Requirements For Lifting the U.S. Trade Embargo Against Cuba

Matias F. Travieso-Díaz, Esq., Shaw Pittman, Potts & Trowbridge

Part III

2. The Caribbean Basin Initiative

The Caribbean Basin Initiative consists of a multitude of programs contained in the Caribbean Basin Economic Recovery Act of 1983 ("CBI I"), as amended and supplemented in 1990 ("CBI II").[27] On a smaller geographic scale than the EAI, the CBI aims to foster development by providing greater access to the U.S. market for many goods of designated countries, stimulating U.S. investment in their economies and encouraging liberalization.

Conditions for CBI qualification are set so as to promote U.S. trade, foster anti-narcotics efforts, and advance U.S. foreign policy objectives. 19 U.S.C. [[section]]2702(b). Over two dozen countries reap CBI benefits. While CBI I was set to expire in 1995, CBI II made permanent the initiative's programs and preferences.

a. Duty-free entry into the U.S. of eligible products from CBI countries

Under Harmonized Trade Schedule Item 9802, a wide variety of products from CBIdesignated countries receive duty-free entry into the U.S. market, including most agricultural and manufactured goods. Products excluded from duty-free treatment but assembled in CBI countries from American components receive reduced tariffs. Duty-free entry of sugar and beef into the quota-regulated U.S. market is covered by special rules. Detailed regulations address the question whether a product made with components from non-CBI countries has been transformed sufficiently to receive duty-free treatment. 19U.S.C. [[section]][[section]]2701, 2703; 19 C.F.R. [[section]]10.

b. Guaranteed Access Levels for Apparel

For access to the protected U.S. textile and apparel market, the CBI offers designated countries the opportunity to negotiate Guaranteed Access Levels for textile and apparel products made of U.S. formed and cut fabric.[28] This program provides incentive to U.S. manufacturers to locate part of their operations in CBI countries by combining the reduced costs of production in the low-wage Caribbean economies with a relatively high level of access to the U.S. market.

c. Bilateral Investment Treaties

As a precursor to the free trade agreements pursued under the EAI, the CBI encouraged the negotiation of Bilateral Investment Treaties ("BITs") with Caribbean governments. BITs establish certain basic economic rights for U.S. investors in the signatory country, such as protection against uncompensated expropriation, and rights of profit repatriation. While ostensibly two-way guarantees of investment rights, BITs are essentially economic self-help measures for emerging economies, and typically contain liberalizing reforms and incentives for attracting U.S. direct investment.

d. Section 936 Funds and Other Tax Incentives

One positive development in the Caribbean Basin Initiative has been the unexpected level of investment activity undertaken under the auspices of the Internal Revenue Code Section 936 tax incentive program. "Section 936 Funds" are created by the deposit in Puerto Rican banks of the profits of U.S. corporate subsidiaries operating in Puerto Rico. The U.S. subsidiaries are exempt from corporate income tax under Section 936, and accept a lower rate of return on their earnings --in turn allowing local financial institutions to lend 936 Funds out at reduced rates. Borrowers of Section 936 Funds for projects in Puerto Rico may thus save up to 20% on their finance costs.

Since 1987, these funds have also been available for investment in active business assets and development projects in eligible CBI-beneficiary countries. 26 U.S.C. [[section]]936(d)(4). As of mid-1992, $620 million in Section 936 Funds had been disbursed for 33 projects in CBI countries, and the total could amount to $1.5 billion by the end of this year. Since the program's inception, Section 936 Funds have accounted for an average of 22% of total loan financing in these countries, and now provide a greater share of loans to eligible countries than direct lending from the Inter-American Development Bank.

Although the Section 936 Funds have become a valuable development tool in the Caribbean Basin, the tax incentive program is under attack. President Clinton is proposing to reform the plan to produce more revenue, while some members of Congress wish to end the plan altogether because of the benefits that corporations reap from this tax shelter. If Section 936 Funds continue to be available at the time the trade embargo is lifted, and assuming Cuba qualified for CBI benefits, such funds would provide an important means of channeling private investment into Cuba.

