Beyond Trade & Travel: Normalizing US-Cuba Relations

While much attention has been focused on the changes to ease travel and trade between the United States and Cuba, President Obama’s Policy Directive on US-Cuba Normalization lays out a broader vision for normalization of relations and mutual cooperation between the two neighbors. Issued October 14, 2016 (along with other regulatory changes discussed here) the Directive also lays out six priority objectives for normalization and actions to implement them.obama-castro-handshake

Among other things, the vision laid out by President Obama’s Policy Directive includes – travel to Cuba for U.S. persons that is safe and secure from natural and man-made hazards and regional cooperation with Cuba towards these goals, and a strengthened U.S. position in international systems by removing an irritant from its relationships with allies and partners and gaining support for a rules-based order.

The six U.S. medium-term objectives for US-Cuban policy are to:

  1. Continue high-level and technical engagement;
  2. Continue to encourage people-to-people linkages;
  3. Seek to expand opportunities for U.S. companies to engage with Cuba;
  4. Support further economic reforms by the Cuban government;
  5. Expand dialogue with Cuba in international fora; and
  6. Seek greater Cuban government respect for human rights while recognizing that the United States must leave the future of Cuba up to the Cuban people.

To facilitate the effective implementation of this Policy Directive, U.S. departments and agencies will have the following roles and responsibilities:

National Security Council (NSC) staff will provide ongoing policy coordination and oversight of the implementation of overall Cuba strategy and of the Directive.

The Department of State will continue to be responsible for formulating U.S. policy toward and coordinating relations with Cuba. This includes supporting the operations of Embassy Havana and ensuring it has adequate resources and staffing, issuing visas, refugee processing, promoting educational and cultural exchanges, coordinating democracy programs, and political and economic reporting.

The U.S. Mission to the United Nations (USUN) will coordinate with the State Department to oversee multilateral issues involving Cuba at the United Nations.

The Department of the Treasury is responsible for implementation of the economic embargo restrictions and licensing policies.

 The Department of Commerce will continue to support the development of the Cuban private sector, entrepreneurship, commercial law development, and intellectual property rights as well as environmental protection and storm prediction.

The Department of Defense (DOD) will continue to take steps to expand the defense relationship with Cuba where it will advance U.S. interests, with an initial focus on humanitarian assistance, disaster relief, and counternarcotics in the Caribbean.

The Department of Homeland Security (DHS) will, together with the Department of Justice, engage with the Cuban government to combat terrorism and transnational organized crime.

The Department of Justice (DOJ) will, together with DHS, engage with the Cuban government to combat terrorism and transnational organized crime.

The Small Business Administration (SBA) will support exchanges with the Cuban government in areas of mutual interest, particularly on formalization of small businesses and to spur the growth of new enterprises.

The Office of the United States Trade Representative will provide trade policy coordination in international fora and prepare for negotiations to normalize and expand US-Cuba trade.

The Department of Agriculture (USDA) will work to increase U.S. food and agricultural exports to Cuba.

The Department of Health and Human Services (HHS), in accordance with the June 2016 Memorandum of Understanding between HHS and the Cuban Ministry of Public Health, will collaborate with Cuban counterparts in the areas of public health, research, and biomedical sciences, including collaboration to confront the Zika virus, dengue, chikungunya, and other arboviruses.

The United States Agency for International Development (USAID) will coordinate the U.S. response to natural and man-made environmental disasters.

The Department of Transportation (DOT) will continue to develop air and surface transportation links between the United States and Cuba and provide required regulatory and safety oversight of transportation providers and systems.

The Office of the Director of National Intelligence (DNI) will support efforts to normalize relations with Cuba and seek opportunities for engagement with Cuban counterparts on areas of common interest and information exchange on mutual threats.

The Department of the Interior (DOI) will continue to cooperate with Cuba on marine protected areas and to engage Cuban counterparts to finalize arrangements on wildlife conservation, terrestrial national protected areas, and seismic records.

In issuing the Directive, President Obama stated:

This new directive consolidates and builds upon the changes we’ve already made, promotes transparency by being clear about our policy and intentions, and encourages further engagement between our countries and our people.

