America’s aggressive unilateralism irks Allies

O. Croci

The war of nerves between the United States and its Allies over the "Cuban Liberty and Democratic Solidarity Act," better known by the name of its principal sponsors as the Helms-Burton Act, reached a turning point earlier this month when the European Union referred the matter to the World Trade Organisation. A WTO dispute settlement panel will now have to decide whether the Act violates world trade rules. The U.S. government passed this controversial piece of legislation last year to increase pressure on Cuba, at a time when the island feels the impact of the collapse of trade and aid ties with the former Soviet bloc, by trying to enlist forcefully in its anti-Castro crusade also other countries. The Act is mainly a restatement of existing economic sanctions, first imposed by President Kennedy in 1962, mixed with a series of inducements designed to encourage liberal reforms in Cuba. Its details, however, are so petty that the usually sober British weekly The Economist, with little diplomacy but great conciseness, has called the American initiative "stupid." The reasons for this trenchant assessment are manifold.

The effectiveness of economic sanctions to bring about political change is doubtful, to say the least. In this case, they are likely, as recently stated also by former U.S. President Jimmy Carter, to "make Castro look like a David fighting against a Goliath" and thus reinforce his political legitimacy, both at home and abroad. Sanctions are to remain in force until such a time when a democratically elected government in Cuba implements a series of measures elaborately defined in Title I, and II of the 70-page Act. At that point, American aid, loans and investments would begin to pour into Cuba. Only the self-righteous sponsors of the Act seem not to have noticed the ironic contradiction contained in these peculiar provisions, namely that only a Cuban government that took orders from Washington would be considered democratic. One of the American demands, moreover, is that the Cuban government return to American citizens property "confiscated" after the 1959 revolution. The Act conveniently ignores that Cuba, which settled claims by all foreign owners, offered compensation, based on tax reports, also to American citizens. These, however, were dissuaded from accepting it by the State Department, which estimated that American overt and covert attempts to topple Castro would eventually succeed. Title III of the Act has generated the biggest controversy because of its extraterritorial implications, that is to say that it extends the reach of American law to foreigners operating outside American territory. Foreigners conducting business in Cuba using property nationalised by the Cuban government (the Act uses the expression "foreigners who traffic in confiscated property," thus offensively suggesting that people doing business in Cuba are no better than drug dealers or thieves) can be sued in American courts and have their assets on American soil confiscated. They, their associates, and members of their families, moreover, can also be barred from entering the U.S.

It seems clear that Helms-Burton was conceived exclusively as an instrument to impose American policy towards Cuba on countries reluctant to treat Castro as an international pariah. The fine print of the Act, in fact, minimises the scope of its application. Title III, for instance, only applies to commercial property worth at least $ 50, 000 (so it excludes thousand of claims for private homes), it is not retroactive (so it can only be used against foreigners making new investments in Cuba), and finally, can only be used by people that were American citizens at the time of nationalisation. The more numerous Cuban refugees who became American citizens later will have to wait until August 1998 before they can invoke the Act. By that time, the authors of the Act must have thought, the mere existence of the Act and the threat that it could be used would have pushed everybody into line. Things, however, did not go as smoothly as hoped since American allies began denouncing the bill immediately.

At its June 1996 meeting in Panama, the Organisation of American States voted a resolution condemning the Helms-Burton Act with 23 votes in favour and 10 abstentions. Only the U.S representative voted against it. The European Union and Canada firmly condemned the extraterritorial provisions of the Act and began to consider different measures to protect home companies targeted by the Act. President Clinton, who had at first threatened to veto the bill, changed his mind following the February 24, 1996 incident when the Cuban air force shot down two small American planes dropping anti-Castro leaflets over the island. Caught between electoral considerations and allies’ protests, Clinton decided to sign the bill but to suspend the right to bring an action under the contested Title III for six months. This attempt to defuse the situation, however, floundered when, in early August, Clinton signed the D’Amato bill, which requires the U.S. government to impose sanctions on foreign companies investing “too much” (that is anything more than $ 40 million a year) in the oil and gas industries of Libya and Iran. This is an even more bizarre piece of extraterritorial legislation aimed at foreign companies which do not only operate outside the U.S. but whose transactions involve no American financial instrument and no transfer of American technology. Not surprisingly, the European Union immediately adopted retaliatory legislation, which allows European companies targeted under the Acts to sue for damages in European courts. Similar legislation came into force in Canada on January 1. The Canadian government is also considering the option of bringing the Helms-Burton Act before NAFTA’s dispute- settling panel.

Although the US government claims that Helms-Burton has created more international pressure on Castro than anything since his ascent to power, it does not appear to have discouraged other countries from doing business in Cuba. According to data reported by The Economist, 25 new joint ventures were signed and 143 new negotiations began since the Act came into force. One of the new joint ventures involved the Canadian company Sherrit, which was the first and so far only foreign investor in Cuba to be targeted under the Act when its executives were barred from entering the U.S. last July. France recently increased the annual export credit line it grants to Cuba. Turkey, one of the U.S. staunchest allies, signed a new trade deal. A Bahamas-based investment company, copying a British initiative, has set up a “Cuban growth fund”, to invest in listed Canadian companies that either operate in Cuba or do business there. Canadian Foreign Minister Lloyd Axworthy visited Cuba in January to boost bilateral economic ties (Canada is Cuba’s major trade and investment partner) and promise co-operation in protecting investors from the punitive effects of American legislation. Various Canadian groups have organised a winter boycott of Florida. Even American companies have manifested their dissatisfaction. CNN plans to take the government to court if it is not allowed to open a bureau in Havana. The National Foreign Trade Council (an organisation that includes companies, labour unions as well as non-governmental organisations) has just launched a campaign against economic sanctions. The Council is worried by the enmity that these measures have generated abroad and the negative impact this has on American companies.

Whatever the judgement that the WTO panel will eventually render, there will be negative repercussions for world trade. If the panel finds in favour of the U.S. (which preposterously claims that the Helms-Burton Act is a national security matter), WTO rules will not have much weight in the future. If it finds in favour of the EU, the U.S. is likely to de-legitimise this new organisation created precisely to provide a more predictable trading environment. It is time that the U.S government, and the likes of Senators Helms and D’Amato in particular, learn that no foreign economic policy can be made under the threat of law suits and that human mortality, rather than exploding cigars or their ill-conceived legislation, will eventually assure Castro’s departure. His disappearance, however, will not ensure that the future of Cuba will necessarily be to Washington’s liking. This, after all, is one of the dangers of democracy.

O. Croci is chair of the Political Science Department at Laurentian University