I. INTRODUCTION

My introduction to the issue of United States-Cuba relations coincided with my appointment in September 1971, to the Inter-American Affairs Subcommittee, House Foreign Affairs Committee. The facts to which I was exposed as a member of this panel soon convinced me that our policy of ignoring our neighbor to the south was inimical to our own national, as well as hemispheric, interests. Thus, in early 1973, I joined 11 House Republican colleagues in urging our Government to change our Cuban posture. Subsequently, I elaborated upon this thesis in articles contributed to the Washington Post, the Baltimore Sun, and Foreign Policy magazine.

When Representative Jonathan B. Bingham announced that the Subcommittee on International Trade and Commerce, which he chairs, would hold hearings on our Government's Cuban policies, I felt that my knowledge of the subject would be enhanced by a visit to that country. Thus, I applied, through the Czechoslovakian Embassy in Washington, for a visa to Cuba. On June 24, I was advised by Mr. Teofilo Acosta, First Secretary of the Cuban delegation to the United Nations, that my request had been approved. On the same day I received passport validation from the State Department for travel to Cuba. In the company of two Washington correspondents representing Dayton, Ohio, newspapers,' I departed for Havana on June 26, by way of Miami and Kingston, Jamaica. I returned to Washington via the same route on July 2.

During my 6-day stay, I met with the following Cuban officials: Ernesto Melendez, Vice President, Commission for Economic and Technical Cooperation; Alberto Betancourt, president, Chamber of Commerce of Cuba; Evelio Lastro, Ministry of Foreign Trade; Roberto Fernandez Retamar, director, Magazine of Casa de Americas; Pelegrin Torras, Vice Minister, Foreign Relations; Mariano de la Red, member, Executive Committee, Popular Power, Matanzas Province; Isabel Hernandez Tapanes, Director for Caribbean Affairs, Foreign Ministry; Ramon Castro Ruz, Director, Valles de Picaduras. On my last evening in Havana, I had a 4-hour conversation with Prime Minister Fidel Castro.

I also visited the following: Lenin Vocational School; Alemar housing project; Valles de Picaduras Cattle Breeding Station; public health clinic at Alemar; and Matanzas Province, site of last year's popular elections.

While I saw those sights of which my escorts were most proud, there were no restrictions imposed upon me during my unscheduled time. My journalist companions, in fact, circulated widely throughout Havana. Few uniformed police were in evidence. Yet the visitor could walk the streets at night without fear of bodily harm. Evidently there is no narcotics problem in Cuba. Fidel Castro told me: "Despite the prevalence of drug usage in Latin America, we have had not one case. . . not one case in Cuba."

1 Andrew Mollison, Dayton Daily News; Pat Ordovensky, Dayton Journal Herald.

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Personal freedoms, nevertheless, are limited. Radio and television stations are state-owned (although Cubans are able to pick up Miami radio and television signals). The press is Government controlled; newspapers from other countries are unavailable to the average citizen. An undetermined number of political prisoners are incarcerated in Cuban jails.

Despite my sensitivity to human rights, I did not focus on this issue in my discussions with Cuban leaders. First, the fact that there are political internees already has been established. Second, this, along with the question of family visitation privileges, will be aired when Cuban and American conferees commence negotiations, hopefully later this year.

Rather, I concentrated on three areas which come within my purview as a member of the Subcommittee on International Trade and Commerce: first, the Cuban economy; second, United StatesCuba post-embargo trade possibilities; third, prospects for resumption of commercial and diplomatic relations. My observations concerning these questions appear in section II. My recommendations and conclusions are outlined in section III.

II. OBSERVATIONS

A. THE CUBAN ECONOMY

Since Fidel Castro took the reins of government in January 1959, the economy of Cuba can be divided into three periods: 1959 to 1970; 1970; post-1970. A description of each follows.

1. 1959-1970

My observations while in Cuba confirmed my earlier research regarding the first 11 years of the revolution. The Castro government followed what might be termed "free-wheeling" economic and foreign policies. The young reformers sought to improve the lot of their citizenry as well as reshape Latin America in the Cuban mold. Apparently little thought was given to the economic costs of such

actions.

For those who did not flee the island, the standard of living undoubtedly improved. They received better education, expanded health services, more public housing, and low-cost public transportation. The Cuban people paid a price, however. Food became so scarce it had to be rationed. Clothing was in short supply. A huge external debt, payable principally to Russia, was incurred. This brought to Cuba a large Soviet contingent, replacing previously departed Americans.

2. 1970- A CHANGE IN DIRECTION

Confession is said to be good for the soul. Today Cuban spokesmen freely admit that the sugar fiasco of 1970 wrought a change in the economic game plan. In that year Prime Minister Castro announced to the world that he had set a 10-million-ton sugar production quota for his fellow citizens. Amid a massive publicity campaign students, factory workers, and professional personnel flocked to the fields to harvest cane. Disaster followed. First, the effort was a propagandistic failure only 8.5 million tons of sugar was processed. Second, the world price of sugar fell. Third, other sectors of the economy, drained of employees, suffered a drop in output.

Faced with a mounting trade deficit, Cuban officials, pressured by their Russian creditors, decided to shift gears.

3. POST-1970

Today, the Cuban economy is better planned and coordinated. Scarce resources are more rationally employed. Several examples illustrate this new approach.