This clarity and transparency is important given the long and complicated history of US-Cuba relations that dates back to the 1880s. The Directive is also aimed at ensuring the recent changes in US-Cuba policy outlive the Obama Administration. We can hope that the next Directive will implement the lifting of the outdated and ineffectual embargo, the low point in this history.

Advertisements

What will Brexit Mean for Britain’s Foreign Trade Relations?

As I write this, we are probably just now beginning to absorb the reality that Britain has voted to leave the European Union. Along with this realization come a number of questions.

Brexit text with British and Eu flags illustration

There are no answers in this piece – only questions. Here are two issues uppermost in my mind:

Brexit Impact on Trade Relations with the US

For the past 40 years, transatlantic trade relations have been viewed and developed through the prism of two powerful trading blocs on either side of the ocean. US-EU trade has occupied about 30% of global trade.

What place has US-UK (British) trade occupied? In 2016, Germany was the top US trade partner in Europe (4.6% of overall US trade). Britain was second among EU countries (2.1%). Also in the top 15 US trade partners were France, Italy, the Netherlands, and Belgium. How will these figures affect US calculations going forward?

The United States and the European Union are currently negotiating the TransAtlantic Trade & Investment Partnership (T-TIP) Agreement. T-TIP negotiations are aimed at further cementing US-EU trade ties. Already low tariffs will be eliminated. Divergent rules and standards on the two sides of the ocean will be harmonized and standardized.

  • Will Britain choose to participate in the ongoing T-TIP negotiations?
  • If so, on what terms will Britain want to participate?
  • Will Britain be allowed to set the terms for its participation?
  • How will the EU and the US react?
  • Will the US be willing to negotiate separately with Britain?
  • Will T-TIP negotiations have to be suspended while they figure this out?

Brexit Impact on Trade Relations with Britain’s Former Colonies

Britain’s trade relations with its former colonies have also been shaped through the prism of its membership in the EU. Supporters of the “leave” Brexit vote may be waxing nostalgic for the days when the “sun never set on the British Empire”. (The Spanish Empire first held this title until most of its colonies in the Americas fought for and won their independence in the early 19th century.)

By the early 20th century, the British Empire comprised one-fifth of the world’s population and a quarter of the Earth’s total land area. Belgium, France, Germany, and the Netherlands were the other major European colonial powers.

After attaining political independence over the course of the 1960s and 1970s, the former colonies established the African Caribbean and Pacific Group of States (ACP). The Cotonou Agreements, otherwise known as the “ACP-EC Partnership Agreement” set the framework for trade relations between the EU and the 79 ACP members. And the ACP-EU framework is the prism through which Britain has shaped its trade relations with its former colonies in Africa, the Caribbean, and the Pacific.

Currently, these relations have focused around negotiation and implementation of Economic Partnership Agreements (EPAs) with seven (7) regions. EPAs are replacing the unilateral access for a limited range of goods by ACP countries to EU markets with reciprocal access in goods and services. EPAs also include provisions for development cooperation and assistance to help countries make these transitions. Continue reading

Trade Agreements & Jobs

A few weeks ago I treated myself to a massage. As we got to know each other, my masseuse – let’s call her “Mary” — shared that 5 years before she had transitioned from an IT position with a major US corporation located, at that time, in Maryland. After working 14 years with the company, she was made redundant when the company was acquired and moved its operations – to Boston, Massachusetts, U.S A.

“Mary” didn’t lose her job because of a trade agreement, or outsourcing. She lost her job because she was viewed as expendable by a corporation to which she had given 14 years.

Trade agreements are about making it easier to buy and sell goods and services globally. They remove or ease countries’ barriers to trade – import duties, regulations, etc. The rules are often skewed in favor of the richer, more powerful countries. And they are too often shaped by the interests of the powerful corporations at the table that can disenfranchise the poor, wherever they are located.

Trade agreements do make it easier for corporations to export their cultures and values to other countries. The down sides can include a stronger focus on corporate profit over community good. There are potential upsides as well – greater transparency and efficiencies. So, yes, trade agreements can be a mixed bag.

However, when it comes to jobs don’t blame trade or trade agreements. A company that is already pre-disposed to treating its employees as expendable will pack up and move with minimal regard for their years of service or their future with or without these agreements. Blame a corporate culture that says – it’s okay!

