Cuba-EU: Own goal affects exports

Carlos Cabrera Perez (Café Fuerte )

HAVANA TIMES — The Cuban economy starts 2014 with what appears to be an “own goal.”

The European Union (EU), judging from official statistics of the island, no longer considers Cuba a very poor country and took it off the list of countries under its System of Preferential Tariffs. Cuba will now pay 21% on its exports to the UE instead of the previous 4%.

The bad news came in recent days and also affects other countries considered to have stepped up a notch in their economic development, according to the system applied by the UE in its trade relations with the rest of the world.

Europe has made comprehensive changes in its tariff system and reduced from 177 to 90 the countries benefitting from preferential tariffs. To classify the countries it was guided by the periodic evaluations of the World Bank.

Discreet Silence from Havana

With the new criteria, left outside the preferential system of European tariffs are high-income countries such as Qatar, but they have also excluded nations with medium-high income as Brazil, Venezuela and Cuba which, surprisingly, has been included in this category, although Brussels did not clarify what statistics were used to base its decision.

Havana has so far kept a discreet silence on the matter, although it knew about the change, at least, from the last quarter of 2013, when Brussels informed each country and said that the new tariffs would come into effect with the New Year.

The measure, even if it is based on a real increase in the indices of Cuban wealth, remains negative for the country’s exports. The international crisis has contained prices of Cuban products which will now also be taxed at the new tariff rate. The result could lead to greatly diminished profits, as in the case of tobacco products, for example.

Cuba exports tobacco, minerals, fish products and some foods to Europe, all of which benefited from the EU Trade Preferences until this January.

Perhaps Havana is waiting to comment until January 20, when Brussels could discuss and decide whether to open bilateral negotiations with Cuba for the establishment of a bilateral cooperation agreement. But here is where with typical political tug of war enters in, and the EU has no current consensus on Cuba. A group of countries defend maintaining the “Common Position” and others advocate that the bilateral agreement is a preliminary step to eliminating this stance.

Madrid, Cuban reference

Madrid, which is a kind of reference for European affairs regarding Cuba, has said that a bilateral agreement would be positive to contribute to the transition and economic reform in Cuba, and pointed out that the agreements with the EU contain clauses relating to democracy, fundamental freedoms and human rights .

If Brussels gives the green light next week, the EU would then consider the establishment of a political dialogue with Cuba. However Raul Castro already warned in his New Year’s speech that his government’s only commitment is to the Cuban people. A repetition of a traditional stance crowing of dignity, but without tangible results in the lives of those who say they committed.

Nonetheless, the real in politics is what is not seen and the structural crisis plaguing the Cuban economy leaves fewer spaces for foolish boasting. And the Cuban leader has shown a dose of economic rationality in his mandate, as when he said that a country is like a family that cannot spend more than it earns.

His decision to pay the recent debts to different creditors also demonstrates his economic reasonableness. The fact is that when he took office, the illustrious brother (of the former leader) found that Cuba had squandered its international credit and remained just as poor.

Improvising Governance

In a speech at the National Assembly in the summer of 2013, the Cuban president lamented that many Cubans do not understand the economic “guidelines” and criticized the past trend of governing without a program, constantly improvising and depending on others, a clear reference to Moscow and Caracas .

“Cuba has to fend for herself,” said Raul Castro as he called for diversifying the Cuban economy and lamented that “a communist, I do not know where he is now,” has said that he wants no part of the economic policy because it was “a return to capitalism.”

On that occasion, Raul Castro expressed the need for more laws and to discuss them widely with citizens and in the National Assembly. He further recommended that the legislature abandon its tradition of meeting only twice a year.

Regardless of what happens between the EU and Cuba, leaving the European preferred tariff system hurts the Cuban economy. And the reasons for this condition are still not entirely clear, as Panama and Peru, growing at around 9% per year, continue to benefit from lower tariffs on their exports to Europe.

In the coming months or years, maybe we will learn if the source of this harmful measure for the Cuban economy is the result of a change in European standards or the result of an enthusiastic communist bureaucrat’s altered figures in the perpetual quest of the Castro regime to deny or hide the obvious.