Cuba market inches open

With help from Doug Palmer and Adam Behsudi

CUBA MARKET INCHES OPEN: Starwood Hotels on Saturday became the first U.S.-based hospitality company in nearly six decades to secure access to the Cuban market, striking a deal just a day ahead of President Barack Obama’s landmark trip to Havana to manage two hotels with the intent to manage a third.

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Expect at least a couple more splashy business announcements during the president’s trip, which kicked off Sunday afternoon, although a flood of U.S. investment is unlikely for at least another year or two. That’s because Congress still must end the U.S. embargo, a process that will be a heavy political lift — too heavy for Obama’s final year in office and made heavier by the fact that Cuban President Raul Castro, whose last name still inspires animosity, is still in office. The 84-year-old won’t step down until 2018.

Cuba, meanwhile, maintains strict control over investments in the country and requires any foreign businesses to partner with a state-owned monopoly to sell to the Cuban people. Those business practices are deeply intertwined with the regime’s communist philosophy, and economic reforms are happening painstakingly slowly. But for next week, the Obama administration and U.S. businesses will be basking in the progress so far; the mere fact of Obama’s visit to this long isolated communist nation would have seemed unimaginable just two years ago.

“This is not the time to be working out multi-layered incredibly complex issues, but this kind of visit can ignite or reignite the process to actually get at them,” said Mark Entwistle, a former Canadian ambassador to Cuba. Click here to read the full story by yours truly: http://politico.pro/21BOQi2.

IT’S MONDAY, MARCH 21! Welcome to Morning Trade, where your host would like to thank all the readers who passed along congratulations and well wishes for my new dog. Here’s a picture of her for those who are interested: http://bit.ly/1RXSuNS. Other than the TPP-text-tracking bloodhound Roxy, has trade policy had any other canine mascots? Let me know: vguida@politico.com or @vtg2.

A HINT AT OBAMA’S POST-PRESIDENCY? Speaking of Cuba, those who’ve watched Obama in office say this trip to Cuba is exactly what they expect him to be doing more of in his post-presidency, POLITICO’s Edward-Isaac Dovere reports.

“He’s the most popular political leader in the world outside of the U.S., with a star power, a mega power that will enable him to play important roles in conflict resolution, rescuing political prisoners and peacekeeping and dealing with different countries,” said Bill Richardson, the former United Nations ambassador and governor of New Mexico, and the only candidate in the 2008 Democratic presidential primaries who agreed with Obama when he talked about changing tactics on Cuba.

“I see the two most important foreign policy players in the post-Obama presidency as Obama and the Pope.” Click here to read the full story: http://politi.co/1WAdMoP.

WHO ELSE IS IN CUBA? As many as 39 lawmakers — eight senators and 31 representatives — are also on the trip with the president and the entire first family (except for Bo, the family pet). That’s on top of the four cabinet officials, including Agriculture Secretary Tom Vilsack, that the White House announced earlier would be going. Chef and entrepreneur Jose Andres, co-founder of the Think Food Group, is one of at least 11 business executives identified by the White House as also traveling to Cuba. He tweeted images of his flight into the island nation from his airplane window.

BUY FROM ME, ARGENTINA: Don’t forget, Obama will also stop in Argentina after his trip to Cuba — an important visit in its own right as the new president in Buenos Aires has been pushing economic reforms. The U.S. president will meet with Argentine President Mauricio Macri on Wednesday, where the two leaders are expected to discuss “the economy, security, climate change, and democracy, and human rights,” said Mark Feierstein, senior director for Western Hemisphere Affairs at the National Security Council. He said on a conference call with reporters that bilateral agreements are expected in those areas.

MALMSTRÖM: U.S. MARKET ACCESS OFFER HAS WIDE EXCEPTIONS: Across the Atlantic, European Union Trade Commissioner Cecilia Malmström is defending the European Union’s request to shield a long list of sensitive sectors from market openings under the U.S.-EU trade talks.

After a daylong meeting with U.S. Trade Representative Michael Froman, Malmström argued the United States was being nearly as protective in its own way. “We have a long list of exceptions, yes, because we are 28 countries, and all 28 countries have given to the commission some sensitive areas,” Malmström said at a German Marshall Fund event in Brussels.

But the requests are “also very specific,” she added. “The U.S. has fewer exceptions, but they are wider … We still have more, but the difference is not as big as it can seem if just you hear the numbers.” The United States, for example, is looking for broad protection for its maritime services sector, while the EU has 19 specific areas in that sector that it wants to keep closed, she told the group.

DOL KEEPING ITS EYES ON PERU: The Labor Department raised worries about the ability of Peruvian textile, apparel and agricultural workers to freely organize in a report released Friday. The report is a response to a complaint filed last year by Peruvian labor unions, which have accused their government of failing to comply with labor standards established under a 2009 trade agreement with the United States.

The unions said in their complaint that a Peruvian law violates international standards on the right to organize by allowing employers to continue to hire non-traditional export sector workers on unlimited temporary contracts — some as short as 15 days — which creates an environment where employees are reluctant to organize labor unions or demand certain rights.

