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Trade Sanctions:The U.S. Embargo with Cuba

Zayabal Batjargal

William Baynard

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Outline

• History of U.S. trade sanctions

• Overview of the legislation governing the trade embargo with Cuba

• Major problems created by the embargo

• Global response to U.S. actions

• Policy Implications

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U.S. Trade Sanctions

TargetInitial Year Type of Sanctions Precipitating Event Key Changes to Sanctions

North Korea

1950 Comprehensive trade and financial. sanctions

Korean War; possibleacquisition of nuclearWeapons

U.N. threatens trade and financialsanctions to forestall nuclear weapons acquisition (1993-94)

Vietnam 1954 Denied MFN status Vietnam War and aftermath; personnel MIA

Total trade embargo lifted; otherrestrictions remain (1994)

Cuba 1960 Comprehensive trade and financial sanctions

Castro-led takeover;interventions in Africa(1980s); Repress opposition

Cuban Democracy Act restricts trade of U.S. subsidiaries abroad (1992), TSREEA (2000)

Libya 1978 Comprehensive tradeand financial sanctions; Air travel ban

Gadhafi regime support forterrorism; bombing of PanAm Flight #103

Limited U.S. export restrictions(1978); Lifted in 1999 and Codified by TSREEA

USSR 1980 Grain & Oilseed Embargo Invasion of Afghanistan Lifted in 1981

Iran 1984 Comprehensive tradeand financial sanctions

Support for terrorism, opposition to peace processin Middle East, WMDs

Total export embargo (1995); Lifted in 1999 and Codified by TSREEA

Sudan 1988 Comprehensive trade and financial sanctions

Civil war and human rights abuses; terrorism support

Aid sanctions (1988-89); Lifted in 1999 and Codified by TSREEA

Iraq 1990 Comprehensive trade and financial sanctions, limited oil sales under U.N. oil-for-food program

Invasion of Kuwait; post-war discovery of extensive program to acquire WMDs

Toppling of Saddam, 2003 - Trade opened back up

SOURCE: Institute for International Economics, Policy Brief 98-4 Sanctions-Happy USA, by Gary Clyde Hufbauer, July 1998

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Cuba: 60 years as a US client

• 1880’s: U.S. is dominant trade partner with the Spanish colony of Cuba

• 1898: U.S. helps Cuba achieve independence from Spain in Spanish American War

• 1901: The Platt Amendment gives the US the right to intervene in Cuba

• 1959: The Cuban Revolution ends direct US influence in Cuba

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Cuba: 60 years as a US client

• Before 1959 the U.S. was Cuba’s main trading partner. Florida was Cuba’s largest U.S. state trade partner.

• 85 percent of Cuba’s exports were transported to the United States

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Cuba: 48 years as a US enemy

• 1959: Fidel Castro: The Cuban government passed the first Agrarian Reform Law

• 1960: President Eisenhower imposed a partial economic embargo

• 1962: President Kennedy expands embargo and prohibit travel to Cuba

• 1992: Cuban Democratic Act (Robert Torricelli Act)• 1996: Cuban Liberty and Democratic Solidarity Act (the

Helms-Burton Act)• 2000: Trade sanction reform and export enhancement

act (TSRA)

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U.S. Agricultural and Related Products Exports to Cuba, 2001 - November 2006

Source: U.S. Trade Internet System, www.fas.usda.gov/ustrade

$6.0

$141.2

$254.3

$397.9

$358.7

$317.5

2001 2002 2003 2004 2005 Jan-Nov 06$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

$350.0

$400.0

$450.0 Million Dollars

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Cuban-American Activists

• The Helms-Burton Act of 1996 and its predecessor the Cuban Democracy Act of 1992 were passed.  These two pieces of legislation were guided by Cuban lobbies in an effort to secure the demise of Fidel Castro. 

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Major Problems

• Embargo’s failure to accomplish its goal.

• Prevention of access to medical supplies for Cubans.

• Prevention of the sale of agricultural and other goods to Cuba by U.S. producers.

• International scrutiny faced by the United States.

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The State of Cuban Government

• The embargo has provided Castro with a scapegoat for domestic economic problems and engendered nationalist fervor among the people.

• Castro remains in power and his brother is poised to take over should he die.

