By Steve LeVine
April 22, 2009
President Obama can increase trade with Cuba without convincing Congress to lift the embargo
As President Barack Obama seeks to ease tensions with Cuba, he risks a standoff with Congress over Washington’s 47-year-old trade embargo on the island. While the White House on Apr. 13 made some travel easier and said U.S. telecom companies may invest in Cuba, Obama could do much more if he wants. The notion that the embargo makes trade with Cuba impossible "is a fallacy," says Jake Colvin, an analyst at the National Foreign Trade Council, a lobbying group for U.S. exporters. In fact, the President can authorize nearly any U.S. company to operate in Cuba.
Obama, of course, would face strong opposition from conservatives and some Cuban Americans if he loosens trade too much without reciprocal steps from Havana. Yet Cuba buys a lot of American goods already: $710 million in grain, fruit, poultry, and other products last year. And it would likely buy far more if it could. "An opening with the U.S. fits into Castro’s economic calculus," says Julia E. Sweig, a Cuba expert at the Council on Foreign Relations.
A big stumbling block to doing business in Cuba is credit. American banks are barred from financing trade with Cuba, so Havana must pay cash for U.S. imports. A good start, Colvin says, would be simply to let companies give Cuba 90 days to pay for goods rather than requiring cash up front. Later, Obama might let American banks get involved, though the embargo specifically bars financing trade in certain products, says Anya Landau French, a researcher at the Lexington Institute, a think tank.
Obama could also let Cuba sell products in the U.S. to earn money to buy more American goods. And he might take the Apr. 13 measures further. The White House said it would allow more frequent money transfers and travel to the island—but only by Cuban Americans. Even with the embargo, Obama could allow anyone to visit for cultural and humanitarian purposes, though not tourism, French says, adding: "There’s no reason the U.S. should be restricting its own people’s travel."
In many industries, U.S. companies will be playing catch-up. Europeans, Canadians, and others have long been in Cuba. Nonetheless, American business is excited about the possibilities. Caterpillar (CAT), for instance, is hoping to export its bulldozers, road graders, and other construction vehicles to the island. "Cuba doesn’t need to rebuild its infrastructure. It needs to build an infrastructure," says Bill Lane, Cat’s top lobbyist. "There will be demand for almost every product Caterpillar produces."
LeVine is a correspondent in BusinessWeek’s Washington bureau.