The Internal Revenue Code contains two additional sources of tax incentives for U.S. enterprises wishing to become involved in CBI countries. The CBI Convention Tourism Tax Credit provides a simplified deduction on U.S. taxes for companies that hold business conventions in eligible CBI countries. 26 U.S.C. [[section]]274(h)(6). Also, classification of a company as a "foreign sales corporation" enables a U.S. exporter to receive a U.S. tax credit when it establishes a specialized sales subsidiary in a CBI country. 26 U.S.C. [[section]][[section]]921-927.

e. U.S. Government Procurement of CBI-Country Goods

In 1986, the U.S. Trade Representative's office waived for CBI countries certain restrictions on U.S. government procurement of foreign products.[29] Under the Trade Agreements Act of 1979, bids for U.S. government procurement contracts could not be made by the seller of a foreign product unless the country of origin had also lowered its own restrictions on government procurement of U.S. products. 19 U.S.C. [[section]]2511. The U.S. Trade Representative's action waived this reciprocity requirement for CBI countries, thus enhancing the ability of Caribbean countries to market their products to the U.S. government -- the largest single purchaser of goods and services in the United States.

f. Special Treatment in Enforcement of U.S. Trade Laws

A subtle preference is given to CBI countries under a new trade law enforcement provision enacted in CBI II. In an investigation to determine if foreign trade practices violate anti-dumping and countervailing duty laws, imports from two or more countries are usually aggregated to determine if material injury to a U.S. industry has occurred. Under CBI II, imports from CBI countries will no longer be aggregated with those of non-CBI countries. 19 U.S.C. [[section]]1677(7)(C)(iv)(II). The possibility of small CBI countries being penalized by countervailing duties principally brought on by the actions of large, non-CBI countries is thus reduced.

3. Other Economic Assistance Programs, by Agency

By virtue of geography and recent history, the development needs of the Latin American and Caribbean nations have received special U.S. attention in the last decades. In addition to the programs specially devoted to the region, the general tools of U.S. trade promotion and development policy towards the Third World remain at the disposal of Latin American and Caribbean countries and could be utilized by Cuba if the U.S. trade embargo were to end.

These programs and preferences have developed over a long period of time and are not under a unified command. The discussion here will group the most important of these programs under each agency or organization charged with administering them.

a. U.S. Agency for International Development

As the mainstay of U.S. foreign assistance administration, the U.S. Agency for International Development ("USAID") conducts a vast array of development projects and assistance programs from its field missions around the world.[30] USAID has drawn criticism for being wasteful and over-bureaucratic. Perhaps as a result, Congressional funding for USAID development projects has been curtailed in recent years.

USAID administers three basic categories of non-emergency assistance.[31] The first, Economic Support Funds ("ESF"), are disbursed as ongoing "program assistance" to foreign governments, and serve economic and political foreign policy interests of the United States, in some cases related to military base rights or access rights agreements. ESF assistance may finance a country's balance of payments, fund specific government spending programs, or otherwise assist in economic stabilization. Central American countries are among the major ESF donees. Where possible, USAID uses ESF assistance in conjunction with Commodity Import Programs, in which USAID helps recipient countries purchase of U.S. goods needed in their economies.

The second variety of USAID funding, Special Assistance Initiatives, are short-term, government-to-government injections of aid, often into a multilateral pool. The Philippines and the former communist countries of Eastern Europe are current Special Assistance Initiative aid recipients. USAID also administers a special fund arising out of the Central American peace process: the Central American Reconciliation Assistance, Demobilization and Transition Fund. A similar special fund could be established to assist Cuba.

The third and most heterogeneous type of USAID assistance, called Development Assistance ("DA"), funds discrete development projects with U.S. and local partners. Examples of uses of DA include:

- pre-feasibility and feasibility studies in commercially-oriented energy development and research, in coordination with the Department of Energy, and the Trade and Development Agency

- agricultural research and land productivity projects

- science and technology development programs

- housing guaranty programs

- a Capital Projects Fund for infrastructure development of

roads, irrigation, port facilities and free zone facilities

- engineering, construction and telecommunications projects

- environmental protection programs.

In addition, DA funds are used for a broad category of Private Sector Development projects. Coordinated by USAID's Bureau for Private Enterprise and the Office of Trade and Investment, these projects include:

- privatization financing for U.S. businesses

- providing capital for private sector development banks and

credit facilities to small- and medium-size businesses and micro-enterprises

- the Business and Development Network of regional offices

providing business information and services

- training programs in investment, management and marketing

for nationals of beneficiary countries

- helping beneficiary countries establish export and investment promotion offices

- the Private Sector Revolving Fund: loans, credit guarantees and training for projects with substantial developmental impact

- financial support for joint ventures in energy development

- the Forfeit Guarantee Program, rendering financing assistance to U.S. companies wishing to export to AID-assisted developing countries

- the Franchise Guarantee Program, providing loans to indigenous entrepreneurs to become franchisees of U.S. corporations.

