tv Key Capitol Hill Hearings CSPAN January 14, 2015 7:00pm-9:01pm EST
recount committee in 2000. now, i guess you didn't know how to count votes on the supreme court or something. i don't know what happened. but he was involved in that for two months in florida. so he was on the inside of that. he's the co-chair of the election law committee of the administrative law and regulation. he was for the apa. we worked together on the task force on lobbying regulation as i've mentioned before. and i enjoyed that very much. there are many other things that you've done but we don't have time to go through all of them. welcome, joe. >> thanks very much. thank you. and thank you, professor, and i will say that only professor therber couldcjs federal lobbying law was an exciting enough topic to put at the end of a friday afternoon when you guys have been sitting here for a full week. but hopefully this will be -- >> a friday afternoon at 5:00. >> exactly, 4:00. hopefully this will be of some things that are -- of interest
to you and are of practical importance. if you're in this area or you're getting into this area. basically, i want to cover not -- each to the same extent, but five different areas. the lobbying disclosure act, you already have some familiarity with with the previous presentations and particularly professor therber's presentation now. the registration act. the ethics rules, i know you touched on to some extent in the prior session. revolving door, again, professor therber talked about some of the reforms it's made in the 2007 law, but we'll get into the substance. and then just quickly some of the self-imposed or voluntarily implemented restrictions that the obama administration placed relating to lobbyists. so in terms of understanding how the lobbying disclosure act
works, it's a little bit weird because the registration is done by an organization or by a firm a lobbying firm or law firm, but it's triggered in the first instance by an activity by an individual employee of either an organization like a nonprofit organization, trade association or a lobbying firm, of course, could be public relations firm lobbying firm or law firm. and basically, an individual becomes a lobbyist if that individual makes two or more lobbying contacts on behalf of his or her organization if she's in-house. or for a particular client. if this is for -- if we're talking about an employee of a lobbying firm or a law firm. and in addition, spends 20% or more of her time at any calendar quarter on what's defined as lobbying activities for that
client. and these -- in these definitions, in particular, lobby activities is the heart of the problem that professor therber spent a lot of time dealing with and explaining and grappling with. first of all, lobbying contact, you have to again, two or more for a particular client or your organization at any time is any kind of communication with either a member of congress or staff at any level. doesn't matter, from the senate majority leader down to the person sitting at the desk, the 22-year-old at the front desk in the basement of the building, all counts as a contact in the congress. it's a contact with a career
civil servant. and lobbying activities are not only the contacts themselves, but all other activities in support of it,vryuu including research and writing fact sheets you leave with the member staff or the executive, the administration official. scheduling the meetings you know, the follow-up phone calls, e-mails and the like. that -- and the time, the effort that goes into the background for that. that is included in lobbying activities. registration is required if those two tests are met. two contacts, 20% or more of your time the person's time in a calendar quarter on lobbying activities, if in the case of a lobbying firm, they or law firm, they receive at least, more than $3,000 from those lobbying
activities in the quarter or if it's -- we're talking about in-house, they have to track the portion of the, you know, employee's time related to lobbying activities based on that definition. and associated overhead and other costs and-ky that has to be at least $12,000 on a calendar quarter.phó÷ the trick lies in the lobbying activities. we talked about the contact. should've put this slide earlier. congress any member of staffer and the executive branch, executive office of the president. executive schedule, which is a cabinet and sub-cabinet positions, senior executive service and all of the schedule cs all the lower level political appointees. so this is the, again, the issue that the professor spent so much time with and brought the public ÷)gejdtqi sru nd gotten attention from others in recent years.
why are so many lobbyists not registered? what is this about? and the answer lies from the legal standpoint legal intersecting with the practical in what doesn't count is lobbying activity but is clearly part of the influence industry as discussed in the last session. first and foremost, grass roots lobbying, right? huge industry, all the activities that go into that. don't involve any direct contact with member of congress or staff staff but as the polling the media. all of that doesn't count.ga+ñ could cost millions of dollars and sometimes they do. no registration or reporting.
which you got into this whole issue of/luáu)(p& intelligence, but where you really somebody -- taking a position on something and trying to influence it, the contact isn't going to count. there's a whole business of trying to find out before the rest of the public does what's going on on capitol hill because of the way it influences the value of companies. >> can i interrupt? >> sure. please. >> the political intelligence business. and they sort of -- they were kidding, but i think they meant it, if you start regulating what they do they write memos to their clients about what ways and means of finance will do with a particular tax provision because they're there in the room listening to it. they said, wedúí if they start regulating this, we'll just say we're journalists and we -- and
we're writing a news letter to two people. >> right. well, that's right. that's -- that would be the next stage. but at this point, it's sort of below the radar because it doesn't count as the -- the contacts don't count and therefore it's not doesn't trigger registration and reporting. then there is the -- and also, if lobbyist just set÷0jlñ up a meeting for a client without really letting the member's office know what it's about it's not going to unnecessarily counter as a contact. then there's the whole area of strategic lobbying advice. this is the daschle situation that the professor was talking about. somebody says this is how you get this done. they're not going to have to
register as a lobbyist. what's reported, i think you've discussed this before. i won't spend a lot of time on this. it's very limited what's disclosed under the lobbying disclosure act even when you do register. the client, the name, of course the name of the organization, if it's in-house, the names of the individual lobbyists, the employees of the organization, or the lobbying firm that triggered this thing required the organization or firm to register. the federal agency or branch of congress that's being lobbied but not the people, you don't have to say you met with you don't have to sap even what member of congress. lobbying the u.s. house. you have to give the -- i didn't put this in, you do identify the bills of the general subject matter areas, but not the particular people you met with. it does disclose if the lobbyists served as one of these covered officials in the last 20 years. and then the amount of income from lobbying activities. you don't have to say how you calculated it or you know, what you based it on.
if only some of it was the direct lobbying, that's the only income you're going to report on the lobbying disclosure report even if you are required to register. in addition, the 2007 law that professor therber described the honest leadership and open government act. introduced requirement for semiannual twice a year report where lobbyists have to report their contributions to federal candidates and pacts, leadership&0ñ pacs and national party committees. contributions to events that are to honor recognize asga3ç member of congress, there's a lot of wiggle room how that's defined.)qgñf
. this is for reasons we'll talk about. you have to certify when you found this report that you as the lobbyist didn't violate the congressional ethics rules with respect to gifts to members of congress and staff. i'll talk about in a minute. i want to turn now to the foreign agent's registration act which is a lot broader in its scope. and yet, turns out to be a lot less effective in its coverage. we'll talk about then the lobbying then the lobbying disclosure act. we'll talk about much broader in scope than the lda. it requires a lot more to be disclosed. goes back to the 1930s. it was originally enacted to address the concerns about secret agent publicity. agents in the u.s. for nazi germany. it was passed in 1938 as a result of those concerns.