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Sanctions Political Value for Castro

• “For 45 years the United States Government violated these commitments [WTO commitments] with the imposition of a unilateral economic, commercial and financial blockade against Cuba which places serious constraints on the economic, cultural and social development of my country, creates obstacles to trade relations among states and jeopardizes the welfare of the Cuban people.”– Statement made by the Cuban representative to the

WTO during the General Council meeting of 17-18 May 2004

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Access to Healthcare and U.S. Pharmaceutical Companies

• Although access to pharmaceuticals in Cuba is improving, the inability of U.S. firms to trade with Cuba limits the access to medicine for the Cuban people.

• The inability of U.S. pharmaceutical companies to do business in Cuba has given European and Asian producers easy access to the Cuban market.

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U.S. Exports to Cuba

• An open market for U.S. agricultural products in Cuba could provide a great deal of revenue for U.S. farmers.

• The U.S. auto industry also stands to benefit from the removal of trade sanctions towards Cuba

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Cuba and the Rest of the World

• EU officials recently hosted Cuban dignitaries in Brussels

• The Mexican government has a longstanding history of official support for the Cuban government

• Canada remains Cuba’s largest trading partner

• All three aforementioned parties wholeheartedly oppose the U.S. embargo

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The Embargo and the Rest of the World

• The Helms-Burton act threatened U.S. subsidiaries. Mostly those operating in Europe, Canada and Mexico. It further stated that no ship could dock in the United States if it had previously docked in Cuba.

• The EU brought a case to the WTO. The Panel and AB ruled in favor of the EU regarding Section 211 of the Omnibus Appropriations Act of 1998.

• The U.N. General Counsel has officially voted to oppose the embargo 17 times.

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Extraterritorial Implications

• “Title III allows US citizens to sue in the US court system anyone who "traffics“ in property confiscated by Cuba, and extends this right to people who were not US citizens at the time of the confiscation.”– Joaquin Roy, International Legal Scholar

• In face of a WTO case, the United States compromised with the EU on several provisions of Helms-Burton.

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Remaining Problems

• The fact that the embargo remains in place disallows any united effort between the United States and any other meaningful party, particularly the EU, to address human rights issues in Cuba.

• The U.S. embargo distorts world trade and leaves the nation vulnerable to criticism in the WTO.

• As Cuba becomes less and less threatening to the United States it is likely that the “national security exception” may no longer apply.

• “As U.S. policy toward the region has moved on, so has Cuban mischief-making”– Cato Institute Report, in regards to U.S. Latin American Policy

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Current U.S. Policy

• “I submit to you that foreign businesses will not flourish on the island as long as there is an active communist regime in control” – U.S. Commerce Secretary Carlos Gutierrez,

21 February 2007

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Future Policy

• If business cannot function in Cuba, U.S. policy should allow this failure to occur on its own, rather than providing an excuse for the Cuban regime.

• The end of the embargo would provide the United States a stronger footing for future trade negotiations.

• Without the embargo, the United States could work multilaterally to address human rights issues in Cuba.

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Trade Implications

• The current trade embargo not only restricts U.S. companies, but distorts the entire world trading system and undermines the spirit and letter of WTO regulations.

• The promotion of trade will do more to ensure national security than its denial.

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Sources• Nikolay Marinov “Do Economic Sanctions Destabilize Country Leaders?”

American Journal of Political Science, 49 (3), 564–576. • M2 Presswire. Coventry: Mar 27, 2007.  pg. 1• “On Cuba, Try Kindness,” The Boston Globe August 03, 2006 Thursday

THIRD EDITION • The Economist. London: Jun 23, 2007. Vol. 383, Iss. 8534;  pg. 60• “Change on Cuba: Time to end an anachronistic policy,” [EUROPE 1ST EDITION]

Financial Times. London (UK): Dec 10, 2003. pg. 12• Joaquin Roy, “The Helms-Burton Law: Development, Consequences, and Legacy for

Inter-American and European-US Relations,” Journal of Interamerican Studies and World Affairs, Vol. 39, No. 3, pp. 77-108.

• http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds176_e.htm• Jonathan G. Clarke and William Ratliff, “Report from Havana: Time for a Reality

Check of U.S. Policy toward Cuba,” Policy Analysis, no. 418• WTO Online Documents

– General Council Report

– Dispute Settlement Summary, DS 176