Through the Bureau for Private Enterprise and the Office of Trade and Investment, USAID forges partnerships between U.S. businesses and trade associations and the governments and private sectors of beneficiary countries. USAID sponsors the International Executive Service Corps of retired U.S. business executives, who provide technical assistance to businesses and organizations in the developing world. U.S. business is kept abreast of sales opportunities arising from USAID-related projects by a computerized data base, the Procurement Information Access System.

b. Overseas Private Investment Corporation

The Overseas Private Investment Corporation ("OPIC") is a self-financing federal corporation with the mission of assisting U.S. investors in developing countries and emerging economies. 22 U.S.C. [[section]]2191. OPIC's programs are available in over 140 countries throughout the world. OPIC's assistance takes three principal forms. Project financing makes available OPIC development funds for direct loans and loan guarantees to U.S. investors in commercial projects overseas. Direct loans range from $500,000 to $6 million, while loan guarantees can reach $50 million. The loans are made at interest rates generally comparable to commercial rates, but loan terms vary according to a project's financial and political risk. Investment insurance issued by OPIC protects U.S. investments overseas against three types of political risks: currency inconvertibility, expropriation and political violence. Finally, Investor services provided by OPIC include advisory services and databases, investment missions, seminars and conferences. OPIC staffs its various programs with regional specialists, including specialists in Latin America.

c. U.S. Department of Commerce

The Commerce Department plays an active role in supporting development in Latin America through its numerous programs of general trade promotion. Commerce is the hub of an inter-agency task force, the Trade Promotion Coordinating Committee, which links most of the federal government's export promotion programs. This task force has a hotline for businesses needing trade information and counseling (1-800-USA-TRADE), and publishes a directory of U.S. government resources for exporters. Among these resources is the National Trade Data Bank, a CD-ROM database on export and trade opportunities. Similarly, Commerce's Office of Export Trading Company Affairs publishes the "Export Yellow Pages."

The International Trade Administration ("ITA") at the Commerce Department organizes trade missions to foreign countries focusing on particular U.S. industry or service sectors, and missions to introduce U.S. companies to foreign markets. ITA also arranges for U.S. participation in foreign trade fairs and exhibitions. The U.S. Foreign Commercial Service has officers in overseas posts scouting commercial opportunities for U.S. investors and traders.

The Generalized System of Preferences ("GSP"), administered by the Commerce Department, permits developing countries duty-free entry to the U.S. market on eligible products. 19 U.S.C. [[section]][[section]]2461, 2462; 15 C.F.R. [[section]]2000. GSP expired on July 4, 1993, but President Clinton is requesting Congress to renew the program.

d. Department of Agriculture

A major form of U.S. foreign assistance to the developing world is the Agricultural Trade Development Act of 1954. The Food Aid Program established by this statute and administered by the Department of Agriculture in coordination with USAID provides concessional loans to purchase U.S. agricultural products to meet the needs of developing countries.[32]

The Agriculture Department's Trade Assistance and Promotion Office, and the Office of International Cooperation and Development, offer information, databases, services and trade missions to U.S. and foreign agricultural producers. The U.S. Foreign Agricultural Service maintains 16 missions abroad, which scout agricultural export opportunities for U.S. farmers.

e. Export-Import Bank

The Export-Import Bank of the United States is an independent federal agency that facilitates the export financing of U.S. goods and services to creditworthy foreign buyers. 12U.S.C. [[section]]635; 12 C.F.R. [[section]]411. In 1991, Eximbank programs financed over $1 billion in imports of U.S. products to CBI countries. Eximbank's Export Credit Insurance program protects U.S. exporters against buyer default, thus allowing the exporter to offer more attractive credit terms. The Eximbank Loan Program offers loan guarantees for U.S. exporters, direct loans to foreign purchasers and intermediary loans to lenders who then make loans to foreign purchasers. The Working Capital Guarantee Program helps potential exporters obtain critical pre-export financing from commercial lenders, providing repayment protection for private sector loans to foreign purchasers of U.S. goods. Eximbank provides special programs for small exporting businesses, including enhanced protection for short-term sales.