registration under the foreign agents registration act is triggered by any person acting as an agent. meaning, at the direction or request of a foreign and a foreign principal is any person, any person outside the -- company outside the u.s. could be an individual,k kt could be a foreign corporation, could be a foreign government, foreign political party. and registration's required. if they engage in the u.s. in what's considered political activities, which we'll talk about in a minute. but the key thing to know about it is that if the u.s. person, a-skz /aw lobbyist right is u.s. pr agent whatever is engaged in lobbying activities they have the option to register%: under the lobbying disclosure act instead unless, unless the principal is
a foreign government or foreign political party. and as a result of that, most of the registrations for farap/ are just for foreign governments and foreign political parties. if you have one of those clients, though, the scope of what triggers registration is a lot broader than lda. it does include grass roots lobbying, for sure. and it also of any kind. and includes providing any kind of strategic or communications advice about influences the u.s. government. so the tom daschle situation. that is, you know, sitting there not contacting anyone no state, local official, but just saying here's how you go about getting this done. here's how you plan your direct lobbying campaign or planning carrying out grass roots campaign, talking to -- writing
op-eds, media the stuff that doesn't surface under lda is all captured by fara. supposedly, and it also includes retaining other people for these activities. if youu.!b put together something in the u.s. and hire a grassús9+juj firm to do something for a political party, that requires registration. >> keeping it sort of interactive here. what if a firm here in town organizes trips for members of congress to go to a foreign country to know about the foreign country, but to influence them with respect to the policy related to that foreign country. to the -- does the firm doing that need to register under fara? >> that's an interesting question. technically what triggers registration has to be activities within the united states. if you're taking people overseas overseas we're reporters, and
you're basically doing it for the purposes you're talking about, technically it does. it should require registration under fara because they're engaging in political activities dealing, trying to influence a sector of the u.s. public. if you are advising a foreign government overseas about their -- and you only do it. you don't do anything in the united states. an example of -- we have a lot of u.s. political consultants now who are going overseas and helping foreign political parties win elections there. that doesn't require registration.+÷qz if they go over there and advise them about how to deal with the u.s. government technically it wouldn't require registration. but if they come back and make a follow-up phone call from the u.s. send an e-mail, you know, that would trigger it.in0l$
there's certainly a significant amount of activity. it's generally believed that falls under foreign agents registration act. it isn't reported because people either don't understand it don't want to comply with it, don't understand how broad the scope is. there was a recent series in the new york times about thinkhj tanks, you know, sort of taking money foru grants from foreign governments to do studies and activities intended to shape to write the policy atmosphere in washington and raising the question about whether that would constitute activity under fara. what's reported is initially and every six months if you do follow fara registration, you actually have to include your
contract with the client. you have to say exactly how much you paid you were paid and for what including all expenditures, everything itemized. a description of the activities you carried out. and you actually have to detail each -- not only identify anyone you talk to, but detail every contact with any, you know, official or staff, elected official,i:]ês appointed official or staff. any representative of the media or representatives of u.s. think tanks. actually say i met with john smith on such and such a date or sent him an e-mail or had a phone call and discussed so and so. >> can we go back to that? >> sure. >> i'm confused. why in the world can't we do this with the lda? >> well, that's the -- you know that's the point. there's a big contrast between the lda and fara.
and even under fara a lot of people like representing foreign corporations and so forth that used to have to register under fara depending on what they were doing. no longer have to as a result of the exception. >> it wasn't serious? it does show the contrast doesn't it? >> yeah it does show the contrast. but even under -- even under fara you will see if you, from time to time in the press, that there are certainly people out there doing things on behalf of foreign governments without registering. and here, too, is in the lda area, there's a problem of enforcement. this law is enforced by the department of justice by a unit in the criminal division, and they have very little staff and unless something is brought to
their attention by an article or a complaint, there's no proactive, you know, investigation or monitoring. who should be registering under fara but do not. turning to the ethics rules and professor therber talked about the leadership and act of 2007. it did tighten the rules after the jake abramoff scandal. but it's a classic example of congress sort of tailoring, reacting to and tailoring reform legislation to fight the last world war. and rather than look at the thing in a policy way and say what should we really be concerned about our p5kv objectives here and how do we -- they're basically like well,
jake abramoff took these people on golf trips. we should focus on who is on the plane when they take people. it's all tailored to the last, to the last scandal. nonetheless, the rules were tightened. and as a result of that and some of the other scandals from this era, there's been significantly heightened scrutiny. and as i mentioned one of the key elements is that even though the congressional ethics rules are basically rules part of the rules of each chamber. the first day, this past tuesday, you know, they swear in the members and had that vote for the speaker and sure no one was paying attention after that. they adopt the rules for the u.s. house and do a similar thing in the senate. and portions of those rules are the ethics rules. and there's all kinds of interpretations and rulings by the ethics committee. but those rules are technically just binding of members and
staff of congress. so if you give somebody a gift in violation of the rules we're about to talk about or take them out to a fancy restaurant the member or staffer that you gave that gift to or you took out to lunch or dinner, they're the ones that can be sanctioned by the house ethics committee. the house senate committee, there's nothing they can do to you. the ultimate sanction is to be thrown out of the u.s. house. but so what. you're not in the u.s. house. but, under this 2007 law, they make -- now make at least the registered lobbyists have to certify they didn't violate the gift rules. which means if you did. did violate them, you did take somebody as a registered lobbyist. you took them out to dinner got them a ticket to the caps game and you certify that, then you're in trouble. because now you've made a false statement to u.s. government. and that is a federal felony. so that's how this at least one thing the 2007 law did is put
the onus on the lobbyist side as well as on the members. so just to talk about some of the basics on this, on the ethics rules. starting with the senate and the rules are pretty similar in the senate and the house. a firm, organization and the individual lobbyists it employs cannot give anything to registered lobbyists cannot give anything that counts as a gift regardless of its value. and this is the business -- if you register lobbyists, you really can't even take somebody out, treat them to a cup of coffee in the rayburn cafeteria. true. you'll see it's a little bit ironic because some of the exceptions allow for a lot more than a cup of coffee. but that is true. then tickets to an event. again, talk about the typical people given sky box tickets. concert tickets to sports
events. that counts as a valued at the highest face value, highest cost ticket to the event. basically lobbyists cannot hand those out at all, except covered by the exceptions we'll talk about. under the house rules, registered lobbyists cannot give anything that counts as a gift regardless of value. and that ban applies to anything given. not only by the lobbyists and not only by the firm but by any officer employee ofç? &háhp &hc% if you work for a law firm that has registered lobbyists and you're not a lobbyist yourself, you still cannotí ff= give anyone, any member of the congress or staffer any gift. and that's true even if you pay for it personally. even if the firm doesn't reimburse you. it's still not permitted by the
house rules. and they have the same rule with respect to tickets to concert events. and plenty of time for questions at the end. go ahead. >> incredibly small town. and i feel like you have people who are friends working on the hill. and friends in lobby shops and law firms all over town. people are getting tickets as you know, incentives and things along those lines. how is any of that accounted for? >> well that's a great question. leads into the first of the exceptions of this thing, which is there is an exception for personal friendship. if you were generally personal friends with someone, you can and even if you're a registered lobbyist, you can give them a gift. but personal friendship does not mean that you became friends with them because, you know, through a working relationship. it really has to bectam&ñ personal, like you know, from college or through networks outside of
work basically. and, of course as you point out correctly, the lines, you know, the lines can get fuzzy. and you have situations where people lobbyists who got engaged to congressional staffers have to get permission from the, you know house ethics committee to -- i think they have to get permission from the house ethics committee or senate ethics committee, certainly sought it to give the engagement ring because, you know, maybe they met through work.éfi it's fuzzy. and it's something that the committees are somewhat strict about. a broader exception to all of this is that members and staff can accept meals and other things of value from political committees. that means, you know, campaign committees and federal pacs.
