U.S. ag exporters face barriers to becoming a major food supplier to Cuba despite the restoration of diplomatic relations, said the head of the USDA’s Foreign Agricultural Service. In testimony to a House Foreign Relations subcommittee, administrator Phil Karsting said Cuba imports more than $2 billion a year in food. The U.S. share was $287 million in 2014, according to the Commerce Department, less than half of the total for 2008.
“While I am confident U.S. farmers, ranchers, and exporters are poised to capture markets in Cuba, I don’t want to minimize the obstacles,” said Karsting, pointing to “two overarching factors. First, Cuba is a country with limited foreign exchange. And second, U.S. companies are behind our foreign competitors in market development.” Another impediment, he said, is Cuba’s policy that all U.S. agricultural imports must flow through the state-run agency Alimport.
The USDA has not decided whether to assign an agricultural officer to the newly re-opened U.S. embassy in Havana, said Karsting, who noted that “the embassy will operate in a restrictive environment.”
By law, U.S. food sales to Cuba are restricted to cash in advance. U.S. agencies are barred from providing export assistance, and the USDA can’t provide money for market-development activities by U.S. trade groups. Lawmakers, including Sen. Amy Klobuchar of Minnesota, have filed bills to end the U.S. trade embargo on Cuba.
Most transactions between Cuba and the United States, “including most export, import and other activities, remain prohibited,” said a Treasury Department official. Ag and food exports are permitted. Treasury has modified its interpretation of “cash in advance” sales and authorized U.S. banks to establish correspondent accounts with Cuban banks. Both steps should facilitate sales, said John Smith, acting director of Treasury’s Office of Foreign Asset Control.
Ag groups regard Cuba as a natural and nearby market for U.S. farm exports. Yet the island ranks 59th among export markets so far in 2015, said the U.S.-Cuba Trade and Economic Council, which monitors trade between the countries. As of July, sales totaled $122.4 million. Cuba has scaled back on U.S. purchases, the council says, for reasons that include lack of foreign exchange, financing offered by U.S. competitors and “financial largess” of China and Venezuela. Cuba also uses its purchases of U.S. goods as a lever for change in U.S. trade rules, says the council.
Text of testimony by USDA, Treasury and Commerce officials is available here.