f. Small Business Administration

The Small Business Administration ("SBA") is an independent federal agency charged with counseling, aiding and protecting U.S. businesses that meet its size requirements. 15 U.S.C. [[section]]636. The SBA's Office of International Trade provides information and services to small businesses on exports and investments abroad. Among the services provided is access to the Export Legal Assistance Network, a nationwide group of international trade attorneys who provide initial consultations to small businesses. The SBA also has its own International Trade Loan program, guaranteeing 85% of loans up to $1 million.

g. U.S. Trade and Development Agency

In addition to the trade and development programs already mentioned, another independent federal agency, the U.S. Trade and Development Agency ("TDA"), is also charged with some of the functions described above. 22 U.S.C. [[section]]2421. The TDA hosts foreign officials and businessmen to the United States on reverse trade missions and provides grants for feasibility studies, consulting and project planning for major projects in developing countries. The projects involve high-priority sectors such as agribusiness, energy, telecommunication and transportation. TDA's grants for these projects range between $150,000 and $750,000. TDA also offers Technical Assistance Grants to involve U.S. technical experts in development projects underway.

h. U.S. Department of Labor

The Bureau of International Labor Affairs of the U.S. Department of Labor offers a variety of labor force development and training programs upon the request of foreign governments. Labor Department personnel, funded by USAID or the World Bank, conduct these training programs in the host country to develop small business entrepreneurial skills, increase labor and management productivity, and improve labor-management relations in the workplace.

i. Peace Corps

The Peace Corps sends volunteers to developing countries to initiate local self-help and development projects involving agriculture, rural infrastructure, small business, health, education and other developmental concerns. 22 U.S.C. [[section]]2501 and 22 C.F.R. Chapter III. Peace Corps volunteers have access to small amounts of seed money to initiate their projects, but otherwise must help their local contacts apply to traditional U.S. and multilateral assistance agencies for funding.

j. U.S. Information Agency

The U. S. Information Agency ("USIA") directs a host of programs from its overseas missions to spread American ideals of liberty, democracy and free enterprise. 22 U.S.C. [[section]]1461 and 22 C.F.R. Chapter V. In addition, USIA sponsors the International Visitors Program, which brings foreign individuals or groups to the United States for month-long visits. Visitors, who are usually foreign government and business leaders, tour U.S. cities and meet their U.S. counterparts.

k. Inter-American Foundation

The Inter-American Foundation ("IAF") is another independent federal agency, which provides grants to local self-help and development organizations throughout Latin America. 22 U.S.C. [[section]]290; 22 C.F.R. [[section]][[section]]1001-07. Established in 1969 as an experimental system of foreign-assistance delivery, the IAF approves approximately $25 million in direct grants each year to a wide variety of grassroots groups and non-governmental organizations, cooperatives and micro-enterprises.

B. Removing the Indirect Consequences of the Embargo

Once the trade embargo against Cuba is lifted, further steps will be needed to involve Cuba in the above described U.S. assistance programs and preferences, which the rest of Latin America and the Caribbean has enjoyed for many years.[33] This section summarizes the actions needed under present law to permit Cuban participation in the main programs and preferences.

1. The Enterprise for the Americas Initiative

General eligibility requirements for the benefits of the Enterprise for the Americas Initiative are set out in 22 U.S.C. [[section]] 2430b. To be eligible, a Latin American or Caribbean country must have a government that is democratically elected, does not provide support to acts of international terrorism, cooperates on international narcotics control matters, does not engage in systematic human rights abuses, and is making strides towards economic liberalization. 22 U.S.C. [[section]] 2430b(a). Determination of a country's eligibility for EAI benefits is left to the President, who need only notify Congress in advance of his intention to designate a country as eligible. 22 U.S.C. [[section]] 2430b(b).

