Restoring U.S. – Cuba Trade Relations

President Barack Obama’s historic trip to Cuba on Sunday could be a game changer for U.S. agribusiness to recapture lost market share. He will be the first American President since Calvin Coolidge in 1928 to visit Cuba. This will be a very different kind of visit, which is another demonstration of the President’s commitment to chart a new course for U.S.-Cuban relations and connect U.S. and Cuban citizens through expanded travel, commerce, and access to information.

The U.S. announced new measures on Tuesday to make it far easier for Americans to visit Cuba and eased limits on the use of U.S dollars in trade there as President Barack Obama prepared to make a historic trip to Havana. According to the U.S. Treasury and Commerce Departments, the new measures will allow Americans to travel more easily to Cuba independently for educational, cultural and other authorized purposes without having to go in organized group tours, creating new cracks in a longstanding U.S. ban on general tourism to the island. Previously, only groups of people could make such visits. Coupled with direct commercial fights to the island expected to begin later this year, the new policy could allow many more Americans to visit the country.

Congressman Jim McGovern, a leading voice in Congress in the push normalize U.S.- Cuba relations, joining President Obama on his trip to Cuba. Congressman McGovern pointed bills pending before Congress that would allow U.S. businesses to trade with Cuba without restrictions, let U.S. telecommunications and Internet companies to provide services to the island, and allow for U.S. investment in privately owned Cuban agriculture businesses. Throughout history, agriculture has served as a bridge to foster cooperation, and I have no doubt that agriculture will continue to play a powerful role as we expand our relationship with the Cuban people in the coming years, said Thomas Vilsack the U.S. Secretary of Agriculture, who also will join President Obama on his trip to Cuba on March 21-22.

Significant opportunities exist for American agribusiness in Cuba, from exporters of agricultural commodities and food products to associated industries that will benefit from greater market access. Demand for high quality U.S. agricultural products is driven not only by the increasingly middle class Cuban population of 11 million, but also by remittances and tourism, which is expected to rise dramatically. According to the Engage Cuba Coalition, Cuba imports up to 80% of its food. In 2014, Cuban agricultural imports totaled almost $2 billion, nearly doubling since 2004. Cuba’s main imports include dairy (14%), soy products (13%), wheat (13%), corn (11%), rice (10%), and poultry (10%). The top U.S. agricultural exports to Cuba are poultry, corn, and soybeans. As a result of U.S. policies, American agribusiness is losing ground to countries who are able to offer financing.

The Trade Sanctions Reform and Export Enhancement Act (TSRA) of 2000 prohibits U.S. exporters from extending credit to Cuba’s agricultural importers. Consequently, the U.S. fell from its position as the #1 supplier of agricultural products from 2003 to 2012; the U.S. is now Cuba’s #4 supplier after the EU, Brazil, and Argentina. As USDA reports, since the Trade Sanctions Reform and Export Enhancement Act (TSRA) was implemented in 2000, the United States has exported nearly $5 billion worth of agricultural products to Cuba. These exports have been supported by the close geographical proximity of the United States to Cuba and the island’s strong demand for U.S. agricultural products.

U.S. agricultural exports to Cuba totaled $300 million in FY 2014, comprising 16 percent of Cuba’s $1.9 billion in agricultural imports. The United States has typically been the largest supplier to Cuba and has had the highest market share of the island’s imports in nine out of the last 11 fiscal years. Recently, however, U.S. market share has declined due to increased competition, especially from countries able to provide export credits to the Cuban import authorities. Under TSRA, U.S. exporters cannot offer terms of credit, and exports to Cuba must be purchased using cash or through third-party guarantees from foreign banks. But with the normalization of relations between the U.S. and Cuba now underway, potential reforms could help support U.S. competitiveness, increase total U.S. agricultural export value, improve U.S. market share, and benefit both U.S. exporters and Cuban consumers.

A new bipartisan Cuba Working Group (CWG) was established in the House of Representatives in December 2015, comprised of 18 Republican and Democratic members of Congress committed to ending the embargo and strengthening relations with Cuba. Members of the Cuba Working Group are supporters of one or more key pieces of legislation introduced in 2015, with Republicans as the lead sponsors. The bi-partisan Cuba Working Group will promote a U.S.-Cuba policy that reflects the interests of the American people in engagement with Cuba. These bills repeal economic and travel restrictions and would effectively eliminate the U.S. embargo on Cuba:

The Cuba Trade Act of 2015 would allow U.S. businesses in the private sector to trade with Cuba without restrictions;
The Cuba Digital and Telecommunications Advancement Act (Cuba DATA Act) would allow U.S. telecommunications and internet companies to provide services to the island;
The Cuba Agriculture Exports would allow for U.S. investment in privately owned Cuban agriculture businesses;
The Freedom to Travel to Cuba Act of 2015 would allow all U.S. citizens to travel to Cuba.

Pew Research Center survey, from July 2015 found that, Americans approved of the thaw in relations between the two countries. A similar share also said they would favor ending the trade embargo the U.S. imposed against Cuba in 1960. A Gallup survey conducted in February found that 54% of Americans had a favorable view of Cuba. The momentum of public opinion seems to favor Democratic presidential candidates; the public backed their stances on reopening diplomatic relations with Cuba even before Obama’s moves in the past two years.

Cuba has the potential to become a major market for U.S agricultural exports and to develop into a market that is quite diverse, with bulk staple products, such as corn, wheat, soybeans and rice, being important in the near term. U.S. agricultural exports to Cuba could reach $1.2 billion annually if financial restrictions and other barriers are eased, according to Texas A&M University economist Parr Rosson, who provided the estimate in testimony before the Senate Agriculture Committee last year.