juncture, there’s no appe-tite in the business community to undertake a major effort [to restore trade with Cuba].

O’Flaherty and Deal traveled to Havana in February 2007 on a fact-finding mission sponsored by the Center for International Policy.

“What really struck us was the marked difference in which Cuba treats trade and how it treats investment,” Deal said. “Cuba seems to seek only limited foreign investment on very specfic terms. It’s more selective about foreign investment today than in the 1990s.

“Today, the leading sectors for investment are tourism and basic industries like petroleum and mining; health and public education are banned as too sensitive.”

Deal added: “Realistically, even if the U.S. and Cuba move to eliminate measures blocking investment, U.S. investors are unlikely to rush in unless there’s a significant change in Cuban policies and a more friendly investment regime.”

In addition, he said, “both governments would have to dismantle the many legal barriers and policy disincentives they’ve created over the years. U.S. unilateral action would not pave the way by itself. The Cubans would have to do likewise too.”

The three main barriers to investment are the embargo signed by Kennedy in 1962; the Cuban Democracy Act of 1992, which forbids foreign subsidiaries of U.S. firms from doing business in Cuba, and the Helms-Burton Act of 1996 which prevents citizens of third countries from using expropriated property.

“Together, these three effectively block all U.S. investment in Cuba,” said Deal, adding that “outstanding property claims are probably the biggest obstacles to U.S. investment, aside from the laws themselves. Settlement of these claims would have to precede any lifting of the embargo.”

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