To improve the UK's relationship with Cuba requires more than just words – we must act on this new formal agreement
by Dan Smith for Left Foot Forward, 08 August 2011.
Last month Cuba and the United Kingdom signed a formal declaration to strengthen bilateral co-operation. The agreement champions "closer dialogue and economic, scientific, technical, educational, cultural and sporting links between the two countries" and highlights key areas for collaboration including environmental issues, biotechnology, trade and investment, regional security, child protection and disaster preparedness.
The move should be welcomed as a positive step – not just by those supporting the Cuban people, but also by those looking to expand British trade relations in Latin America. In order to make tangible change, however, the agreement must be substantiated by positive action – something which has been lacking in previous UK policy towards Cuba.
The UK is the sixth largest economy in the world and the third largest economy in the European Union. It is the seventh largest importer and the 11th largest exporter in the world. In spite of this, the level of trade between Britain and Cuba is derisory. Exports to Cuba totalled an abysmal $14.4m (£8.9m) in 2009 while imports came to a pathetic $15.8m (£9.8m). Compare this to September 1958 when the UK government exported 25 fighter jets to General Batista's dictatorship. The equivalent value today – at around £40m a plane – would equate to an annual UK export to Cuba of around £1bn.
It is tempting to explain the lack of commercial activity between our two countries as a legacy of the cold war. However, back in 1986, Cuba constituted the UK's fifth largest market in Latin America. Furthermore, UK trade with Cuba is dwarfed by other EU countries including Spain, Italy, France and the Netherlands. Indeed, in 2008, the UK was only the 11th largest exporter of goods to Cuba from the EU.
It is therefore more appropriate to view the level of trade as a direct consequence of policy adopted by consecutive UK governments. In particular, the Blair government – as a result of closer ties with the Clinton and Bush administrations – took an increasingly aggressive and hard-line stance against the island. Blair was a keen advocate of the EU common position – which suppresses trade and exchange with Cuba – while, in 2003, the UK was instrumental in blocking Cuba's entry into the Cotonou agreement which gives trade preferences to former European colonies.
According to UK Trade & Investment (UKTI), "the greatest hurdle to doing business in Cuba is painfully slow decision-making which results from all investment decisions being referred to the highest levels of government". However, as indicated in the graphs below, there are a number of other countries which manage to cut through the perceived "layers of bureaucracy". It is ridiculous that UKTI blames restrictions within Cuba for the lack of trade when the main obstacle remains the UK's unwillingness to challenge the ongoing US blockade.
In theory, the UK Protection of Trade Interests Act makes it illegal for UK companies to comply with extraterritorial US Helms Burton legislation but, in practice, the UK government replicates the pernicious and illegal blockade. Transactions cannot take place in US dollars and payment cannot be channelled via American banks. The risk of US sanctions creates uncertainty and banks, businesses and companies can get caught between conflicting legal requirements. For instance, in August 2010, Barclays bank was fined $298m (£190m) by US authorities for handling transactions with banks in Cuba. The result is that the little trade that does occur often takes place through "third parties" and unfairly increases Cuba's import costs.
The blockade also restricts access to long-term credit which means Cuba is often limited to dealing in cash transactions or expensive short-term credit. This makes bilateral trade more costly for the island and significantly stifles its economic freedom. The uncertainty caused by the blockade creates a volatile market and increases the risk of liquidity problems. As the UKTI report says: "Even when there is potential demand for many products, the reality is that not all companies are in a position to ensure payment or to finance long-term payments … This is mainly due to Cuba's lack of access to the long and middle-term financial market, so relying mostly on short-term credit, and credit offered by the providers."
It is peculiar that David Cameron has spent much of his tenure attempting to expand British markets abroad – in places such as China, India and the Middle East – but Cuba's potential remains untapped. Cuba's geographical location – as both a Caribbean and Central American nation – represents a strategic advantage whilst the Cuban market offers various long-term benefits. Cuba has a highly educated and literate population and there is an abundance of experienced and qualified employees. Brazil has already recognised the business potential in Cuba and has invested heavily to make Mariel Port the leading freight port in the Caribbean.
The UK should be applauded for repeatedly voting against the US blockade at the United Nations, but further action is required to normalise relations with Cuba and develop real, discernible trade and co-operation between our countries.
The Cuba Solidarity Campaign and the British trade union movement have worked tirelessly to promote the normalisation of relations and it is clear that real political will does exist. Early Day Motion 1171 supporting the strengthening of ties between the UK and Cuba was signed by 248 MPs whilst over 92% of candidates in the 2010 general election supported better relations. The examples of various EU countries – including Spain, Italy, France and the Netherlands – demonstrate that the debilitating effects of the EU common position can be circumvented if perceptible political will exists. It is now crucial that we harness political will within the UK to turn this "paper" agreement into something more concrete.