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WORLD TRADE
WT/L/666
4 December 2006
ORGANIZATION
(06-5811)
Original: Spanish
General Council
14-15 December 2006
CUBA – ARTICLE XV:6 OF THE GENERAL AGREEMENT
ON TARIFFS AND TRADE 1994
Report by the Government of Cuba under the Decision of 20 December 20011
The following communication, dated 1 December 2006, is being circulated at the request of
the delegation of Cuba.
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The Government of the Republic of Cuba hereby requests an extension of the waiver of the
provisions of Article XV:6 of the General Agreement on Tariffs and Trade 1994 approved on
14 October 19962 and renewed on 20 December 20013, as is appropriate given that Cuba is not a
member of the International Monetary Fund (IMF), and due to expire on 31 December 2006.
The reason for this request for a further extension of the waiver is that the conditions
specified in previous years continue to exist, albeit worsened by the measures constituting the
economic, commercial and financial blockade imposed on Cuba by the United States, which make it
impossible for Cuba to sign a special exchange agreement with the Members of the World Trade
Organization (WTO).
Cuba does not have access to important sources of credit from international or regional
funding agencies as other countries do.
Under Title I, Section 104, of the Helms-Burton Act, the US statutorily opposes Cuba's
membership of international financial organizations through instructions from the Secretary of the
Treasury to the US Executive Directors of such institutions.
This US blockade policy prevents external financing for the Cuban nation, as can be seen by
the refusal to grant direct funding; as a result, access to credit is subject to onerous conditions and
provided on a much less flexible basis than credit from financial institutions and official sources.
It also restricts free trade through the official ban on the use of the US dollar in external
commercial and financial transactions by the Cuban Government, forcing the country to carry out
such transactions in other currencies even though the prices of its main commodities are quoted on
world markets in US dollars. As a result, Cuba has incurred huge losses from the appreciation and
depreciation of that currency in relation to the currencies of its main trading partners, as well as the
instability suffered by its enterprises on account of the double exchange-rate risk.
1
WT/L/440.
Idem.
3
WT/L/182.
2
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After more than 46 years, these Regulations remain fully in force, with the effect of
maintaining an economic, commercial and financial blockade against Cuba.
However, in the period 2001 to 2005, the Cuban economy continued to recover and grew at
an average annual rate of 5.6 per cent. This period saw the key macroeconomic indicators develop
favourably; gross domestic product (GDP) expanded in terms of volume owing to greater efficiency,
productivity and rationality in the use of the available material, financial and human resources; and
considerable progress was achieved in the monetary, financial and fiscal areas.
The Cuban economy recorded expansion of 11.8 per cent in 2005 (at constant 1997 prices).
Attention should be drawn to the major role played in this respect by high value-added services,
notably health services, the growth of which was greater than that of the economy as a whole, and the
sustained growth of the tourism industry.
During this period, the services sector was the driving force of the Cuban economy.
GDP behaviour has basically been underpinned by the growth of tourism, telecommunications and
non-commercial social services, of which health and social welfare have shown the greatest increases.
Cuba has developed more than 200 programmes to improve social services and, to that effect, some
7,000 projects have been completed over the last six years.
Also worthy of special mention given their contribution to economic expansion are
agriculture, the non-sugar industry and mining, notably the increased production of domestic crude
oil, natural gas and nickel, which constitutes an historical record. The country's construction sector
has also significantly expanded.
Cuba has been able to grow and develop in spite of the economic war waged against it by the
US, the rise in oil prices on the international market and the adverse effects of natural phenomena.
Estimated losses from the passage of three hurricanes which lashed the island in 2005 totalled
US$2,308 million and those of the drought suffered by the eastern regions of the country from 2003 to
2005 amounted to US$1,350.0 million; taken together, these figures represent 7.9 per cent of GDP.
Further proof of strength and strict management of public finances were visible in 2005.
Albeit in unfavourable conditions, the State budget continues to back the change in the socio-cultural
order being undertaken by the Cuban State, with the implementation of more than 200 social
programmes. The budget deficit/GDP ratio was 4.2 per cent, higher than previous years, but
remaining within an acceptable range given the conditions and characteristics of the Cuban economy.
Price stabilization also continued during 2005, which meant that the variation in the
Consumer Price Index in relation to 2004 was 3.7 per cent, in spite of the salary increases recorded in
a number of economic sectors.
However, in parallel to this, 2004 saw the entry into force of a new package of anti-Cuban
measures adopted by the Government of George W. Bush with a view to tightening the existing
restrictions on tourism and investment in Cuba, introducing another impediment to financial flows
and travel by US citizens to the island and restricting yet further the sending of family remittances,
trade, and scientific and cultural exchanges. These measures have the stated objective of
overthrowing Cuba's political and economic system.
The US Government's policy of aggression has resulted in an estimated accumulated
economic cost to the Cuban economy of more than US$86 billion, a figure which does not include the
more than US$54 billion in direct damage to the country's social and economic objectives as a result
of acts of sabotage and terrorism organized and financed from the United States. Nor does it include
the value of goods that could not be produced or the damage caused by the burdensome credit terms
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imposed on Cuba. In 2005 alone, direct economic damage inflicted on Cuba by the US blockade
policy exceeded US$4,108 million. According to a report by the Office of Foreign Assets Control
(OFAC) to the US Congress, assets frozen in US banks as a consequence of the blockade totalled
US$268,300,000 in 2005.