so if a federal pac wants to fly someone in federal pac from even a, you know, associated with a corporation or union or leadership pac wants to fly in a member of congress to speak and put him up in a hotel that's not an impermissible gift. and the theory there was that basically these things are regulated by the campaign finance laws. you know the expenditures have to be exposed, regulated into the committees are regulated. and disclosed. and consequently, it's covered in that way. although, this exception applies even to -- doesn't apply to nonprofit organizations, but it does apply to political organizations, committees that don't have to register. and disclose their contributions.4fq another often used exception to
these gift rules is what they call what's commonly known as the toothpick exception. which technically, the language of the exception is food other than, you know, as part of a meal. and basically yñ this is the exception that allows for a you know, organization including a lobbying firm, law firm or trade association or business corporation, to sponsor a reception, even though they retain lobbyists as long as the food and the drinks are nothing that you have to use a fork for, basically. a toothpick or something in your hand, it's considered food not part of your meal and consequently it's under this exception. and that's one that's used a lot. this other one that's used frequently as exception. and again these were both exceptions in both the house and the senate for what are called widely attended events.
this is basically anything that's like an issue forum, you know, seminar, a convention for an industry or particular, you know, issue. this is used by both nonprofit organizations as well as business groups and, you know, labor union conventions. events that are open to individuals through a given industry, a profession and where at least 25 people excludeing members and staff are attending. it has some official policy connection to, you know, the -- or focus related to the members official duties. and the invitation is provided by the sponsor of the event and not by a lobbyist or a third party.jem part of this, and i didn't put this on a slide charitable fund raising events. again, members of congress and staff can attend those. can have meals, can actually
have travel pay to attend if they are you know, to participate in those as long as the invite is provided by the organization. a lobbyist can't buy a table for, you know, a member of congress you know, at trade association dinner or the annual dinner of aje'y nonprofit organization. but the organization itself can comp that ! a charitable event raisingh. money for 501-c3 organization or meets the criteria for one of these widely attended events. the gift rules for the executive branch are a little bit different. the basic rule+g& employee, no employee at any level in the executive branch can accept the gift from what is
called a prohibited source. meaning any person or entity that is> sorry, is the agency in question just the agency they're contracting with or any agency within the government bureaucracy. >> no, it's the agency they're contracting with. if you're contracting with the small business administration, you know, you are able to give a gift to somebody to the department of congress. they have nothing to do with your business. if it's somebody -- if it's somebody that has a regulatory -- that's probably a bad example. the federal communications commission. somebody that has nothing to do with your business. it's not going to be you know, it's not going to be covered.ú7!8ç
gifts of $20 or less are accepted. you can take somebody out for a cup of coffee, even if you do have business before their agency. this toothpick exception also applies. personal relationship or friendship pretty much the same concept as under the house and the senate rules. the other major exceptions here. participation in an event that is related to official duties. if the agency can approve of you attending a conference sponsored by a trade association that your agency regulates or, you know, you see this all the time and pay for a meal and travel, if it's approved by the agency is something, you know, they want to hear from the federal government and it promotes the agency's mission to have you there. similarly, widely attended events similar rules with agency approval and there's other conditions that have to be met for that exception to apply that
we won't get into. i want to turn next to the issue and, again a little bit of discussion of this and this was also amended to some extent by the 2007 law, the revolving door rules. and those of you who work who will work or have worked, on the hill or for the administrationórzmn or who were going to be helping to run managed firms that are hiring people off the hill and the administration will need to be concerned about these rules. these are some of the very, very few rules that actually restrict people from lobbying as opposed to merely requiring, you know, some kind of disclosure. or regulate the conduct incident to lobbying like the ethics rules. under the 2007 law -- so a
former u.s. senator, himself or herself cannot lobby any member or staffer in either branch of congress for two years. former member of the u.s. house, same deal, but they only, it's only for one year. someone who is in the personal office. personal official staff of a member of congress cannot lobby that, you know their former boss. former member senator or any of the staff in that office for one year after they -- after their employment ends with a congress. or with that office, basically. and then the committee staff -- and i'm sorry, the personal staff, tható b applies only if you made above a certain salary level. i don't remember exactly what it is. but it's the senior staff. i don't remember what the dollar
figure is but it's basically only going to be the senior staff of the office who hit that. and similarly people paid at that level or above on committee staff in the house for one year, they're prohibited from lobbying any member of the committee or any committee staff. the senate, if you come off the senate committee for one year, you can't -- and you meet this salary threshold, you can't lobby any senator, staffer, you know, on or off the committee. in the executive branch, the rules are actually a lot more complicated, as you'll see, they've been further complicated by some of the voluntary you know, the self-imposed restrictions from the obama administration. if you worked on a particular matter involving specific
parties and you were actually responsible for it you can't be involved in that you know for the rest of your life. that completely makes sense. you were involved in the decision to issue a, you know, a water permit to company "x." you know, in -- while you were at the environmental protection agency, you can never you know, be involved in that. you can't turn around and help them with that permit application even if it's 27 years later, you know, the proceeding is still going on. if you were responsible for that area in your agency but you actually weren't directly involved, you're banned from being involved in the matter but only for two years. so if you're the supervisor of this employee that was, you know deciding to issue the water permit and didn't have anything to do with it didn't have to sign off on it let's say, you're barred from being involved in that matter for two years.