Based on the evidence it gathered, the Labor Department’s report expressed “significant concerns” about whether the system “is sufficient to protect the right to freedom of association.” It also raised questions about Peru’s ability to enforce its labor laws. The department recommended Peru adopt various ways to avoid the abuse of short-term employment contracts and said progress in implementing the recommendations will determine any next steps and will be assessed within nine months.

But House Ways and Means ranking Democrat Sander Levin said the report does little more than “raise questions” about labor law enforcement in that country. It “makes clear that Peru has failed to meet its obligations under the FTA,” Levin said. Click here to read the report: http://1.usa.gov/1TYN5wf.

POLICY COMMISSION TO TAKE ON ASIA-PACIFIC INTEGRATION: The Asia Society Policy Institute is ready to dig into the ever-present debate about how to better integrate the Asia-Pacific region’s trade initiatives. The think tank on Sunday launched a new policy commission, led by former Deputy USTR and ASPI Vice President Wendy Cutler, that aims to issue “recommendations on the most effective, practical, and inclusive pathways for greater regional trade integration based on high standards,” the think tank said. The goal is to provide those ideas by the Asia-Pacific Economic Cooperation leaders’ meeting in Peru in November.

The following are members of the commission: Choi Seokyoung, former South Korean ambassador to the WTO and a negotiator in the U.S.-Korea free trade agreement; former Philippine Trade Secretary Gregory Domingo; former Australian ambassador to Japan and the WTO Peter Grey; Shotaro Oshima, former WTO Appellate Body member and former Japanese deputy foreign minister for economic affairs; and former Indonesian Trade Minister Mari Elka Pangestu. The commission will also soon include “a senior trade policy expert from China.” Click here to read the Asia Society press release: http://bit.ly/1MvvAeW.

CARTER: TPP VITAL TO U.S. INFLUENCE IN ASIA-PACIFIC: But for now, countering China is still center stage in the debate over the Trans-Pacific Partnership, with Defense Secretary Ash Carter warning Friday that the United States would cede the Asia-Pacific region to a coercive and unfair trading system dominated by Beijing if Congress does not approve the pact.

“The principal risk is that we will lose control of the terms of trade and the conditions of trade in the region that will be most important to our economy in the future,” Carter told POLITICO’s Mike Allen during a Playbook Breakfast event. “To be realistic about it, China will kind of muscle other countries into deals that are coercive, unfair and, very importantly, exclude or discriminate against our companies.”

The blunt message came as the leading Republican and Democratic presidential candidates continue to oppose the pact in an election cycle dominated by economic anxiety and fears about free trade. In addition, Republican leaders are balking at approving the deal in the face of objections by the pharmaceutical, financial services and tobacco sectors over details of the bill.

LET’S TALK TURKISH TARIFFS: Turkey’s average tariffs have increased 12.8 percent since 2012 due to requests from domestic producers, the World Trade Organization found in its routine trade policy review of the country. In fact, the WTO review found that some of Turkey’s tariffs exceed what it committed to at the global trading body, including on product such as textiles, ferroalloys and ball or roller bearings.

On the other hand, the Eurasian country has the ability to raise many of its tariffs even more because half of its products aren’t subject to commitments at the WTO, and in many cases, its tariffs are also below the ceiling it committed to at the global body. It has set ceilings for all of its agricultural goods, but average duties for those goods are 49 percent, compared to 5 percent for industrial goods. Tariffs on meat, dairy, sugar and other ag products are above 80 percent, according to the WTO secretariat.

At a meeting in Geneva on Turkey’s review, Deputy U.S. Trade Representative Michael Punke also raised concerns about the lack of transparency surrounding Ankara’s investment incentives and agricultural policies. “These include certain [sanitary and phytosanitary] measures which affect U.S. exports of a range of products, such as bovine genetics and crops produced with agricultural biotechnology, as well as the structure and operation of Turkish agricultural support mechanisms.” Click here to read the full WTO report on Turkey: http://bit.ly/1R7N9Y6, and here to read Punke’s statement: http://1.usa.gov/1MvtvzR.

INTERNATIONAL OVERNIGHT

Increased Chinese investment in hotels and other real estate is raising national security concerns, the Los Angeles Times reports: http://lat.ms/1o0wbiz.

Japan will help Vietnam in its fight against counterfeit goods to help increase the effectiveness of TPP, according to Nikkei Asian Review: http://s.nikkei.com/1MwlWJ4.

The U.S. plans to temporarily lift sanctions on Chinese telecommunications company ZTE, the Wall Street Journal reports: http://on.wsj.com/1WBqYd6.

India is likely to export nearly two million tons of sugar this marketing year, according to Reuters: http://reut.rs/1U0609Y.

THAT’S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: abehsudi@politico.com and @ABehsudi; vguida@politico.com and@vtg2; dpalmer@politico.com and @tradereporter; mkorade@politico.com and @mjkorade; and jhuffman@politico.com and @JsonHuffman. You can also follow @POLITICOPro and @Morning_Trade.

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