The list of issues spurring deep divides between members of Congress is long, but trade is separating itself as a potential area where Republicans and Democrats can work together. While Trade Promotion Authority passed out of the Senate Finance Committee and is being considered by the House Ways and Means Committee, the Senate Agriculture Committee spent time reviewing challenges and opportunities resulting from potential increased agricultural trade with Cuba.
After more than 50 years of strict embargoes, President Obama, in his 2015 State of the Union address, announced a change policy direction towards Cuba. In the days after the annual address, the President outlined a number of policy initiatives aimed at improving relations between the United States and Cuba, including authorizing expanded sales and exports of certain goods and services from the United States to Cuba.
Recognizing there remain strong opinions on this issue among his Senate colleagues, including Florida Senator and 2016 Presidential candidate Marco Rubio (R-Fla.) who opposes easing restrictions on Cuba, Senate Agriculture Committee Chairman Pat Roberts (R-Kan.) said this remains a complicated issue to address.
“Foreign policy does not happen in a vacuum,” Sen. Roberts said “We have to take a realistic approach and work out a step by step plan towards lifting the embargo. This is a goal that should include Congress.”
Located less than 100 miles from the Florida Keys, Cuba has potential to be a major market for U.S. agricultural exports. Under the Trade Sanctions Reform and Export Enhancement Act of 2000, Congress lifted the ban on the export of agricultural products. After passage of the TSRA, U.S. agricultural exports to Cuba peaked at $658 million but have fallen to $286 million in 2014, with poultry, soybeans and soybean meal and corn constituting 96 percent of U.S. agricultural exports to Cuba. While U.S. agricultural exports to Cuba have declined in recent years, global exports have reached $1.7 billion, and the panel of witnesses at the Senate hearing said this represents a tremendous opportunity for U.S. farmers and ranchers as Cuba imports approximately 80 percent of its food.
Minnesota cattlemen Ralph Kaehler was one of the witnesses. Kaehler told the committee his family exported the first livestock to Cuba in 2002 following enactment of the TSRA. Since then, he has led trade delegations to Cuba that have resulted in exports of livestock, dried distillers grains, powdered milk, animal milk replacer, and texturized calf feed.
“Given the opportunity, U.S. farmers do well in Cuba,” Kaehler explained. “We have a significant advantage of shorter shipping over Europe, South America, Asia and other major exporters.”
However, he said current trade financing regulations make it overly cumbersome for U.S. farmers and ranchers to compete with other exporters. Another witness, Kansas wheat farmer Doug Keesling, agreed, highlighting the requirement prohibiting U.S. exporters from using letters of credit to facilitate sales. Instead, they must offer only cash-in-advance sales.
“If a company wants to take the risk of providing a loan to a Cuban buyer, they’re out of luck because selling on credit isn’t even an option for them,” he said. Keesling also highlighted other regulatory and infrastructure challenges that “make it very expensive to do business with Cuba.”
Another point Kaehler raised surrounded export assistance programs, like USDA’s Market Access Program. Current rules prohibit USDA from providing assistance for exports to Cuba. He urged the committee to consider ending that prohibition as it considers reforms to U.S.-Cuba trade relations.
Also testifying at the hearing was Parr Rosson, agricultural economics professor from Texas A&M. Rosson said there is strong potential for Cuba to become a major market for U.S. agricultural exports.
“With a more open economy, less regulation by both governments, strong tourism and remittances, U.S. food and agricultural exports have the potential to exceed $1.2 billion annually within five years,” he said. “While much of this additional export volume may be consumed by international visitors, a growing share will also make its way to into the Cuban populace, spurring additional demand for U.S. products.”
Multiple pieces of legislation have been introduced to remove barriers to trade for U.S. agricultural products to Cuba. Specifically, Senate Agriculture Committee Ranking Member Debbie Stabenow (D-Mich.), helped introduce the Freedom to Export to Cuba Act. Sen. Stabenow said U.S. farmers and ranchers are “uniquely positioned to lead the way” in improving relations between the U.S. and Cuba.
Chairman Roberts said this will not be a quick process and will require a “new system of engagement” with Cuba.
“Agriculture has long been used as a tool - not a weapon - for peace and stability,” Roberts said. “It is my hope that Cuba will embrace the practices of free trade, enterprise and commerce, so that both countries will gain from increased relations.