Becoming EAI-eligible would allow Cuba to reduce, pursuant to 22 U.S.C. [[section]] 2430c, any official debt to the United States government that has remained outstanding since the two countries severed relations. But participation in EAI's two other "pillars" -- investment funding and trade liberalization -- would require further steps.[34]

In order for free trade agreements to be negotiated between Cuba and the United States, the President would have to make a number of determinations and notifications to Congress. First, under the Foreign Trade Agreement Act, the President would have to proclaim that Cuba is no longer dominated or controlled by the world communist movement. 19 U.S.C. [[section]]1351. Second, under the Trade Act of 1974, 19 U.S.C. [[section]]2431 et seq., the President would not be able to extend non-discriminatory trade treatment to Cuba without submitting a report to Congress that Cuba's emigration restrictions no longer exist. 19 U.S.C. [[section]]2432(b). Alternatively, the President could extend nondiscriminatory treatment by entering into a bilateral commercial agreement with Cuba, determining that such agreement is in the national interest, and properly notifying Congress. 19 U.S.C. [[section]][[section]] 2434 and 2435(b).

2. The Caribbean Basin Initiative

The extension to Cuba of the most important programs and preferences of the Caribbean Basin Initiative will hinge on Cuba's designation as a CBI "beneficiary country." Under present law, Cuba cannot be designated a beneficiary country, because "the President shall consider only" a specific list of 27 Caribbean Basin countries-- not including Cuba. 19 U.S.C. [[section]] 2702(b). Congress would have to amend the Caribbean Basin Economic Recovery Act to insert Cuba into the list of eligible designees.

Even then, Cuba must overcome several prohibitions and preconditions. Under 19 U.S.C. [[section]]2702(b) paragraphs (1)-(7), the President shall not designate a country a CBI beneficiary:

1) if it is a communist country;

2) if it has nationalized, expropriated or seized U.S. property, or unduly infringed other property rights of U.S. citizens;

3) if it has not respected arbitration awards to U.S. parties;

4) if it affords preferential treatment to the products of another developed country which adversely affects U.S. commerce;

5) if its government violates U.S. copyrights;

6) unless it has agreed to extradite U.S. citizens; and

7) unless it is taking steps to afford internationally recognized worker rights.

However, the President can bypass the criteria of paragraphs (1), (2), (3), (5), and (7) to designate one of the eligible countries as a beneficiary if he "determines such designation will be in the national economic or security interest of the United States," and reports the rationale for such determination to Congress. 19 U.S.C. [[section]]2702(b).

Designation as a CBI beneficiary would immediately gain Cuba duty-free entry of designated products into the U.S. market. Cuba would also stand to gain automatically if Congress passed the bill now pending to grant CBI countries' products parity of treatment with Mexican products under an enacted North American Free Trade Agreement. (H.R. 1403, The Caribbean Basin Trade Agreement Act.) Special treatment for Cuban products in enforcement of countervailing duty and anti-dumping laws would also go immediately into effect. 19 U.S.C. [[section]]1677(7)(C)(iv)(II). The U.S. Trade Representative could act under Executive Order No.12260, 48 Fed. Reg. 1653, to add Cuba to the list of CBI countries for which U.S. government procurement restrictions were waived in 1986. 51 Fed. Reg. 6964, February27, 1986.

Access to hundreds of millions of dollars in "936 Funds" under Internal Revenue Code Section 936 would have to await the signing of a Tax Information Exchange Agreement between the United States and Cuba. 26 U.S.C. [[section]] 936(d)(4). Likewise, Cuba would not benefit from the CBI Convention Tourism Tax Credit until the tax agreement is signed. 26 U.S.C. [[section]]274(h)(6). Negotiation of tax treaties between the U.S. and foreign countries is often a protracted process.

Negotiation of Guaranteed Access Levels for U.S. formed and cut textiles and apparel completed in Cuba would be subject to the same restrictions on U.S.-Cuban trade agreements noted in the EAI discussion above.

3. U.S. Agency for International Development Programs

The Economic Support Funds, Special Assistance Initiatives and Development Assistance programs run by the U.S. Agency for International Development are now unavailable to Cuba because of the trade embargo statutes, particularly the Foreign Assistance Act of 1961 which -- as discussed above -- prohibits U.S. assistance to Cuba, most communist countries, and countries that have unjustly expropriated U.S. property. Were the embargo to be lifted, USAID would need to establish a field mission in Cuba and set in motion its project review procedures. Most importantly, Congress would need to appropriate the funds for USAID programs in Cuba.

4. Overseas Private Investment Corporation

The authorizing act for the Overseas Private Investment Corporation does not specifically restrict funding projects in Cuba. 22 U.S.C. [[section]] 2191 et. seq. However, to be eligible for OPIC political risk insurance, an investment must be in a country that has signed a commercial agreement with the United States. Cuba and the U.S. would need to enter into such an agreement.