any employee participants in a trade or treaty negotiation can't be involved in that particular matter for one year. senior personnel that's again, defined pretty much, you know, as the top political appointees in the agency. cannot -- cannot lobby their former agency. any attempt to influence their former agency about any matter for one year. and the very senior folks, the people, again, on the executive schedule, cabinet, subcabinet officer, the president know they cannot attempt to influence any executive schedule employee for two years and then for both of those groups, executive branch employees, they cannot lobby. cannot represent any foreign entity before the executive
branch for a period of one year. and the last thing before opening this up for questions and discussion the restrictions imposed by the obama administration. and these were not laws, these were done by executive order. to try to deal with the issue of, you know undue influence and the role of lobbyists, what's perceived to be the undue influence of lobbyists. political appointees who, anyone appointed to a position. and i guess everyone's familiar, basically, what i mean by political appointee. the president gets to a point somewhere in the neighborhood of 3,000 people in the federal government. pretty small percentage of the
you know of the federal workforce, but that, you know, that's still a whole bunch of people. now, only about 1,100 of those, jim, are subject tod-nç what we call p.a.s. presidential appointments that require senate?q]ñ confirmation. the rest once the white house signs off and the fbi background check and they do the politics and the agency signs off. that, i mean of course i said that quickly, but that takes like, you know, that could take 18 months or more. but that does require senate confirmation. but all of those folks who are appointed by the president at 3,000 something are required in the obama administration to sign an ethics pledge. >á forget the rules -- the exceptions are narrower than those permitted by the rules. they don't get this widely attended event exception if
we're talking about something in sponsored by a lobbyist or a firm organization retains registered lobbyists. a former employee could not lobby any political employee -- any political appointee, rather, before they leave for the remainder of an administration. an effort to prevent people from saying, hey, i'll do two years in the administration and then cash in. now, you can talk about dethe merits or that. is it legislate they earn their living that way? this is an effort to prevent that kind of thing by -- and really, these -- to these there really haven't been any exceptions. now, there's another one that i didn't put in here because it isn't all that relevant. which has to do with vx new political appointees to the
obama administration. if you were a registered lobbyist, you can't get a political appointment without a waiver. and it's not that, you know, right now you know they're not -- there will be some people appointed in the administration other than at the highest levels starting to run out, obviously, for the senate confirmation piece. but this rule still applies. if you were a lobbyist and the number of years i mean, it was originally, you know, sort of technically two years, but they really looked back longer. but if you're currently a lobbyist, you can't get a political appointment under this policy unless you get -- unless you get a waiver. and there have been a number of waivers, including for some cabinet and subcabinet positions. but that rule's still in effect. another rule that they imposed was that originally lobbyists registered lobbyists. and again, this -- we talk about registered lobbyists, all turns on that lda definition. so people who aren't registered weren't caught up in these
rules. and all the kinds of influence in the tom daschles of the world and so forth and the1#"qn other people who we might think of as engaged in lobbying and not required to register on the lobbying disclosure act would not be subject as individual lobbyists to these restrictions. originally as this policy was put out, registered lobbyists were prohibited from participating in federal advisory boards. and there are a lot of federal adviseory boards set up to get input into government decisionmaking. and this, there was a lot of reaction and concern about this. and just this past summer[hp÷, the administration changed that so that if a registered lobbyist is appointed to one of these boards in a representational capacity, they are there representing a trade association or industry, they are allowed -- they are allowed to serve.
more informally, not rather any executive order, the obama administration imposed restrictions on not meeting with lobbyists, registered lobbyists within the white house complex. invitations to both official and political i guess official events depending on what the nature of it is. but to political events, lots of events at the white house are sponsored by you know, generally paid for by the democratic national committee because they're political in nature and the christmas parties, all kinds of other events. lobbyists are not as a rule supposed to be inx(ufz to those. and then on the political side impose that the democratic national committee which is the national, one of the three national party committees that's basically the, you know of course, the president essentially is in charge of that. if it's a party of the incumbent
president would not accept contributions from registered lobbyists or allow them to participate in the finance counsels and that kind of thing. so that is the -- that concludes my formal presentation on this. a lot of information and material -- >> question and then we'll go to the students. you had mentioned that it's not -- it's a norm not to meet with lobbyists in the white house. but the white house log shows that there were many lobbyists that came into the white house during the consideration of the affordable care act including john rather who was a lobbyist for the aarp and talked about those meetings in this class with billy townsend from pharma and other people. i'm confused. did they go back on that? >> well, the restrictional
meeting in the white house was not part of any formal executive rule. it was a policy. you know, i think was the understanding they wouldn't meet -- people who were actually registered lobbyists. now, whether that, you know, that -- some situations -- >> the eisenhower building was okay, but not the white house. >> no i don't think the eisenhower building. now the executive -- yeah. no, that's not supposed to be okay either. but i don't know -- >> the log shows that many of them came anyway. >> all right. yes? >> i was wondering how well the -- i mean, i was just wondering. you say as these finds and you know, you're violating these laws particularly the foreign agents fairly serious. how many people have actually been fined for not registering as a federal lobbyist or for acting on behalf of foreign governments and not actually registering? >> right. the answer is that the lobbying .
act and the foreign agent vejnhv] effectively enforced. i think the professor addressed that, also in the last, in the last session. the -- there are regular audits now under the lobbying disclosure act. there are more cases of people getting some -- some people, blatantly violating it. just blowing off registration and being told about it, you know, can be finedhuñ or worse. foreign agents registration act typically the unit that enforces it will try to achieve compliance rather than going after you know fines or criminal penalties. it's only in the case that's a very sensitive, very sensitive foreign policy area. that the justice department will, you know, will go beyond that. but if they discover it and they go after it and you don't comply then they'll, you know, they may do something about it.
but it's, that's rare. where there really is you know effective sort of compliance is a practical matter is with these these -- is with these ethics rules. the members and staff are very conscious that if they cross the line and they get caught up in an ethics committee investigation, regardless of how it comes out it's terrible press back home. and it's immediately, you know public, it's a very difficult thing to explain and it can be harmful or fatal to your reelection chances. and particularly if you haven't been there long. so -- and the staff are very you know, conscious of this, too. you try to you know, let's go out for a pizza. if you're going to -- they're going to say no, definitely. people are i think you can say even though there's some of these exceptions you can say, well, you can still give receptions and meatballs on toothpicks that are most -- but
the expensive meals the expensive trips have pretty much been -- privately paid for by business interests, so forth, pretty much been shut down. but the -- the certainly the enforcement was not effective with the two lobbying regimes. the other thing that's effective is revolving door. if you -- if you violate that and get caught, the u.s. attorneys office will generally start with a criminal prosecution. yes? >> i have a question about the revolving door, actually. you said that if there is a lobbyist who is personally involved in a particular issue, then they are barred from being able to be involved in being the head or being involved in an agency that's working on that particular issue. but taking, for example, the federal communications commission, the current head, he was the head lobbyist in that industry for comcast for four
decades. how does that -- >> you're talking about -- well, i was talking about when you come out of the government. you're talking about somebody coming into the government. somebody coming in -- coming into the government is not governed by the revolveing door rule. there is you know, there's supposedly the obama administration policy prevents somebody from there's a separate policy that i didn't put up here that prevents someone coming into the administration from dealing with any issue you su know, for which they were a lobbyist while they were, you know, in the private sector. i don't know, i don't know if chairman wheeler was a registered lobbyist or what -- exactly what the situation was. but that situation coming in rather than leaving the government is governed by the administration rule and not theñvzcc
