Plan to Stiffen Cuba Ban Annoys US Trading Allies

ELECTION-YEAR politics are behind a move by the United States Congress to tighten the 30-year-old stranglehold on the Cuban economy. But a reinforced blockade may provoke anger among important US trading partners.

Democratic presidential candidate Bill Clinton has supported a bill to strengthen the embargo on Cuba, and the Bush administration last month abruptly dropped its long-standing opposition to penalizing countries from which US subsidiaries trade with Cuba.

"Basically, the White House is backing it to appease the right wing of the Cuban-American community," says Donna Rich Kaplowitz, a Cuba specialist at Johns Hopkins University. "It's a battle with the Democrats for the Cuban-American vote."

The Cuban Democracy Act, sponsored by Rep. Robert Torricelli (D) of New Jersey, is seen as an ideological barometer for legislators by the conservative Cuban-American Foundation, which is pushing for the bill.

The Torricelli bill early this month won the approval of the House Foreign Affairs Committee. Four more committees must review the measure, but it appears headed for full House approval in the coming months. A companion bill is expected to be introduced in the Senate shortly by Sen. Bob Graham (D) of Florida. A similar subsidiary-trade prohibition amendment, drawn up by Sen. Connie Mack (R) of Florida, is attached to the 1992 Export Administration Act.

"This is a freight train.... If we can't derail it, we'd just as soon get out of the way," says an official of a large US firm with a foreign-based subsidiary doing business with Cuba.

The most contentious section of the Torricelli bill prohibits US firms from trading with Cuba through foreign-based subsidiaries, a practice now conducted with US Treasury Department approval. The sanctions would include tax penalties and fines against US parent corporations. The bill would also prohibit the US from giving aid or trade assistance to any country that gives aid to or subsidizes trade with Cuba. Administration reversal

The Bush administration stopped opposing the bill after negotiations produced changes that give the president the option of applying sanctions rather than making them mandatory.

The bill is being closely followed by Switzerland, Britain, Canada, France, Argentina, and Mexico, where the majority of the US subsidiaries trading with Cuba are based; and these countries do not like what they see.

A similar proposal in 1990 prompted Canadian Attorney General Kim Campbell to order US subsidiaries in Canada not to comply with the US trade directive if it were to become law.

"It is for the British Government, not the US Congress, to determine the UK's policy on trade with Cuba," warned British Trade Secretary Peter Lilley last year.

"I don't think this bill is popular in the White House. They know it will be one big headache with our allies," says Ms. Kaplowitz, co-author of a recent study on US trade with Cuba.

The measures would go into effect within 60 days of passage and would apply only to new contracts. But a tighter embargo would bind at a time when foreign-based US subsidiaries and Western nations are dramatically expanding trade with Cuba, stepping into the gap left by the former Soviet Union and its allies. Trade between US subsidiaries and Cuba tripled between 1988 and 1990, reaching $705 million, according to the Kaplowitz study. Rising exports to Cuba

Western exports to Cuba, paid for in hard currency, have risen from $953 million to $4 billion today. Sales of food and medicine account for most of the trade. An amendment to exclude food and medical supplies from the Torricelli embargo was effectively annulled when a second amendment was approved requiring US officials to supervise the distribution of such products in Cuba, which would not be possible given the current climate.

US firms dealing indirectly with Cuba are not pleased by the trend. "Cuban trade is not a significant part of our Argentine [subsidiary's] business. But we oppose this because it makes it that much more difficult for us to compete worldwide," says Darryl Natz, a spokesman for New York-based Continental Grain.

For example, commodity traders may buy and sell a shipment of sugar several times before it reaches its destination. "If we have to worry whether Cuba, which is one of the world's largest sugar suppliers, is in that chain of trades, we'll have to get out of the sugar-trading business," notes one US broker.

Proponents of a stricter embargo say US subsidiaries are helping prop up a ruthless dictatorship. Critics argue the Torricelli bill will hand US sales to European or Latin American competitors, hurting US firms more than it would Cuba. Conversely, a lifting of the US embargo on Cuba would mean US companies could sell $1.3 billion to $2 billion worth of goods to the Caribbean island in the first year after the embargo, according to Kaplowitz.