5. Generalized System of Preferences

The Generalized System of Preferences for developing countries, 19 U.S.C. [[section]]2461 et seq., does not specifically identify Cuba as a country excluded from duty-free treatment. However, it does provide that the President shall not designate a country to be a GSP beneficiary if it is a communist country -- unless it is already receiving nondiscriminatory treatment, is a member of GATT and the IMF, and is not controlled by "international communism." 19 U.S.C. [[section]]2462(b)(1). Additionally, the President cannot designate a country to be a GSP beneficiary if the country has expropriated U.S. property or infringed U.S. property rights without making good-faith efforts to redress the owners. 19 U.S.C. [[section]]2462(b)(2)-(7). Most of the latter set of restrictions can be waived if the President determines the GSP designation will be in the national economic interest, and so reports to Congress.

6. Agricultural Trade Development and Assistance

Food aid under the Agricultural Trade Development and Assistance Act of 1954, 7 U.S.C. [[section]] 1691 et seq., will become available to Cuba so long as the President determines Cuba to be a "friendly" country, and not one under the control of a foreign government running a world communist movement. 7 U.S.C. [[section]]1703(d). Food aid under the International Development and Food Acts, codified in 22 U.S.C. Chapter 32, falls under the anti-Cuba restrictions of the Foreign Assistance Act of 1961 and would be available if the FAA's prohibitions were lifted.

7. Export-Import Bank

Cuba is presently excluded by name from those countries wherein Export-Import Bank guarantees, insurance or credit may be used. Only a Presidential determination that Cuba has ceased to be Marxist-Leninist, or that an Eximbank transaction involving Cuba is in the national interest, can lift the prohibition. 12 U.S.C. [[section]] 635(b).

8. U.S. Assistance Programs Without Specific Restrictions

Beyond the general ban imposed by the embargo, there appear to be no specific restrictions relating to Cuba on the activities of the following agencies: the U.S. Trade and Development Agency (22 U.S.C. [[section]]2421), the U.S. Peace Corps (22 U.S.C. [[section]]2501 et seq.), the Inter-American Foundation (22 U.S.C. [[section]]290), the Small Business Administration (15 U.S.C. [[section]] 636) and the U.S. Information Agency (22 U.S.C. [[section]] 1461).

9. The Free and Independent Cuba Assistance Act of 1993

As discussed earlier (see n.20, supra), a bill recently introduced in Congress would, in one leap, direct the President to accomplish most of the actions identified in the above discussion as necessary to involve Cuba in U.S. preferences and assistance programs after the trade embargo is lifted. The Free and Independent Cuba Assistance Act of 1993 (H.R. 2758) ("the Act") aims to coordinate the delivery of emergency assistance to a "transition" Cuban government, i.e., one making significant progress towards democracy and economic liberalization. Programs available to a transition government would be in the nature of emergency and humanitarian assistance programs, including U.S. support for multilateral assistance.

The Act would deliver a wide range of benefits once Cuba reached democracy. At that point, the Act would call for the President to consider Cuba for designation as a CBI beneficiary, and would amend the Caribbean Basin Economic Recovery Act's list of eligible countries to include Cuba-- giving the President the authority to hasten Cuba's designation.

Once a democratic government was installed in Cuba, the Act would also have the United States provide Economic Support Funds, Development Assistance programs, food aid, Export-Import Bank financing and insurance, finance support from the Overseas Private Investment Corporation, Trade and Development Agency assistance, Peace Corps programs, and relief of Cuba's external debt. The Act also would direct the President to negotiate a free trade agreement with Cuba.

Even though not all-encompassing, the Act exemplifies the type of comprehensive enabling legislation that would be needed to speed the process of bringing Cuba within the coverage of the main U.S. trade and economic assistance programs.

III. Conclusions and Recommendations

The U.S. trade embargo against Cuba rests on three statutory sources: the Trading with the Enemy Act, the Foreign Assistance Act, and the Cuban Democracy Act. The President has the legal authority to remove the embargo, to the extent that it is founded upon the TWEA and the FAA. Under those two statutes, the President could lift the embargo unilaterally, at any time, and without any preconditions, and would not be required to consult Congress in order to do so. Political considerations, of course, would probably dictate that the President work closely with Congress before taking any such action.

