US Trade Sanctions: The Cuba Embargo ITRN 603, International Trade Relations October 21, 2002 Adil Cherkaoui John Hawes Bassem Houssami Christine Kurowski

2 I. Introduction  Trade Sanctions: is a tool used by the USG against foreign countries to achieve a variety of foreign policy goals.  The purpose of the economical sanctions is to cause economical pain in the targeted country, forcing its government to change behavior.  From 1993 to 1996, 62 U.S. laws or executive actions were enacted, authorizing unilateral economic sanctions against 35 countries.  According to the organization USA Engage, the U.S. sanctions cost 15 billion annually in lost U.S. export in the year 1995.

3 Introduction (con’t)  The most prohibitive U.S. unilateral sanctions target Cuba, Iran, Iraq, Libya, North Korean, Syria and Sudan.  In 1999, President Clinton revised U.S. policy governing economic in accordance with new congressional legislation.  The 106th Congress passed the “Trade Sanctions Reform and Export Act” of 2000, clarified permissible trade with Libya, Sudan, Syria and North Korea, and allowing American agricultural and medical exporters to Cuba.

4 Cuba Sanctions Since the early 1960s, U.S. policy toward Cuba has consisted largely of isolating the country through comprehensive economic sanctions The embargo was imposed pursuant to section 620(a) of the Foreign Assistance Act of 1961 (22USC 2370(a)) section 5(b) of the Trading with the Enemy Act (50 USC App. 5(b)) The Cuban Democracy Act in 1992 and the Cuban Liberty and Democratic Solidarity Act (Libertad) in 1996 – often referred to as Helms Burton made the policy stronger

5 Other Acts Against Cuba 1997 Omnibus Appropriations Act Appropriations Act, 1996 & 1998 International Security and Development Cooperation Act of 1985 Antiterrorism and Effective Death Penalty Act, 1996 Internal Revenue Code Department of Defense Appropriations Act, 1987 Foreign Assistance Act Arms Export Control Act Export Administration Act Export-Import Bank Act

6 Effects of Economic Sanctions Economic sanctions rarely succeed in convincing a target country to change its behavior Sanctions usually cause ordinary people to suffer, rather than a country’s leaders Sanctions frequently inflict more harm on the US than the target country, decreasing US exports and resulting in a loss of US jobs Unilateral sanctions especially ineffective. Foreign competitors move in, enhancing trade ties to the target country

II. Exempting Food and Agriculture Products from U.S. Economic Sanctions: Status and Implementation.

8 End of Cold War With the collapse of the centrally planned economies Of Eastern Europe 1989 & dissolution of the Soviet Union in1991, Cuba lost  its major markets  its primary source of foreign assistance. Cuban Foreign Trade fell by 75% Economic output fell by 50%.

9 The Trade Sanctions Reform and Export Enhancement Act of Codified U.S. sanctions on commercial sales of food, agriculture commodities, and medical products to: Iran, Libya, North Korea, and Sudan, and extended this policy to apply to Cuba. Congress has a veto power. Permanent prohibition on Cuba’s access to U.S. private and other public financing to purchase exempted products. Prohibits making available U.S. government credits, credits guarantees, and other financial assistance to facilitate agricultural and medical product sales to certain sanctioned countries.

10 This act made changes: Broadened the exemption to allow sales of non- food agricultural commodities and fertilizers. Streamlined the process U.S. exporters follow to obtain licenses to sell exempted products to sanctioned countries.

11 Status of Implementation Took effect February 25, Extension of Food & Medical Exemption to Cuba. Debate on Proposed regulations governing sales to Cuba. Codification of food & medical exemption. Exceptions to Exemption.

12 Status of Implementation (con’t) Export licensing requirement. Payment and financing terms of exempted sales. Prohibition on U.S financing of agricultural sales to Cuba.

13 III. Political Background U.S. State Dept. lists 5,911 U.S. firms and citizens whose property was confiscated by Cuba without compensation in the 1960s Provision in Helms-Burton allowing Americans to sue users of confiscated property has been suspended by Clinton and Bush since its passing in 1996 Cuban-American community accounts for less than 9% of the population of Florida.

14 Who supports the embargo? Cuban-American exile community Those concerned that Cuba may be developing biological weapons and/or harboring terrorists Anti-Communists who want nothing to do with Castro President Bush

15 Who opposes the embargo? Younger generation of Cuban-Americans U.S. travel industry and agricultural states Free-trade capitalists who believe that market forces are the best method of undermining Castro Coalition of liberal Democrats and conservative Republicans

16 Family Aid U.S. embargo allows people to send up to $1, per year to Cuba The United Nations’ 1996 estimate of the amount of U.S. currency being sent to Cuba was $800 million The net dollar inflow to Cuba in 1996 from tourism was $400 million; from sugar, $500 million Irony is that the very group that supports the embargo and wants Castro removed is inadvertently supporting the Castro regime

17 IV. Proposed Policy Changes We propose changes in 5 areas: Travel Private Investment Trade Shipping Property Claims

18 1. End Travel Restrictions Restrictions no longer justified on security grounds Cuba no longer a Soviet base, nor can it effectively export revolution Travel will build Cuban enterprise, speed economic & political change Will increase contacts, information, also promoting change

19 2. Permit US Private Investment Agriculture, Housing, Telecoms sectors Follows pattern of US private investment in Eastern Europe, where it helped accelerate transition out of Communism Would increase pressure for rule of law Accelerate Cuban market-based reforms, begun in Strengthen role of private sector in Cuba Deepen contact with US society and ideas

20 3. Open Trade Sectors Agriculture sales should have access to normal commercial credit arrangements Telecoms and other sectors should also benefit Need to make financing a responsibility of the market, not government restriction and political decisions Put US suppliers in same competitive position as Canadian and European suppliers Take advantage of US geographic proximity

21 4. Lift Shipping Restrictions Continuing ban on third country ships that call in Cuba from visiting US ports serves no security purpose Raises cost of shipping to US, causes friction with third countries Allowing US vessels into Cuba trade would complement moves on trade and investment, and make US shipping more profitable.

22 5. Property Claims Subject of WTO disputes with 3 rd countries Neither US property claims and Cuban exile property claims should result in legal action in US courts against third country nationals The 5911 US claims for pre-revolutionary properties should be negotiated, as was done with claims in Eastern Europe Cuban exile claims should be handled by Cuban courts, as part of transition to rule of law and eventual return of interested exiles.