First, the Government has been restructured by relieving the Prime Minister of much of the responsibility for day-to-day administrative decisions. The position of First Vice Prime Minister was established and seven other Vice Prime Ministers were created (an eighth is

expected to be added this year). Each of the Vice Prime Ministers oversees a broad range of social and economic programs (and military affairs in the case of First Vice Prime Minister Raul Castro). As one of my contacts noted: "This enables us to achieve a higher degree of coordination. Before the change, we discovered that two departments were responsible for producing buses. We just cannot afford such duplication in a small country like Cuba."

Second, in July 1972, Cuba became a full member of the Council for Mutual Economic Assistance (CMEA), the Eastern European Common Market. This made available to the Castro government the development loan facilities of the International Investment Bank, & CMEA subsidiary.

Third, in December 1972, Cuba renegotiated its debt to the U.S.S.R. Those bills which were contracted prior to 1973 became payable, interest free, commencing in 1986.

Fourth, Cuba also concluded a long-term trade agreement with Russia in December 1972. This arrangement included exchanges of sugar and oil in fixed amounts and at predetermined prices.

Fifth, since 1973 Cuba also has received $3.3 billion in credits from Western capitalist nations.2

Sixth, a work-incentive system has been initiated. Production norms were instituted and those who exceed the standard receive a bonus; those who fail to meet it are paid less.

Seventh, the Cuban Government has experimented with a freemarket pricing approach as a means of influencing consumption decisions. A flexible price for eggs, based upon fluctuating supply levels, is one example. It is anticipated that a more comprehensive pricing system will be inaugurated next year.

Eighth, production, health, and education planning is more cohesive. When a new industrial facility is constructed, arising_immediately adjacent to it (after environmental factors have been considered) are a New Town, public health clinics, schools, and roads.

Ninth, Cuban schools have been fully integrated into the country's economic system. Emphasis on vocational education accomplishes two goals: (a) it helps create a more technically oriented society; (b) it provides a needed source of labor (one-third of the population age 16 years or less).

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Tenth, an ancillary effect of the popular election experiment in Matanzas Province is economic decentralization. Responsibility for administering local projects (road and school construction, etc.), instead of resting in Havana, now is vested in provincial and municipal officers.

Eleventh, much of this economic planning will be institutionalized when the Republic of Cuba adopts a new Constitution. This document will be approved when the First Party Congress convenes in Havana in December. It then will be placed before the voters for ratification sometime next spring.

A substantial portion of Cuba's gross national product still is committed to capital equipment and facilities. Consequently, a shortage of consumer goods (and the concomitant rationing of foodstuffs) continues. But overall living standards are improving. One neutral observer, a Canadian citizen, told me that during the past 8 months she has witnessed a marked increase in the kinds and

3 Argentina, Canada, France, Great Britain, Italy, Japan, and Spain.

quantities of items available in the marketplace. To borrow a phrase popular in the 1960's, "there is light at the end of the tunnel" for the Cuban consumer.

B. PROSPECTS FOR UNITED STATES-CUBA TRADE AFTER THE EMBARGO

Alberto Betancourt, president of the Chamber of Commerce of Cuba, asked me, "What will American businessmen be willing to sell us if the embargo is lifted?" I replied, "Anything!" It should be noted, however, that post-embargo trade patterns will substantially differ from those which prevailed in the 1950's.

1. NEW PATTERNS

(a) In 1958 the United States accounted for approximately 67 percent of Cuba's foreign commerce. In that year we exported $547 million to Cuba while importing $528 million from that country. Today, Cuba has greatly expanded and diversified its trading partnerships. The United States, therefore, will not, as in the past, dominate the Cuban market.

(b) United States firms no longer will be able to invest in Cuba (one of the subjects scheduled for negotiation, in fact, is the $2 billion claim against the Castro government for expropriated American assets-$1.8 billion privately and $200 million federally owned).

(e) Americans will not be selling in an open market. Instead of calling upon end-users, our salesmen will have to deal with representatives of the various trading enterprises which operate under the direction of the Ministry of Foreign Trade. For tips on how to do business in Cuba, interested parties should consult with those U.S. firms presently dealing with Eastern European socialist states.

(d) There is little prospect for immediate extension of long-term credits to Cuba by the United States.

(1) Cuba already has heavily mortgaged itself abroad.

(2) Section 402 of the Trade Act of 1974, which applies to nonmarket economies, will limit federally financed credits until Cuba's emigration policies satisfy the President and the Congress.

Undoubtedly, these reasons prompted Fidel Castro to remark to me: "We prefer to trade on an equal basis."

In the light of these facts, what kind of exchange can be expected between the United States and Cuba?

2. POSSIBLE CUBAN EXPORTS TO THE UNITED STATES

(a) As in an earlier period, sugar will head the list of commodities shipped to the United States. But, in view of the altered circumstances since the 1950's, three questions recur.

(1) Has Cuba committed all of its sugar output? I was told, "No, despite commitments to Russia, a substantial quantity will be available for the world market." Present annual sugar production hovers in the neighborhood of 5.5 to 6.0 million tons. Plans call for the complete mechanization of all processing plants (one already is entirely computer-operated) and the substitution of machines for manual labor in the harvesting process (the Camaguay fields are now 40 percent mechanized). Thus, not only will fewer workers be employed in the sugar industry, but also greater yearly yields are anticipated.