The CDA presents a more complex situation. The CDA has expanded the embargo in some respects (e.g., by prohibiting trade with Cuba by third-country subsidiaries of U.S. corporations). The statute has also defined a set of events in Cuba (specified in [[section]] 1708(a)) as preconditions to the President's ability to take steps to lift the embargo. The President must make a determination that those conditions have been satisfied (e.g., the accession to power in Cuba of a government elected through free and fair elections conducted under internationally recognized observers), and must report his determination to Congress, before he can act on the embargo. At that point, Congress can override the lifting of the embargo if it disagrees with the President. Presumably, the President's determination could also be challenged in the courts.

One consequence of the CDA's imposition of a definite set of conditions before the President is able to lift the embargo is the loss of U.S. government flexibility to deal with developments in Cuba. Unless Cuba's transition to democracy proceeds in an orderly fashion that satisfies all requirements in [[section]] 1708(a) of the CDA, the President may not be able to lift the embargo for a significant period of time while events unfold in the island. More likely than not, the transition in Cuba will not follow the clean pattern predicted in the CDA, and additional legislation will be needed to enable the President to remove all or part of the embargo before the CDA's conditions are fulfilled. Alternatively, Congress could enact legislation now that clarifies that the President retains the authority -- normally vested in the President's office by the Constitutional grant of power to the President to conduct foreign affairs -- to decide on the timing and conditions for lifting the embargo.

Aside from these statutory issues, the President can rescind at will most of the embargo regulations issued by various government agencies under the President's delegated authority. In particular, he is empowered to revoke the Cuban Assets Control Regulations, which were issued under his TWEA authority. The only exceptions to this Presidential power are those regulations issued to implement direct provisions in a statute, such as the new trade restrictions imposed by [[section]] 1706 of the CDA.

In addition to authorizing the imposition of a trade embargo, the FAA has cut off all U.S. economic aid to the present government of Cuba. Moreover, no U.S. aid can be given to a future government in Cuba until the President deems that giving such aid is in the national interest of the U.S., or until he determines that Cuba has taken appropriate steps under international law standards to provide restitution or compensation to U.S. citizens whose property was confiscated by the Castro government. The FAA's prohibition of giving aid to Cuba is directly or indirectly responsible for Cuba's exclusion from numerous economic assistance programs that the U.S. has developed in the last thirty years, both for the benefit of countries in Latin America and the Caribbean and to assist friendly nations worldwide.

The FAA's total ban on aid to Cuba has recently been modified by the CDA. Section 1705 of the CDA authorizes private donations of food, medicines and medical supplies to Cuban nationals under the current Cuban regime, provided certain conditions are met. Section 1707 allows the U.S. government to provide food, medicines and medical supplies to a transition government in Cuba, and Section 1708 authorizes the President to provide unspecified "emergency relief" to a Cuban government elected in free and fair elections. While the President has to make a series of determinations in order to provide aid to Cuba under [[section]][[section]] 1707 and 1708, he does not have to determine that Cuba has taken appropriate steps to resolve the U.S. citizen property claims. The CDA's failure to reassert this condition leaves open to question the continuing vitality of the claims resolution requirement in the FAA.

Missing from the CDA and other U.S. laws relating to Cuba are any provisions to incorporate Cuba, once the embargo is lifted, into the various economic aid programs sponsored by the U.S. government or in which the U.S. participates. There is, however, a bill now pending in Congress (H.R. 2758) that would direct the President to take steps to bring a democratic Cuba within the coverage of most U.S. sponsored economic aid programs. This bill, or another like it, needs to be enacted before the Cuban transition begins so that the U.S. government agencies will be prepared to take expeditious action to admit Cuba into all applicable assistance programs. Such action will need to include in certain cases the enactment of additional legislation.

Many other U.S. statutes contain provisions that impede trade with, or assistance to Cuba. A systematic search for those provisions should be undertaken now so they can be identified and removed either by Executive action or by legislation when conditions in Cuba warrant it.

Finally, the Federal government should establish -- perhaps under the overall leadership of the Department of State -- an interagency Task Force to identify the problems that will be posed by Cuba's transition to a free-market democratic society, develop a unified strategy to assist Cuba in resolving those problems, and draft the necessary implementing laws and regulations. This Task Force is needed now, because its scope of work is significant and there are indications that the transition process is starting in Cuba already.