Current Economic Developments, lot 70 D 467

Extract From Current Economic Developments1

Issue No. 455

[Here follow sections on Japan’s economic problems, a meeting of the ECE Trade Development Committee, and President Eisenhower’s decisions regarding tariffs on tung oil and clothespins.]

US and Cuba Conclude Economic Discussions

A delegation from Cuba was in Washington November 8 to 17 to discuss with US officials2 various matters concerning economic and commercial relations between the two countries. The talks, which were held at the request of Cuba, were designed to study the problems rather than to find definitive solutions at this time. Both delegations felt that this objective was accomplished and that the mutual understanding that was gained of the conditions facing each country will materially aid in eventual progress in arriving at solutions.

Issues Raised by Cuba

The Cubans were primarily interested in a more liberal share of the US sugar market. They claimed that the progressive reduction of Cuban participation in the US sugar market as provided in Sugar Act legislation has impaired the reciprocal feature of the 1934 US-Cuban treaty.3 They said that the US has captured 80% of the Cuban import market by virtue of special preference accorded US products and claimed that now they have been denied a fair participation in the US sugar market. They stated that this loss of income, coupled with the growth in population, has made it increasingly difficult to maintain minimum economic conditions required for social and political stability. The delegation asked that Cuba be granted the right to supply 50% of the sugar consumption requirements of the US and that 22% of Cuba’s sugar exports to the US be in direct consumption sugar as [Page 922] originally established in the sugar legislation of 1934. It further requested that the Cuban share in the US sugar market be regulated by an agreement which would give stability to the industry and complement the American domestic sugar market. The US delegation was impressed by the desirability of offering a more stable market in the United States for sugar from Cuba and other producers. It assured the Cubans that this problem would be given detailed study and that Cuba’s vital interest in the American sugar market would be taken into account in future recommendations to Congress. However, it was pointed out that the Executive Branch cannot provide the necessary relief through administrative action and that it cannot commit the US Congress to any course of action.

The Cuban delegation, pointing to the full cooperation Cuba gave the US during the war and to its strategic geographic position, requested appropriate measures by the US to make possible continued operation of Cuban mines, thus preventing unemployment. Minimum needs were stated as inclusion of Cuban manganese in the US stockpiling program, lowered duties on imports of iron barites, and expanded US purchases of Cuban copper. With respect to manganese, the US delegation explained that the emergency stockpile objectives have been filled; that long-term stockpile goals can be approximated by stocks already on hand; and, while the supplemental stockpile program has not yet been established, it will be based on an exchange of surplus US agricultural products for foreign minerals. It was explained that further duty reductions on imports of barites would be contingent on negotiations under the General Agreement on Tariffs and Trade. The US believes the Cuban copper industry will best develop through the initiative of private industry and pointed out that Cuba now participates in the US market on essentially equal terms with domestic producers. It was stated however, that there is a possibility some copper might be acquired for long-term stockpile purposes in exchange for surplus US agricultural products.

Requests were also made by Cuba to facilitate tobacco exports to the US and to seek ways and means of facilitating import into the US of Cuban fruits and vegetables, rum and other products.

In connection with the need to develop and diversify Cuba’s economy, the Cuban delegation said that Cuba intends to modernize its customs tariff and that this will result in some increases which will be carried out within the framework of Cuba’s international commitments and bilateral commitments to the US.

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Under GATT Cuba continued for the United States the exemption from the Cuban 20% customs surtax on most imported products. In order to facilitate tariff negotiations with third countries the Cuban Government wants the US to relinquish this preferential exemption in order that it may place into effect a reduced surtax of 4% which would apply to imports of all products from all countries. The US is unwilling to agree to this surtax increase but our delegation replied that the US would be willing to consult with Cuba at any time with regard to tariff preferences enjoyed by the US in the Cuban market should the Cubans wish to eliminate such preferences on specific products in order to offer to third countries in trade agreements the same rates of duty as those enjoyed by the US.

Cuba stressed its need for tourism and asked for redress from discriminatory US federal tax applying to passenger fares between the Caribbean and the US and liberalization of present US legislation limiting the amount of duty-free import by tourists of cigars and alcoholic beverages. Our delegation explained that bills which would remedy the passenger fare situation had been presented to the last session of Congress but were not acted upon and it is expected that similar legislation will be introduced into the next Congress. It also stated that the US would consider the Cuban request for modification of the legislation so as to double the amount of cigars and alcoholic beverages that tourists are presently permitted to bring back to this country from Cuba.

The delegation asked that Cuba be included in the US offshore procurement program as a means of helping their depressed economy. The US delegation pointed out that the program is now limited principally to military goods and to purchases of a few non-surplus products such as fertilizers, and insecticides. Purchases of sugar are made by the CCC from time to time and the Cuban Stabilization Institute and Cuban Foreign Trade Bank receive notices of intention to purchase.

The Cubans mentioned the importance of promoting investment of American capital in their country and to this end inquired as to the possibility of negotiating a double taxation treaty. During the talks the US Treasury indicated that it was in favor of such negotiations which might take place as early as next January.

Matters Raised by the US

The discussions covered various Cuban import taxes and fees which are considered by the US to represent contravention of the General Agreement on Tariffs and Trade. The Cuban delegation reported that remedial action had already been taken on one of these items, that they considered that three of them were not in contravention of GATT and that they would investigate and try to take remedial action on the remaining matters.

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The US pointed out that Cuba has made no effective settlement of various US private claims and debts totaling about $10 million. Of that amount some $1 million represents adjudicated items, part of which have been assigned by the claimant to the US Government on account of taxes. The Cuban delegation expressed the intent of the Cuban Government to arrange for prompt settlement of those claims which have been adjudicated by Cuban courts and explained the procedures established by Cuban laws leading to systematic liquidation of other categories of debts of the Cuban Government.

Another problem raised by the US related to the difficulties in operation of the rice agreement between the two countries which contains a procedure for fixing of the Cuban low-import quotas on rice, including announcement of such quotas by July 1 of each year. The Cuban Government announced its basic quota on July 1 but has not yet announced the preliminary supplemental quota, and this has caused substantial discontent in the US. The Cubans explained the domestic reasons which confront them in this regard and the US Interdepartmental Trade Agreements Committee agreed to discuss the Cuban request for modification of the procedure. The Cubans in turn, reiterated that their country would continue to develop its production of rice within the framework of its international obligations and give preference to imports of rice from the US at low rates of duty to the extent necessary to satisfy Cuba’s import requirements. It expressed belief that Cuba’s supplemental quota can be announced by February 1.

Other questions discussed with the Cubans included overtime pay of government officials in Cuban airports; discounts on payments to pensioners residing outside of Cuba; possible discrimination against Consolidated Railways of Cuba, in which substantial US capital is invested; and discrimination against established American industries in the case of a new hydrogenation plant which is seeking benefits which Cuban law provides for new industries.

  1. Current Economic Developments was prepared twice a month during the period 1945–1974 by the Bureau of Economic Affairs (subsequently the Bureau of Economic and Business Affairs) of the Department of State for internal use as a background and policy guidance report for policy level officers.
  2. A list of the members of the U.S and Cuban Delegations which participated in the economic talks is printed in Department of State Bulletin, Nov. 29, 1954, p. 815.
  3. Reference is to the United States-Cuban Reciprocal Trade Agreement, signed at Washington, Aug. 24, 1934, and entered into force, Sept. 3, 1934; for text, see 49 Stat. 3559.