WTO 10th Ministerial Conference: The Nairobi Package

The World Trade Organization (WTO) 10th Ministerial Conference was held, for the first time in WTO history, in Africa – Nairobi, Kenya. WTO 10 Ministerial logo

Scheduled for December 15-18, 2015, extending discussions for a fifth day allowed the Ministers to reach consensus on the Nairobi Package.

In the Ministerial Declaration, WTO members reaffirmed the pre-eminence of the WTO as the global forum for negotiating trade rules and for trade governance and pledged to strengthen the multilateral trading system in a manner inclusive of prosperity and welfare for all Members. They also directly addressed the divergence of views on how to conduct the current round of trade negotiations while, essentially, endorsing the very incremental progress made to date.

Launched in 2001, the Doha Development Round was intended to negotiate new rules on a wide range of trade activities as part of a single undertaking – one package of trade rules to which everyone agrees at the end of the Round. However, the single undertaking has eluded the Members who have been unable to even agree on what they mean by the term “Development.” Agriculture trade rules have been at the heart of this impasse.

Director General Azevêdo, beginning with his first Ministerial in this role, has been identifying those portions of the Doha negotiating issues that can be agreed to in mini-packages. The highlight of the Bali Package from the 9th Ministerial in 2013 was the Trade Facilitation Agreement to expedite movement of goods across borders. The Nairobi Package contains Members’ consensus around the sticky Agriculture issues.

Nairobi Package on Agriculture:

Export Competition – This Decision introduces new rules to reform provision of financial support by WTO members for the export of their agricultural products.

  • All export subsidies are to be immediately eliminated by developed countries. Developing country members have until the end of 2018 to do so or in the case of cotton products by January 1, 2017, with exceptions with respect to support for producers of basic agricultural products until the end of 2023. For least developed countries (LDCs) and the thirty-one net-food importing developing countries these exceptions remain in place until the end of 2030. Developing countries are nevertheless required to ensure that their programs are not used to circumvent their obligations under this Decision.

 

  • Financial support in the form of export credits (but not working capital for suppliers), export credit guarantees and insurance programs can be provided for no more than eighteen (18) months and must be self-financing (covering long-term operating costs and losses), charging risk-based premiums. Developed countries must comply by the end of 2017. Developing country Member providers of export financing receive a four-year phase-in period (36-month term as of 2016, 27-month term by 2018) to achieve the 18-month term by the end of 2020. LDCs and net-food importing developing countries can receive payment terms of up to 54 months for procurement of basic foods, with extensions permitted under exceptional circumstances. Existing contracts that do not conform can be allowed to run their course, so long as they are not modified and are notified to the WTO Committee on Agriculture.

 

  • Agricultural Exporting State Trading Enterprises (STEs) must comply with these rules and refrain from using their monopoly powers to displace or impede the exports of other Members. STEs are governmental or non-governmental enterprises authorized to engage in trade with exclusive or special rights that allow them to influence the level or direction of imports or exports. STEs are prevalent in China and also function as marketing boards for specific products in many developing countries.

 

  • While reaffirming commitment to maintain adequate levels of International Food Aid, Members must ensure that such aid is needs-driven, provided as grants only, and is tied neither to the commercial exports or the market development objectives of the donors. Agricultural products provided as food aid are not, as a general rule, to be re-exported and must take into account local market conditions for the same or similar product – procuring locally or regionally where possible. Members are encouraged to provide cash-based food aid. Monetization of food aid – food exported and sold on the local market of the receiving country to support other projects – should be a last resort and be related to delivery of the aid or to address chronic hunger or malnutrition in LDCs and net food importing developing countries.

Continue reading

Is it Time for a Trade Agreement on Labor Mobility? Part I

At any given moment, a company looking to source a product, be it sugar or software, has several advantages and resources at its disposal. As a result of trade agreements, import tariffs have been lowered. Rules are in place to minimize import barriers and to increase transparency about the rules. The company knows what goods it can import and under what conditions.

