Foreign Relations of the United States, 1958–1960, Cuba, Volume VI

406. Memorandum From the Director of the Office of Caribbean and Mexican Affairs (Wieland) to the Assistant Secretary of State for Inter-American Affairs (Rubottom)¹

Washington, December 9, 1959.

SUBJECT

• Suggested Course of Action toward Cuban Expropriation Problem

I agree substantially with much of Mr. Turkel’s memorandum to you to November 24² concerning the use of discretionary authority to change foreign sugar quotas. I commend Mr. Turkel, particularly for his admonition that the authority which it is intended to seek in Congress should not be used promptly, if indeed, it is used at all.

In this connection, I feel strongly that an attempt to use the sugar quota as a weapon against Castro will work what may be irreparable damage to our longe-range relations with Cuba and furthermore would be ineffective as a weapon in the achievement of our own objectives.

Any reduction in the sugar quota, whether “nibbling” or massive, would strike above all at those in Cuba most damaged by the Castro government’s program and whom we count on to restore sense to Cuba if we don’t complete their ruin. It would strengthen his hand with the large mass of Cubans who would be the last to feel the full impact of this device. Roughly 75 percent of the Cuban population, including practically all the urban and rural masses who now support Castro, live on a very low subsistence level. Long after their sugar quota would be damaged, they would continue to live much as now eating their usual diet of rice, beans and yucca, going barefoot or wearing alpagartas, wearing cheap local clothing and living in the shacks or inadequate housing they now occupy. On the other hand, those Cubans who seek, however inadequately at present, to improve relations with the United States as their main hope for Cuba’s future progress, would be the first to suffer.

The consequences of a cut in the United States quota for Cuban sugar could well be disastrous. We would be taking an irrevocable step which would certainly injure and could indeed destroy, the source of Cuba’s livelihood. I feel certain that all of us are satisfied that once any part of the quota has been taken away from Cuba, there would be little hope of ever restoring it. Whatever our original motivation, we would thus be embarked on a one-way voyage of destruction of one of the most advanced economies in Latin America in order to strike at Castro whose regime we have good reason to believe is transitory. At the same time we would very probably destroy politically and economically any possibility that compensation in some degree might be paid to the expropriated American investors who have been following our counsel with commendable patience considering the provocation to which they have been subject.

The political effects of a quota cut would be: (a) to create hatred of the United States in Cuba and elsewhere in the hemisphere; (b) to increase sympathy for Castro, thereby probably prolonging the tenure of his regime; (c) to give what would be, with perhaps some justification, clear evidence of a policy of economic coercion of a country 90 miles from our shores; and (d) to create for ourselves the eventual problem of trying to pull up Cuba’s weakened economy after Castro has gone, with grant aid—in effect, keeping Cuba on a dole from the United States taxpayer for an indefinite period while we try to overcome the antipathy toward the United States among the entire Cuban populace and continue to dig up more grant funds at the expense of the American taxpayer to replace revenues from Cuba’s present sugar exports to the United States.

I suggest that trying to strike at Castro through the sugar quota is economically unfeasible and politically unwise.

I suggest as an alternative for consideration in the Department the following course of action premised in each case on the continued recalcitrance and defiance of Castro:

1. A set of instructions to go forward promptly to Ambassador Bonsal giving him specific advice on the conduct of negotiations for a reasonable settlement of the expropriation question through mutually satisfactory terms of compensation and other pertinent conditions. (Advice on such instructions is being obtained from appropriate areas of the Department and other agencies.)

2. An offer would be made to the Cuban Government for a United States-Cuban Binational Commission, similar to that utilized in the case of the Mexican agrarian reforms, to seek agreement on fair valuation and mutually satisfactory terms of compensation.

3. A proposal to submit the entire question of expropriation and compensation to the the International Court of Justice or to agree to the establishment of an international arbitration commission under the auspices of the Court.

4. In order to prepare for step 7 below, and coincidental with either step 2 or 3 above, depending upon developments in Cuba, the Cuban Government would be told that the United States Government is giving it notice that it wishes to discuss, in accordance with paragraph 1 of Article XXIII of GATT,³ the considerable number of pending contraventions of GATT provisions by former Cuban governments, as well as by the present Cuban Government. (Some of these contraventions are of long standing, one of which, for instance, dates back to January 2, 1948.) Failing a satisfactory adjustment of these contraventions, the United States would refer to the GATT Contracting Parties the matter of the contraventions, in accordance with the provisions of paragraph 2 of Article XXIII. (If the contravention matter should be referred to the Contracting Parties, this would partially prepare Cuba and international opinion for the next step described below.)

