Obama Needs to Stop Playing Small Ball With Cuba
Obama Needs to Stop Playing Small Ball With Cuba
Or a Republican in the White House, backed by a fearful, anti-Cuba
Congress, could undo — in an instant — all his good work.
BY WILLIAM M. LEOGRANDEFEBRUARY 1, 2016
On Jan. 26, the Obama administration rolled out a new slate of
regulatory reforms that further relax the embargo against Cuba — the
third such action since Obama and Cuban President Raúl Castro announced
their intention to normalize relations in December 2014. The goal is to
stimulate commerce and create a constituency in the business community
that will defend Obama’s legacy of better relations with Cuba — even if
there’s a Republican in the White House in 2017.
The Obama administration’s recent moves lower some long-standing
barriers to U.S.-Cuba commerce. The big changes include one that will
license U.S. firms to privately finance authorized exports, and another
to allow sales to Cuban state enterprises, so long as the sales “meet
the needs of the Cuban people,” as determined by the Department of
Commerce. Another obstacle that will disappear: the ban on letting Cuba
buy U.S. products on credit, which has put U.S. exporters at a major
disadvantage to competitors in Europe and Asia. Under the new rules,
this restriction will now be lifted across all sectors of approved trade
except in agriculture, where credits are still prohibited by the 2000
Trade Sanctions Reform and Export Enhancement Act.
By allowing U.S. firms to sell to state enterprises so long as these
sales benefit the Cuban people, the new regulations open a potentially
wide field of exports, although the exact scope of what is permissible
has been left intentionally vague. Among the examples of eligible goods
are those for artistic endeavors, education, food processing, public
health and sanitation, and residential construction — by no means an
exhaustive list, but one can imagine that most consumer staples might be
eligible for export.
But despite opening these important new avenues for business, the
regulations did not go nearly far enough to calm the fears and remove
the regulatory obstacles that still impede U.S. business deals with
Cuba. Without some notable commercial successes, the business community
could lose interest in Cuba and in lobbying Congress to lift the
embargo, leaving Obama’s normalization project dead in the water.
Like the dog that didn’t bark, several anticipated regulatory changes
were left out of the new package.Like the dog that didn’t bark, several
anticipated regulatory changes were left out of the new package. The
prohibition on U.S. investments (except in telecommunications) remains
intact, as does the prohibition on almost all imports from the island,
rendering trade with Cuba a one-way street that the government in Havana
is loathe to accept as normal. From low-end commodities like sugar and
nickel to high-end luxury goods like rum and cigars, Cuban products
would find a ready market in the United States.
U.S. financial institutions are still barred from processing most
international dollar-denominated transactions between Cuba and foreign
firms or banks (so-called u-turn transactions). This extraterritorial
extension of the embargo has led to billions of dollars in fines against
foreign banks, hampered Cuba’s reintegration into the global economy,
and angered U.S. allies. President Obama could have issued a general
license for U.S. banks to process these transactions. That would ease
the fears that many banks, both foreign and domestic, have of doing
business with Cuba because the current financial regulations are so
complex. Finance is the lifeblood of commerce; if funds cannot be easily
transferred, business will not get off the ground.
In addition, people-to-people travel to Cuba is still limited to
prepackaged trips by traveler providers like National Geographic,
RoadScholar Adventures, and Classic Journeys. Individuals cannot
organize their own educational program or travel independently. To be
sure, travel providers have concocted tours for every imaginable
interest, but these package tours are not cheap. If, as Obama contends,
“the best ambassadors for American values and interests are the American
people,” they should be free to exercise their right to travel to Cuba
with their own itinerary. The President could have issued a general
license for self-directed people-to-people educational travel.
President Obama is proud of his opening to Cuba, mentioning it as a
signal achievement in each of his final two State of the Union
addresses. But this chapter of his legacy is not yet finished, and if he
isn’t careful, a Republican in the Oval Office could write its closing.
Most of the Republican presidential candidates oppose Obama’s opening to
Cuba — Marco Rubio and Ted Cruz most stridently. On Jan. 26, Rubio
denounced the new regulations as “one-sided concessions” intended to
give the Cuban regime an “economic windfall.” When the United States and
Cuba restored diplomatic relations last July, Cruz accused Obama of
“unconditional surrender.” (Donald Trump has hedged his bets, declaring
that a deal with Cuba isn’t necessarily a bad idea in principle — but
that he, of course, would have gotten a better one!)
If a Republican wins the White House in November, his conservative
instincts and his hard-line Cuban-American base in Florida will
predispose him to roll back Obama’s opening to Cuba. And a new president
could do it with the stroke of his pen? Why? Because all of Obama’s
actions have relied on his executive authority, since Congress has done
nothing in response to his calls to lift the embargo.
In my recent conversations with U.S. and Cuban officials, the one thing
that both sides agree on is that deeper, broader commercial relations
offer the greatest hope of creating powerful political constituencies in
both countries willing to defend normalization — making rapprochement
irreversible. “We have a window of opportunity here,” said David
Sepulveda, State Department coordinator for international communications
and information policy, during a recent trip to Cuba to discuss
telecommunications. “We need to have some solid wins to give [U.S.
Yet, very few deals have been signed so far, in part because of the
limits on commerce still imposed by the U.S. embargo. That’s the
political context in which the new regulations have to be understood:
Obama is trying to jump-start business deals to forge economic ties
between the two countries that will be hard for his successor or Raúl
Castro’s (when he steps down in early 2018) to sever.
But time is short, and skeptical bureaucrats in Washington and Havana
alike are slowing progress. In Havana, every business proposition is
approached with suspicion, as if it were the Trojan Horse of capitalism.
When Google offered to blanket Cuba with Wi-Fi at little or no cost, for
example, Cuban officials were leery of entrusting their digital
infrastructure to a U.S. company when Washington has tried repeatedly in
the past to use the internet to foment opposition to the Cuban
government. In Washington, meanwhile, every proposal to further relax
the embargo is subjected to microscopic legal and political nitpicking
inside the executive branch bureaucracy. Rather than pushing the limits
of presidential executive authority now, so that commerce has time to
flourish before the next president takes office, the Departments of
Commerce and Treasury are rolling out piecemeal changes which are
necessary but will not get the job done.
To break through the timidity of the Washington bureaucracy, the White
House must stay on top of the issue, continually reminding officials
from cabinet secretaries on down that advancing relations with Cuba is a
presidential priority, and that their marching orders are to find ways
to get it done, not find excuses why they can’t.
President Barack Obama has less influence over Havana’s bureaucracy, but
there is one way he could put U.S.-Cuban relations at the top of the
Cuban government’s agenda: Go to Havana to make the case in person.
Source: Obama Needs to Stop Playing Small Ball With Cuba | Foreign