Despite the demand for labor that draws people to take desperate lengths to cross national borders, no such mechanisms exist for the labor market. Trade rules continue to relegate the issues of labor movement to the realm of domestic policy. The result is national immigration policies that marginalize the low-skilled or unlicensed service providers as well as the more highly-skilled and educated workers from certain regions of the world. These are the workers who migrate to pick fruit, mow lawns, clean homes, care for children and the elderly, and drive our cities’ taxis.

Refugees cross Hungary-Serbia border fence (courtesy of Wikipedia)

Refugees cross Hungary-Serbia border fence (courtesy of Wikipedia)

The current refugee crisis is the inevitable result of the absence of a regularized mechanism for handling the ongoing flow of labor across borders. The minimal system that exists is therefore quickly overwhelmed when there is an emergency, such as the outflow of refugees from war-torn Syria. The hundreds of economic migrants that annually take advantage of the summer weather have become hundreds of thousands of people fleeing war as well as the resulting poverty.

Germany’s offer to absorb up to 100,000 migrants, it is widely agreed, is motivated by the appeal of attracting young laborers to replace its ageing and diminishing labor force. Nor is Germany the only country facing this pending challenge. We know, for example, that the US economy faces a shortage of skilled workers in the not-so distant future.

Of course, some of these needs can be met locally. However, we have trade rules in place that limit the ability to stop the import of sugar because a country already grows its own sugar. Why not for labor?

Yes – we are talking about people and their livelihoods, not commodities. However, this is a concern that cuts both ways. Furthermore, a drowned bag of sugar simply dissolves. All that may wash up on shore is an empty sack. We should no longer be willing to stand by and watch people drown while grasping for a better life. Pope Francis, in his speech before the joint session of the US Congress, made an appeal to recognize the humanity in everyone and not be afraid of the numbers.

Of course, it’s hard to ignore that domestically, the unemployment numbers are also high. The US unemployment rate stands at 5.1% (as of October, 2015). It’s much higher among African-Americans, Hispanics, Native Americans, and youth, and varies by region. Unemployment rates in Europe are higher among immigrants. Could there be a connection between these anomalies across the domestic labor markets and the absence of a rational approach to labor mobility?

At the moment the crisis is on. However, if we do not take the time to simultaneously plan for a rational and normalized approach to labor movement, such crises will continue to recur. Is it time to negotiate a trade agreement on labor mobility?

. . . to be continued

Trade & Development, Part II

I’m usually skeptical of explanations for continued poverty in the developing world that point to the history of colonialism. Note, I’m not talking about the continued gap in economic development between developed and developing countries. I’m talking about the existence of deep pockets of extreme poverty after decades of political independence.

As we discussed in our recent post, Trade & Development, one pervasive, and corrosive, explanation for the poverty is corruption. Yet, I find this only a partial explanation. How is it possible to look at another human being and deny their right to the basics of life just to make more money?

In the context of Africa, one remnant of colonial rule may remain pertinent in our search for answers.

Colonial powers carved out their territories ignoring existing ethnograpical and cultural realities. The newly independent nations signed treaties in which they agreed to respect these political boundaries handed down to them. Yet, we know that the cultural memory lives on outside of these country borders.

For example: Just six years after political independence, the Muslim Hausas in northern Nigeria seceded and created the Republic of Biafra. A bloody civil war ended with the surrender to Nigeria by Biafra. Fifty years later the separatist movement continues. The religious and cultural tensions which led to the creation of Bangladesh (predominantly Bengali-speaking Muslim), Pakistan (Muslim) and India (Hindu and Sikhs) out of what had been British India survive today in the conflict over Kashmir. In Europe, Yugoslavia’s borders did not survive the death of President Tito. After several wars, it has been replaced by seven (7) countries organized along religious and ethnic lines.

Partition of Africa

Modern-day borders by colonial legacy (royal blue - France; pink - Britain; purple - Portugal; yellow -Belgium; green - Italy; light blue - Germany). Courtesy of Wikipedia.

Modern-day borders by colonial legacy (royal blue – France; pink – Britain; purple – Portugal; yellow -Belgium; green – Italy; light blue – Germany). Courtesy of Wikipedia.

At the Berlin Conference (1884-1885), the major colonial powers cut lines across the African interior that grouped together scores and dozens of ethnic groups. These lines also split up existing boundaries.