>> let me jump in and ask a little bit more about that. i've been saying there's a restriction on under the obama administration in the first executive order restricting people from being appointed if they are federal registered lobbyists coming in. >> exactly. that's coming!a&in. >> so is this different because it's appointed differently? >> no. if it was a federal registered lobbyist at the time of the appointment, it would have required a waiver. >> yeah, right. >> i'm not sure that he was actually -- remember, being a senior official of a trade association, he was with the ctia, doesn't mean you're necessarily a registered lobbyist. because if you don't personally spend 20% of your time on lobbying activities, you're not going to be listed as an individual lobbyist, even though the association, because it employs other people who do
trigger that and they're lobbyists, has to register. so there again i think you're back to illogic and looseness of the flda. yeah? >> lobbying on capitol hill, how much goes on in district offices or when the member or their staff are away from d.c. and do the rules apply differently? >> yes. that's a great question. the answer is that the same rules definitely apply. they apply regardless of where the activity takes place. again, because nobody wants to get members and staff that you're trying to be helpful to you in trouble when we advise clients that have lobbying applications, we put special
emphasis on the staff that deal with this who are less likely to be aware of this and more likely to be like let's have lunch dinner, because they know that the same rule applies. you pick up on a good point because the risk of a violation certainly is higher. >> back home you think? >> i think there's more !jbçñv uncaught. frankly, innocent and an advertent advertent. the district staff have to take the$fh-same ethics training as the staff on capitol hill. and it'séwjg drilled into them. >>0 sqy # get to a member and you don't want to trigger this ;,h contact thing in the district office, people will lobby the local mayor or state legislator and they will talk to the member about how important this issue is. so if you're a public official from the state legislature if
you make two contacts, does that trigger the rule or not? >> no. because the ef isn't getting paid. the lobbyists, really the kind of thing you're talking about is a form of grassroots lobbying. it's done all the time and indeed doesn't trigger. >> thank you. yes? >> how is citizens united affected lda registration and has it made enforcement of the lda more tricky? >> i don't think it really has affected -- i don't think it's affected enforcement of the lobbying laws. i think it's given rise to a whole new kind of undisclosed influence because of the ability
of nonprofit organizations to make independent expenditures to members on behalf of members of congress without having a contributions disclosed if)5ú it's done by a nonprofit organization, the so-called dart money phenomenon i think has given sort of new tools to a certain class of lobbyists that certainly are not caught up in interests by the lda. yes? >> another group of people or workers who are faced with the same kind of rules when they leave an industry and try to go somewhere else like ways]b=t and means for 20 years and you want to go to k. street and you are prevented from all the options available, there are another
precedent for that elsewhere in the economy? >> i don't know about that. what happens is that somebody who is on the ways and means staff is hired by a lobbying firm. they don't have direct contacts but they're still very valuable in this role. they're not talking to members of staff or committee. first of all depending on their level they can talk to other offices who aren't committee members, depending on what we're talking about and their dollar to the process is valuable and they wait it out before they can engage in direct lobbying of members or staff. >> joe may i jump in on this and say that this is public policy, not private policy. it's the public good that's being considered by having that rule. there are rules if you're in the intelligence community and also some from the defense department where you have a lifetime ban from working with organizations
in the private sector after you leave those organizations. again, it's public:6$ sector policy, not a private thing. >> right. exactly. yeah? >> did you say one or two years is enough? >> well that gets back to his point. i think people said we don't want this crass business, you're working for the committee one day and the next day you're in front of them on behalf of a private interest. on the other hand, the members of congress voting on this and staff think about themselves and their staff, they may want to earn a living some day doing this. they didn't want to go to all the extremes to really make it impossible as a practical matter for members and staff to become lobbyists because a lot of them they have to think about when their careers are going to be over and that this might -- even though it may not be something that interests them, they want that option open to them.
yeah? >> what is the dynamic between the supreme court and the lower courts and now they interpret these sort of rules in terms of the first amendment, and how is that going to play out in the future given the current structure politically? >> so with respect to the lobbying disclosure rules, for the most part, the courts -- to the extent it just requires disclosure and doesn't actually prevent people from doing anything, from lobbying from making contributions, the courts have been pretty -- have pretty much upheld that. the interpretation and application of the ethics rules is really up to the branches of congress themselves. it's the committees who interpret that.q ze anyone else? yes? >> you've been talking a lot about how congressman can avoid
ethical investigations, but on the other hand talking about lobbying itself pitch their ethical engagements to their clients? >> i think nowadays and again, jim can certainly speak to this better than i. no sophisticated lobbying shop pitches just on their ability to have -- who they know and have contacts and certainly nobody pitches on the basis that they play golf or take somebody out for drinks. it's the background. it's the relationship. it's the inside knowledge of the process and the people subject to these revolving door restrictions that they're pitching now. so i don't think that's -- there is an impression obviously outside sometimes the clients have that that's how it works but i don't think the sophisticated firms any longer pitch that because it doesn't
conform with reality. >> very personal question but do you have a good volume of clients coming on the issue of lobbying registration and ethics? >> oh, yeah definitely. we advise clientsdb÷ on compliance, whether they have to register and how to comply with the lda and certainly the foreign agents registration act. >> are you giving them advice about how to get around the law, is that what you're saying? >> depends. sometimes they want to know if the law applies to them and sometimes they don't want to register and we will advise them if you do x, you're going to have to register, and if you don't, you won't. there's no question that those these -- what a lobbying or advocacy or public relations firm may be willing to do for its clients. scandal from being in the newspaper also?
>> that's the theory. that's the idea. >> thank you very much. >> thank you, everyone. [ applause ] >> no, you cannot afford his price per hour unless you work for a very big organization. thank you very much. nice job. >> i wish that were true. tonight on c-span 3, a look at recent steps to ease the u.s. trade embargo against cuba. a marine corpse general discusses the end of u.s. combat operations in advocate. and the house ways and means committee looks at the state of the u.s. economy. last month the white house announced anjfyt agreement with cuba that includes steps to ease a trade embargo against the caribbean nation. experts on international trade and advocates for increased commercial ties to cuba discuss the next steps for imageak&
u.s./cuban relations. this discussion hosted by the washington international trade association is an hour and a half. >> good morning, everybody. thank you for braving the weather today.gkevr(t&háhp &hc% we were a little worried that the federal government might have a delay or a closure because, as you all know, when there's a half an inch of snow in washington anything can happen, can have a disaster. john came in from buffalo this morning where when they have half an inch of snow, that's sort of like spring right? it's like pollen on our cars here. i'm kevin levinson, the executive director ofo we are delighted to have you all here. before i turn it over to our moderator ambassador, john, i would like to thank team diego, inez. we have a big announcement that we made yesterday which was the
launch of a new blog called america's trade policy.com. it was actually created in 2013 by bill chryst at the woodrow wilson center for scholars. it's a new content platform for wida. we welcome input from membersccñ and members of the trade community. there will be information on it in the back, outside the room when you leave today. in fact, john was going to mention this in his remarks. we're really pleased that a book by the peterson institute on economic normalization with cuba we're going to be publishing the first chapter of that on our blog. john will talk about that but you'll be able to find that on our website. on thursday, january 29th we're hosting a panel feature the reverend david beckman of bread for the world and he's talking
about the world hunger report, titled when women flourish we can end hunger. rich leach from the world food program, alease young and claude fontheim. on friday february 13th we have our annual trade councils program with the four councils from the ways and means and finance committees. now to today's panel, i'll leave it to john to introduce our panelists. john is a long-time wita friend, one-time board member, now with the d.c. office of covington and burling and co-chair of trade practice was deputy and u.s. general counsel at ustr. he worked at the department of defense in the '90s with then defense secretary bill cohen with was senator cohen senator
collins and senator frist. john, thanks for doing this, thanks to our panelists. take it away. >> thank you for being here. thank you for wita for putting this on. i want to open with a few remarks. the title today at thawing of u.s./cuba relations. i wonder how many in the audience saw thawing and thought it would be a good place to duck into on a morning like this. whatever prompts you to join us, we're glad you're here. the turnout for this is consistent with other ú r cuba-related events. not only since the president's announcement but over the years cuba has just captures the imagination. i remember back when we were trying to get support for the u.s. colombia free trade agreement which i know enjoys support from folks on this panel