Damage to Cuban foreign trade exceeded US$945,320,000 in 2005, an increase of almost
15 per cent on 2004. Likewise, the financial costs related to the high risk rating assigned to Cuba, in
its capacity as a blockaded country, exceeded US$320,765,000, which had a negative impact on the
country's foreign trade as a result of the difficult financing conditions imposed.
The economic, commercial and financial aggression also affects States, citizens and
companies of third countries as a result of the extraterritorial application of the laws on the blockade
against Cuba. In 2005, citing the violation of various regulations governing the embargo against
Cuba, OFAC imposed fines on eight companies and banking institutions, and at least 38 countries
were affected.
On 13 February 2006, new OFAC regulations on the system of fines applicable to banking
institutions violating US laws on sanctions against various countries, including Cuba, entered into
force. Violators may be subject to civil investigation, assessment by OFAC of the offending conduct,
or criminal investigation and indictment. These new measures have prevented, inter alia, the payment
of Cuba's membership fees to two international organizations based in Geneva, the International
Telecommunication Union (ITU) and the World Meteorological Organization (WMO), owing to the
refusal of the Swiss bank UBS, which holds the accounts of both of these international organizations,
to receive transfers from Cuba.
On 10 July 2006, the Bush Administration published the second version of the Plan for the
Annexation of Cuba, with a view to reinforcing and intensifying the negative impact of the action set
out in the first report of the misnamed "Commission for Assistance to a Free Cuba", which was
approved on 20 May 2004.
The recommendation to apply Title III of the Helms-Burton Act to entrepreneurs from third
countries considered by their activities to be backing the continuity of the Cuban Government reveals
the irrational escalation in the extraterritorial application of the blockade policy against Cuba. This
Title – which presses for entrepreneurs from third countries conducting business with Cuba to be
brought to trial before US courts – had been postponed for years in the face of international pressure.
This new version of the Plan also reiterates the recommendation to rigorously apply the
sanctions under Title IV of the Helms-Burton Act, which prohibits the granting of US entry visas to
foreign investors in Cuba, with particularly harsh treatment being meted out to those conducting
business in strategic sectors, such as oil drilling and extraction, tourism, nickel and rum and tobacco
production and marketing.
Other measures envisaged in the new report include the recommendation to create an
Interagency Task Force with a view to suppressing production of Cuban nickel and strengthening the
Cuban Asset Targeting Group.
The Central Bank of Cuba (BCC) responded to such measures by implementing
Resolution No. 80, which established the mandatory use of the convertible Cuban peso to replace the
US dollar in domestic transactions as a complement to the de-dollarization of the economy which
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began in 2003 pursuant to Resolution No. 65, which serves the same purpose and is aimed at use of
the convertible peso in commercial transactions in the business sector4 within national territory.
In view of the special characteristics of the Cuban economy, monitoring the monetary
aggregate M1A5 is particularly important. This indicator rose 28.5 per cent in 2005 and, in spite of
other increases in previous years as a result of the de-dollarization of the economy and salary
increases, no rise in inflation has been recorded.
Deposit rates in the banking system, in the different currencies, have remained stable.
It should be noted that the changes to Cuba's exchange-rate and financial systems have not
affected its relations with the rest of the WTO Members, as proved by the continuity of operations
with its main trading and financial partners. Neither have these measures adversely affected foreign
investment interests in Cuba.
Furthermore, the Cuban banking and financial system continued to gain in strength and
expand. At the end of 2005, it consisted of the Central Bank of Cuba, nine commercial banks,
16 non-bank financial institutions, 13 representative offices of foreign banks and four representative
offices of non-bank financial institutions.
The external sector recorded a surplus in the balance-of-payments current account for the
second consecutive year owing to increased services exports, notably health services, the quality of
which has received international recognition.
Cuba also continued to move ahead with finding solutions to strategic economic development
problems, while raising the standard of living of its people, as evidenced by major successes in the
areas of education and health in spite of all the difficulties represented by the ongoing hostility
towards it of the US Government.
The US policy has placed severe constraints on all sectors of the Cuban economy. In this
respect it is worth mentioning, inter alia, the major losses triggered by the impossibility of using the
US dollar in external commercial and financial transactions; barriers to investment in the form of
penalties and threats to foreign partners; the impossibility of gaining access to long-term financing
with favourable conditions; a ban on the sending of remittances; the targeting of all Cuban business
operations, while associating other countries and international bodies with this policy.
Even with regard to sales of agricultural products by the United States to Cuba, authorized on
a case-by-case basis and subject to specific licences, restrictions come into play and make the
transactions less effective. A new difficulty lies in the fact that Cuba has to pay the total value of such
imports in advance.
Consequently, the country's efforts to integrate itself into the world trading system are being
made under particularly difficult and exceptional conditions – the outcome of a policy which
contradicts the principle of free trade.
The above factors mean that the particular circumstances that gave rise to the extension of the
waiver granted to Cuba in October 2001 – a waiver which has no adverse effects on other
WTO Members – still exist.
4
Excludes entities created under the Law on Foreign Investment (Law No. 77 of 5 September 1995)
and others expressly authorized by the Central Bank of Cuba.
5
Monetary aggregate which measures the behaviour of the liquid assets held by the public and includes
cash in circulation, savings accounts payable on demand and current accounts.
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Cuba has shown that it has complied with its commitment to make use of the waiver without
affecting the objectives of the General Agreement or harming the rights of the other WTO Members.
_________