To use Angola as an example: For over 300 years prior to the arrival of the Europeans, the Bakongo (the Kongo people), had been united under the rule of the Kingdom of Kongo, one of the most important civilizations to emerge in Africa. Today, these several million people live in the Democratic Republic of the Congo, Congo-Brazzaville, and Angola. From the time of its founding by Ne Lukeni Kia Nzinga until its destruction in 1665 by the Portuguese, the Kingdom of Kongo existed as an organized, stable, politically centralized society. Left alone, this Kingdom might well have evolved intrinsically into a modern-day state. This process was interrupted by the partition of its territory among the European colonial powers.

Modern Consequences

Angola’s population today is divided ethnically into three main groups – the Ovimbundu (37% of the population), the Mbundu (25%), and the Bakongo (13%). The remaining 25% include scores of other ethnic groups, both large and small.

The decades-long war fought by Angola for political independence from Portugal reflected these ethnic lines within the country. Three liberation groups simultaneously fought the Portuguese and each other. The Movimento Popular de Libertação de Angola (MPLA) is predominantly Mbundu (what used to be the Ndongo Kingdom). União Nacional para a Independência Total de Angola (UNITA) is predominantly Ovimbundu (Bailundo Kingdom). Frente Nacional de Libertação de Angola (FNLA) is predominantly Bakongo (Kingdom of Kongo).

The winners were the MPLA, which has ruled Angola since its political independence. Over time, writes Assis Malaquias in Ethnicity and Conflict in Angola: Prospects for Reconciliation, the additional factors present in the liberation struggle – class and ideology — have diminished, leaving intact the ethnic divide. Effectively, the MPLA rules Angola in the interests of the Mbundu people, comprising at best about one-quarter of the population. The resources of the state have become “the property” of the Mbundu, rather than of the citizens of Angola.

In Angola and much of Africa, the arbitrary colonial divisions have “politicized” ethnicity (Assis Malaquias).

As long as this reality remains essentially ignored by the West, the search for solutions to end the corruption that diverts a country’s resources into the hands of a few, and the poverty this practice creates, is likely to remain elusive.

Trade & Development

President Obama in Kenya

Photo Credit

President Obama’s current trip to East Africa (Kenya and Ethiopia) and the recent extension of the African Growth & Opportunities Act (AGOA) are an opportunity to ponder the tenuous link that, without sound domestic policies, exists between trade and poverty reduction. A recent PBS report on Angola provides a stark illustration:

Angola is the second-largest oil producer in sub-Saharan Africa. However, about 36% of the population lives below the poverty line, reports the African Development Bank (AfDB). The country is reportedly flush with money from oil and diamonds; yet Angola ranks near the bottom of the U.N. Human Development Index (149th out of 187 countries).

Angola’s capital, Luanda, has been ranked as the world’s most expensive city for expatriates — beating out Tokyo, Hong Kong, and Moscow. Angola also bears the unwelcome distinction of being the country with the highest child mortality rate in the entire world. The World Bank reported in 2014 that 167 out of every 1,000 children born alive in Angola were likely to die before reaching the age of five. And the government just proposed to cut the health budget by 30%.

What apparently abounds in the country, and accounts for these discrepancies is corruption. Corruption, says Transparency International (TI), is “. . . the abuse of entrusted power for private gain”. Economically, TI continues, it depletes national wealth as corrupt politicians invest scarce public resources in projects that will benefit them rather than their communities. In Angola, judges drive jaguars and the President’s daughter is Africa’s youngest billionaire. Angola is one of the least transparent countries in the world and one of the most corrupt. It is ranked by Transparency International at 161 out of 175 countries and as fifth (5th) from the bottom in Sub-Saharan Africa.

Angola is not the only corrupt country in Africa; nor is corruption restricted to the African continent. Other countries share this scourge. However, the disparities between the wealth generated by the exports of this oil-rich country and the stark conditions in which one-third of its population lives help to shine a bright light on the criminal consequences of corrupt domestic policies.

Angola will, undoubtedly, continue to benefit from its ability to export its oil under AGOA. Trade alone, however, can only do so much.

As we continue to explore this topic, we will address some questions that occurred to us about the connections between corruption and the legacy of colonialism and the present role of the companies doing business in Africa.