Kansas Congressman Jerry Moran has built a reputation, and a successful political career, on his dedication to the state’s agriculture industry. Last week, Moran continued his efforts to bolster the state’s agricultural sector by introducing legislation that would further streamline trade between the U.S. and Cuba.
The passage of the Trade Sanctions Reform and Export Enhancement Act in 2000 allowed for cash sales of U.S. agriculture products to Cuba for the first time in 38 years. Moran’s legislation would take that effort a step further but removing burdensome stimulations that require payments be made to out-of-country financial institutions and allowing Kansas producers to travel to Cuba to promote their goods.
“Current U.S. trade policies hurt American farmers and ranchers by making it more expensive for Cuba to purchase agriculture products from the United States,” Moran said in a release issued last week. “Instead, Cuba is buying its food from other countries less friendly to the U.S. By standardizing our trade policies, we will increase export sales and support thousands of American jobs. I have long fought for common sense reforms to our trade policy with Cuba, and I am glad to partner with Chairman Peterson on this important legislation.”
Kansas is the No. 1 exporter of wheat and the state’s producers could stand to gain millions from increased trade with Cuba. Moran’s legislation has been endorsed by dozens of consumer and producer organizations and Kansas producers are optimistic the proposal will become law.
H.R. 4645, which was authored by Moran, and House Agriculture Committee chairperson Collin Peterson, D-Minn., would help to further simplify trade relations between the U.S. and Cuba. The Caribbean country imports about 84 percent of all the food its 11.2 million residents consume including 100 percent of the wheat and corn used. Since trade between the U.S. and Cuba was re-established, Cuba’s demand for agricultural imports has increased and consequently benefited Kansas producers.
But trade relations between the two countries are complex and often sensitive for both sides.
All food and agricultural products entering Cuba must go through Alimport, which negotiates purchase from U.S. firms, arranges for payment, takes control of the imports at the Cuban port and manages the distribution process within Cuba. U.S. firms cannot and do not negotiate with the product’s end user and have very little contact with any one else within the country. The negotiation process usually begins with Alimport’s announcement of its need to import a specific product. The organization then begins the process of gathering bids and counteroffers from different countries and businesses until it feels it has found the best possible price for the product.
Current trade policy stipulates that a confirmed, irrevocable letter of credit be completed with a third-country bank before U.S. export goods leave for Cuba. That means Cuba must pay for goods before they depart for the U.S. It takes about 15 days to secure a letter of credit and if the letter does not arrive before a ship is ready to depart, it holds up the shipping process even longer, adding time and expense to the process.
The agreement makes the exportation process more timely and costly and impacts U.S.-Cuban trade.
Moran’s legislation would change the system by allowing Cuban buyers to submit payments to upon receipt of the goods instead of before delivery and buyers could send cash payments directly to U.S. financial institutions, eliminating the time and expense of using international financial institutions.
Kansas producers stand to gain from any improvement in U.S-Cuba trade relations. The U.S. is Cuba’s largest supplier of agriculture imports, providing about 30 percent of the county’s imported agricultural goods. According to data from the U.S.-Cuba Trade and Economic Council, the state exported $134.9 million in wheat to Cuba in 2008 and $195.9 million in corn in 2008.
But there is more profit to be had from relations with Cuba. The country’s burdensome exportation process has caused many Cuban buyers to establish relations with European Union producers. The U.S. supplies only 10 million of the 24 million bushels of wheat Cuba imports annually.
Kansas Wheat communications specialist Bill Spiegel said while the legislation would not be a magic bullet for trade between the two countries, it would put Kansas producers at a better advantage to profit from exports to Cuba.
“We can’t predict exactly what Cuba would do but it would open the door for us to deliver more grain,” said Spiegel. “Wheat producers are huge advocates for trade with Cuba.”
The bill has also gained the support of dozens of agricultural special interest groups, the U.S. Chamber of Commerce, and state and U.S. meat and grain producers.
In its letter of support of the bill, the U.S. Chamber of Commerce noted that “Facilitating agricultural exports to Cuba would restore the natural competitive advantage of U.S. agricultural products in Cuba.”
The bill also allows removing the restrictions on U.S. travel to Cuba and would allow American producers to travel to Cuba to better market and sell their goods. Currently, any marketing of U.S. food and agricultural goods in Cuba is done on a small scale and through grocery store stands or product samples.
Spiegel said he foresees many trade groups and organizations making the trip south as representatives of the producers, instead of the producers themselves. Regardless, any in-person contact with Cuban buyer can help establish a “personal” connection and benefit the state.
“This legislation fits with our trade philosophy,” Spiegel said. “Having a customer so close in distance, it makes sense to make trade easier between the two countries.”
