Obama Needs to Stop Playing Small Ball With Cuba
By William M. LeoGrande
Originally published in Foreign Policy
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. 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, Rubiodenounced 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, declaringthat 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. business] confidence.”
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.