5. If the Cuban Government should refuse to adjust the GATT contraventions, the Cubans would be told that the United States is very much dissatisfied with the Cuban implementation of the provisions of GATT and that since the Cuban Government considers, as set forth in its note of November 13, 1959,⁴ that it is very much dissatisfied with the results of GATT, the United States would suggest that the two countries mutually agree to terminate the concessions which each has granted the other under GATT. In order to do this, the two Governments would have to ask the Contracting Parties for a waiver of their obligations, in accordance with Article XXV, paragraph 5, of GATT. At such time as the decision would be made by the two Governments to terminate their obligations under GATT, the two Governments would give notice of the termination of the reciprocal trade agreement of 1934,⁵ as amended, and the Convention of Reciprocity of 1902,⁶ between the United States and Cuba, which at present are inoperative and which would come into effect if the obligations under GATT should be terminated. The Cuban note also expressed strong criticism of these two agreements. (Under GATT and these agreements we are committed to refrain from discriminatory practices. In planning our moves ahead, we should constantly bear in mind that we stand out as advocates of respect for international commitments and that by adopting measures which would violate GATT or other agreements, we would open ourselves to severe criticism not only from Latin America but from European and other countries which are co-signatories with the United States of GATT or bilateral trade agreements.)

6. If Cuba should not agree that there would be mutual termination of the GATT concessions, we would unilaterally ask the Contracting Parties for a waiver of our obligations to Cuba. (This would be more difficult of attainment; in fact, we might conceivably be outvoted and be unable to obtain such a waiver.) The United States would also make a unilateral denunciation of the 1934 trade agreement and of the 1902 Convention.

7. With termination of the obligations of the agreements mentioned above, the way would be cleared for a request for legislative authority to submit the question of the valuation of and compensation for expropriated properties to the United States Commission on International Claims plus an additional request for authority to the Executive to impose appropriate taxes on all Cuban imports. The revenues from these taxes would be employed in creating a special fund with which to settle the claims of expropriated United States interests in Cuba according to the findings of the Commission.

The above procedure has the advantage of being clean cut and flexible. If at any stage during the above procedure we obtain satisfactory action from Cuba, the succeeding steps need not be invoked. Furthermore, we are in the position of refraining from punitive action by limiting ourselves simply to appropriate and recognized means for claiming compensation for private American interests expropriated by Cuba—from whose capital investments and enterprise the present Cuban Government is deriving the benefits. We thus limit ourselves to collecting payment clearly due our citizens with no direct burden on the American taxpayer on the one hand and no unduly harsh measures damaging to the Cuban economy on the other. In addition, we establish a basis for dealing with similar cases which (God forbid) may occur in other countries. This would certainly tend to discourage any other country from attempting to follow the present Cuban pattern inasmuch as we would have clearly demonstrated that we have adequate means of obtaining compensation either by mutual agreement, if possible, or by unilateral action, if forced.

Recommendation:

That you approve the course of action set forth in Nos. 1 through 7 above and authorize CMA to advance this position in discussions with E, L, and other interested areas of the Department.⁷

1. Source: Department of State, Rubottom–Mann Files: Lot 62 D 418, Cuba (Sept–Dec.) 1959. Confidential. Drafted by Wieland, Vallon, Stevenson, and A.H. Hood. Also sent to Turkel and Hill for concurrence.
2. See footnote 3, Document 397.
3. The General Agreement on Tariffs and Trade, concluded at Geneva on October 30, 1947, and entered into force for the United States on January 1, 1948; for text, see TIAS No. 1700 or 62 Stat. (Pts. 5 and 6).
4. See Document 392.
5. Signed August 24, 1934, and subsequently amended; for text of the original agreement, see 49 Stat. 2559.
6. Signed December 11, 1902; for text, see 33 Stat. 2136.

7. The source text bears no indication that the memorandum was approved or disapproved. An attached, undated typewritten note from Turkel to Rubottom reads:

   “I agree with most of the reasoning and nearly all of the action recommendations in Mr. Wieland’s memo on how to handle the agrarian expropriations in Cuba. “I think the order of action should be this:

   • “1. Propose round table negotiations on all subjects after getting the new authority to set sugar quotas.
   • “2. If Castro refuses, then go through the various steps recommended by Wieland.

   “My major difference with Mr. Mann was this: Mr. Mann would start cutting Cuba’s quota right away. My difference with Wieland is that apparently he would never cut the quota. The most Wieland would ever do would be to impose the 1–1/4 cent penalty.

   “My recommendation is: make the maximum good faith effort to negotiate with Cuba. If this fails file suit in the International Court of Justice, etc., but in the last analysis you must be prepared for a massive cut if all efforts to negotiate and resort to judicial means are rejected.”

   Appended to Turkel’s comments is the following remark by Wieland:

   “This is inaccurate interpretation of what I intended to say. I would cut quota but only as a last resort, after all else had failed and if Castro’s regime should survive that long.

   “I would not impose a 1–1/4 cent penalty necessarily. I would tax all Cuban imports, after obtaining appropriate authorization from Congress.”

   No comment by Hill on the memorandum has been found.