and folks in thev y room colombia represented 8 times the market opportunities. but generating interest was always limited compared to cuba which seems to campturebixe the imagination. today's focus is not on the politics of the u.s./cuba relations. but i think it's fair to say it's an economic issue but also an emotional issue. there are families who had their property confiscated, whose families were upended, who have strong views about relations with the current government in cuba and for understandable reasons. today we're going to focus on the president's announcement and what some of the perspectives are from the legal and business community. i want to mention as ken did the
peterson institute in the category of great timing. about six months ago they came out with a study called economic normalization with cuba, a road map for u.s. policy makers. similar to the focus of today's panel, it's not about the embargo, is it good, is it bad. it was just, frankly a workman-like approach as you would expect from its authors, gary huffbauer and barbara cutchwar. these are the things that policy makers need to think about when the tech tonicic plates move. it's on wita's,zjçc br website and its new website and obviously hp r(t&háhp &hc% through the peterson institute. i think the first chapter of that book is available online and there may be even some
copies outside on the table. but it's a very thoughtful piece. what i appreciated about it frankly, was in trade debates the camps usually fall quickly into two the art ent free traders and the ardent protectionists. consistent with the thoughtfulness of the peterson institute work product, this argues that, look we should be -- i think the implicit message is opening market with another country is a good thing, but we should be approach it with some caution and we should approach it in a measured way and not in a breathless way. and the analogy that gary and barbara use in it is russia. with all due respect, that is an economy that is not as open astv1op i think a lot of us hoped it would be at this point in time. when we talk about opening markets with other countries, we
sort of -- those of us who are in the free trade camp like to think, these are markets that are really going to be open to us and not in name only. you have an ol gark in russia that the study references and discusses as something to avoid when we talk about normalizing and opening relations with cuba so that we don't lose the leverage of the u.s. market without having some strategy for making sure the cubançkf
themselves. economic freedom is ultimately going to be the source of their long-term welfare. so with that let me turn it over to our t5 today. i'm going to introduce them in the order that we're seated up here, but then i'm going to mix it up a little bit as far as the order of our to my immediate left is defry vorwerk. she has been in her position with gargail since 2004. before that was a colleague of mine where she handled agricultural issues. she's also the president of the u.s. agriculture coalition on cuba and is very active in this space. to her left is jay colvin, he's the vice-president global trade issues at the national foreign trade council.
jake, in addition to being very active in many trade issues on behalf of american businesses and others has been particularly active in cuba and published a paper entitled the case for a new cuba policy, a road map for the obama administration to engage cuba. to his left is robert hughes. robert is a lawyer here in washington and has represented many clients on matters regarding cuba and has a long history with this issue and has testified before congress and has been a very active participant in the debates, legal and policy-wise with regard to cuba. and to his left is john cavolich. he is senior policy advisor the u.s. trade council formerly
served as president and in addition to making it in from buffalo today, has been very active for probably three decades now on cuba policy matters. we welcome him and the others of the panel today. so we will each -- each k of the panelists will provide remarks for five to seven minutes and then we'll have some time for questions. we're going to start with robert who is going to kind of do a scene setter for us as to the president's announcement on december 17th. i know folks in this room are savvy enough to know that the president did not announce the end of the embargo. most people i think picked up the newspapers on december 18th and thought the embargo was over and when could they get on an airplane, but it's a more complicated matter that robert will lay utout for us. robert, over to you. >> thank you john and wita for
u.s., including $100 of alcohol or tobacco. he can do that notwithstanding the cuban asset control regulations that prohibit imports of cuban origin products. so his executive branch authority has already been and is in the course of being drafted into a final rule, has allowed imports from cuba. exports to cuba, he's allowed at least five different areas of exports. one are building materials that can be used in residential construction consumer goods that aren't defined yet or identified that can be used by cuban entrepreneurs. i think that means basically goods that could be sold in cuba. that's essentially limitless. john could remind me, he's kept a list over the years. i think they're close to 10,000 u.s. trademarks currently registered in cuba. goods can now be sold in cuba.
he also allowed for farm equipment to be sold to small farms in cuba. so the export of equipment. at the same time he licensed certain telecommunications sales to cuba and finally financial services in terms of direct banking and the use of credit cards. my essential point is that the announcement of december 17th summarizes and confirms what i and people like jay colvin at the national foreign trade council has been arguing for years. presidential authority in relation to trade with cuba is essentially unfeterred. you'll hear comments that helms burton codified the embargo and therefore limited presidential discretion in this area. it's not true. when the embargo was codified,
it codified in place the presidential discretion and authority that was exercised on december 17q! there may be some copies at the this. there's an article in the fall edition of early thatxk8r) j out some of the legal basis for what i've just said. we want to leave as much time as possible for questions so i'll end by saying from the small beach head that i've described residential sales of materials could be used in residential renovation and construction, take that as a model for u.s. business. at the moment there are agricultural sales to cuba as one of the few areas in which commerce one way is allowed. those agricultural commodities have to be sold -- cuba insists
that they be purchased by state instrumentality. i suspect that's going to be true with u.s. exports to cuba initially, whether it's building materials or farm equipment or consumer goods. however, i can see over time that's going to expand, so u.s. businesses thinking about trade with cuba should be thinking early on about things like warehouse and distribution facilities in cuba. cuba's recently renovated its national port on the north coast. think about the opportunities of expanding the small opening into corporate access to cuba. i believe that president obama means cuba to be a legacy issue. the secretary of commerce will be going tentatively in april. i don't think she's going to unless there's a larger
initiative under way at this point. so i think president obama wants a legacy issue in the foreign policy area. this is one of the few that remains in the short time he has left, so i expect to see a substantial expansion and broadening of this small opening to give u.s. corporate sector its first real opportunities in cuba since the embargo was imposed 55 years ago. thanks. >> thank you, robert. next we're going to go to devry. >> it's great to see you all here this morning. as i understand, we had to expand the room because of the interest in the topic. as the ambassador stated, there's often great interest when we talk about cuba in washington. i truly believe that your presence here today and the size of the group not only represents
the policy imperative that we have in front of us but the moral imperative that we have in front of us as not only from our standpoint in agriculture industry but as americans in general. for those of you that don't know last week the u.s. agriculture community broadly launched publicly at the national press club the u.s. acc which is the u.s. agriculture coalition fh+ tk cuba. that group is growing. we're continuing to add members since our launch. but that group basically makes up the broad cross-section of the u.s. agricultural and food community with the express purpose of coming together to end the embargo. i'm currently serving as the chair of that organization and before i go any further, i'd like toé)c
#poundcubaalttrade. i was speaking with jake a few mince before and he said wow, you pulled that together in two days. actually, we've been working for about eight months to get ourselves organized around a charter. i'll go through exactly what it is that we've committed to as a group. but why eight months ago? as an outgrowth of one of the trips that i took to cuba last march basically on a sales call, we've been able to sell food into cuba through humanitarian channels since the year 2000. our company was there since 2002. i recognized how difficult it was for our business to actually sell food to cuba. fast forward into may. our cfo was -- and i traveled with the delegation, was part of a historical delegation of the u.s. chamber of commerce to cuba, led by tom donohue, to assess the business climate. the cuban government has
implemented a new foreign investment law that folks may or may not know about. at the same time, they have put laws in place to begin allowing for people individual people, to become part of the private sector. the cuban government is transitioning many individuals off of the government payroll and recognizing the need to empower private enterprise. while we were there we met with most branches of the cuban government. we were able to visit 16[ q%y 9 we were able to meet with entrepreneurs, and we were also able as the first americans to visit the port of mariale that has been funded by the brazilians for $800 million. we vi=0qw6 a canadian investment in energy and we feel like we got a very broad-based understanding of what's going on in the cuban economy. point blank, the rest of the world is there. they're beginning to be there more significantly, and the american business community is not there.
so what is the u.s. acc and what are we planning to do to shift the narrative here in washington and actually drive change? first of all we've come together with the express purpose to liberalize the trade between the two economies and the primary purpose of ending the embargo. i do understand that there have been discussions around how far the president can go, and we certainly welcomed the announcement on december 17th but in our conversations with the administration, we know full well that even on the financing side, the executive order will only take us so far. quite frankly, we are strung by our ability to use u.s. financing to sell food to cuba. so we very much see the end of the embargo as a necessary step in allowing us to have meaningful trade. we're reenergized to establish cuba as a market for u.s. agricultural products andm.x
currently there are 11 million citizens there and it's a natural market. it's 90 miles off our coast. certainly none of us in business in this room could say that cuba is at the top of the list in terms of markets for their company, but what they can say is it makes absolutely no sense that if we have a partner very close to our coast where it's a natural market, that we should be denied an opportunity to trade there. as our coalition we have four goals. we're going to advance a constructive dialogue here in washington on u.s./cuba relations. we're going to actively engage to end the r9 kvr t)jt embargo. we're going to work with key stakeholders to drivexa÷ momentum towards historical change and our hope is in 2015. we are going to take public platforms to explain the moral imperative of trade liberalization with cuba. i'll give you a few statistics because even though we've been able to sell food into cuba since 2002 and we saw an initial
uptick as u.s. agricultural community through 2008, u.s. agricultural sales have declined significantly since then. where it reached about $700 million in sales in 2008, we're around $450 million in sales now. u.s. rice, cuba used to be its largest export market. u.s. rice is no longer exporting to cuba. let me restate that. u.s. rice indicates that cuba was its largest export market. that may come as a surprise. soy, the soy industry they see cuban use a lot of soy oil. it's also a necessary input into animal feed. 99% of the cooking done by cubans is using soy oil. while in 2002 2012, the soy growers saw that they had about a 70% market share. that declined to 40% in one
year. wheat is making zero sales into cuba at the moment. they're estimating that to be about a $250 million loss year on year. and they believe that the cubans are paying three times the price for transporting agricultural products to cuba. so this is about the affordability of food in the cuban market. the cubans are spending too much money on the financing of food and transport of food. bottom line, they're spending too much money on food. so at the end of the day, what we have seen is the brazilians, the vietnamese, the europeans and argentinians are all taking our market and it's quite a necessary event for them to do that. again, while we think it's a modest market, it's important. this to us, i would like to express, is not about a single trade flow of u.s. commodities going south. why do we believe that there needs to be an absoluti normalization of relations?
because this is about the broader american business community being able to take a goods, services and capital we believe that through the broader development economic development of the cuban market we all gain. not only that, the 11 million citizens of cuba gain. those are 11 million citizens wholh*qq' under a policy experiment for 54 55 years. it's a failed policy experiment. what i can say is, if you're a farmer and you plant a seed the same way in year one and you try it again the same way in year two, and then after 55 years you're still doing the same thing, but that seed is not germ nated and popped up and taken advantage ofzbafp photo synthesis and grown, wouldn't you think about doing something differently? that's what is upon us is
changing the status quo. it's easy to be on the side of status quo because there is a negative narrative out there. our coalition last week had azs broad subset of bipartisan support. we had senator jerry moran and sam farr from california rodney davis, republican from illinois, kevin kramer, republican from north dakota the secretary of agriculture which i believe is the first cabinet member since the embargo to stand up with a group that's ending the embargo was there. the governor from missouri agreed to work on a bipartisan basis toé from republican and democrat governors across the nation. so it's a bipartisan issue. one thing we need to remember is that cuba is a w.t.o. membervçs which means they'recl offering benefits to the other w.t áeihm
members and we're just simply not in the game. so it will require normalization of relations. again, we believe that it's not only the majority of congress on our side but we also know that the majority of the american people are on our side. so at this point what we can say is that we certainly recognize the history, the difficulties and the emotion and pain of the u.s. agricultural coalition for cuba is that we can collectively own the future. that's what we can own. i would submit to the business groups that are in the room today that often get steered down the course of moderation on this policy or, gee, it's too tricky to talk about, actually join us, stand up recognize that the policy imperatives here, we've got a lot of things on our plate from trans-pacific partnership to tpa, to t. tip,
but we can't wait one more day. why wait for another president. the answer is in front of us now. we welcome conversation with the u.s. coalition on cuba and i'm open for questions. thank you. >> great thank you. jake, we're going to turn to you next. >> sure. thanks john, and thanks diego and ken. for those of you who don't know, we're a business trade association in washington d.c. that promotes international trade. we've run a coalition called usa engage which opposes unilateral sanctions and promotes the ideas of u.s. engagement in the world. we are a good compliment on what devry is doing. congratulations because you've done a lot in a short period of time and it's been really impressive. she's done a good job of laying out the case for normalization. so i would be remiss if i didn't say we support that, too. rather than saying the same
thing that she said about why normalization is good and important and should happen now i thought i would focus on two other things. the first is the importance of the announcement that's been made by president obama to the business community and also some of the longer term challenges aside from the sanctions to re-establishing trade investment ties between the united states and cuba. first on the announcement, it's just generally really good news. this is a fundamental change in u.s./cuba policy. it wasn't half measures or couched in rhetoric against the castros. what it does is flips the debate upside down. so this is the first time sinced]yñ 2000 when congress was passing the trade sanctions reform act where we have a policy of engagement that opponents the few of them that are left, have to respond to. the other thing that it does is it sends a signal to the business community that it's okay to express interest and start to explore cuba. i think there will be a lot of
curiosity from the business community. it's been off limits for so long so you'll see a lot of interest in exploring the situation on the ground. i think what the administration's announcement will do -- the president'sya announcement will do, will enable that curiosity and enable businesses to start exploring cuba. i wanted to go through a couple of the provisions that have been announced so far that i think are of particular importance to the business community.ta)$v the first is establishing licenses for travel. the fact that treasury will generally license travel will significantly expand the ability of americans to go to cuba and for businesses and entrepreneurs from the united states to start to get a feel for the cuban market. the second thing is enabling direct banking and credit card processing relationships. this is good for americans who want to go on the ground -- who want to go to cuba and travel and use their creditn n([z card, but it's also good for businesses who will have an easier time receiving payment for goods easier to protect your property and trademarks. the third provision that's
generally important for u.s. businesses is permitting u.s. owned and controlled entitys to provide services and engage in financial transactions with cubans located in third countries. this has been a gigantic point particularly for u.s. banks who would have to deny accounts to cuban nationals living in a country like spain. so i think there's also those provisions seem clear to me that they will be enact in the coming weeks and rules that treasury and commerce will put out, but i think there are other areas of the president's announcement in the white house fact sheet where we need to wait to see what's going to happen. there's a lack of clarity. so the first is what will the extend of enabling services be? travel service providing will be allowed to provide services to u.s. travelers going to cuba, but willy$nf orbits bekil able to sell travel online will the u.s. be able to deliver packages to
support entrepreneurs in cuba? i don't think that's clear yet. there are some references that are a bit vague. one is exploring additional options for promoting the growth of entrepreneurship in the private sector in cuba. that may or may not come in an initial round of regulations. my read of the president's authority is similar to bob's which is that he can use his licensing authority broadly. so one thing that i've been suggesting is that he could license imports into the united states of products made by cuban entrepreneurs. so you could license ebay to engage cubans on their platforms to sell things into the united states. i'm not sure that's going to be part of the initial regulations but it does seem like the sort of thing that would be consistent with the president's announcement. so that's the short term. but i think the longer term, the enthusiasm and the curiosity that exists right now is going to be tempered both by the state of u.s. policy and the fact that sanctions still exist and are
out there, but also by the reality on the ground in cuba. we talked a little about the limiting factors that sanctions will president until there's a full normalization of relations, but i think the long-term opportunity depends on more than an end to sanctions. shutting off sanctions is not like shutting off a spigot. they'll be affected by first and foremost, economicx!pyv development in cuba. to the extent that cuba can purchase things from abroad and support investments on the ground in cuba, a trade investment will expand. but the fact thing is it will rely on the attitudes and the pob-ls of the cuban government. if you're looking at trading with cuba, you're going to care about customs facilities, tarrif tarrifs tarrifs, transparency, protecting individual property rights. cuba doesn't always score high
on those metrics in part because they're ambivalent about their relationship with the global economy. having been there a couple times, my perception is they want a trickle and not a flood of foreign trade and they're very wary of the united states. i think that's changing and there's a vibrancy in cuba. there are -- castro is trying to encourage entrepreneurship and is starting to engage internationally more, so we'll see where that goes. but i do think these will be limiting factors even when sanctions go ai ia away. i'll stop there. >> john, can you round us out here? >> i'll try not to be redundant. i apologize for my voice, a little laryngitis. i think many people listened and saw and read what the president announced and heard, saw and read what they jbçwanted. they didn't necessarily listen
to what he said or how he said it, nor did they listen to the cuban response. look at the optics. president obama wore a dark suit stood at a podium, spoke for 15 minutes what he wanted to do with the cuban people. president castro spoke for about three minutes sitting at a table wearing a military uniform. they still feel that they're under attack, and many of them still feel they're at war with us. cuba is only going to permit what it believes it can control. it's not a criticism, just a fact. one of what the challenges are going to be is dismissing the belief that somehow cuba is
dubai with 11 million people that has so much money that it's flowing and they're waiting for the currents to push it north. cuba develops its trade relationships not solely based on cost but also on politics. again, not a criticism. countries do that throughout the world. i'll give you a little history. from 1980 to 1992 foreign subsidiaries of u.s. companies including cargo engagedn5 in trade with cuba, about $5 billion worth. 1992 cuban democracy act stops that subsidiary trade but reauthorized healthcare products. 1996, todd allows for private settlements with u.s. companies, reauthorized food and ag sales.
there have been very little healthcare product sales to cuba since 1992. why? in large measure it's because cuba would rather have a political issue than it would healthcare products for its people. in addition, products are expensive in the united states and they can get products from other places and they can get it with financing. some years ago council worked out an agreement with the catholic church. the agreement was that they would be able to provide for the third party verification, part of the cda says that healthcare products can't be used for torture or reexport, used in tourism, et cetera. they said they would be willing to do that. so from the business community standpoint, we thought that was a slam dunk. it took away an issue that had been v÷ disrupting exports. at the same time, it was able to solve a problem.
cuban foreign ministry went mental. they said basically you've just destroyed our ability to use that as an issue. not saying they always want to do that, but it's a component and it needs to be thought of here. from december of 2001 through november of last year u.s. exporters, food and:=;ag, it's a total of about $5 billion just a shade under $5 billion and that's in cash, and the payment terms have been cash in advance as they required. and the cubans bought after tisra was signed into law. they didn't buy anything for a year. in the u.s. business community and ag groups and others basically said we worked all this time and now you're saying you won't buy anything because you didn't get financing. well, we'll go focus on some other countries. then in december of 2001 they came back because of a hurricane
and said we're going to make a one off purchase, just once just to replenish products that we need that were damaged in the hurricane, wood and that. they didn't buy wood for a couple years, but they began the process. over that time there have been changes. the bush administration actually relaxed the payment terms. then later in its administration, because of abuse is s with travel to cuba, they went back and reversed it. now president obama is reversing it again. my point is that when folks want to focus on everything that we want to do down there, cuba also has to make some changes. cuba hasn't had to make a lot of changes because there have been countries that have been willing to support it. currently venezuela. so i would argue that right now the u.s. relationship with cuba
is far less meaningful to cuba than is cuba's relationship with venezuela. venezuela has issues and they've already decreased slightly, their subsidized oil exports to cuba. that's going to create an impetus for cuba to make some changes that it doesn't want to make. it could result in a second what we call special period in cuba which took place after the ussr changed its relationship. so there's a lot going on that you need to review. we've heard some discussions about that. cuba didn't stop buying from the united states because it couldn't get financing in tisra. as a matter of fact, u.s. companies, when tisra was being negotiated the cuban government
pushed some of the ag groups to push it and the business community said no because cuba has horrible credit and we don't want to be standing in line with everybody else trying to get our money. so i, council president, was able to go around the world and say cuba was the safest export market in the world for u.s. companies, and it is. cuba has never been below 50th out of 223 export markets globally, the united states. that's impressive for a small country on a cash basis. those that are arguing that the embargo needs to be lifted legislatively i think are making a mistake because so much can be done through the executive branch. financing, cuba has been more focusing on re-establishing relationships with existing training partners commercially and politically -- china, russia, iran, mexico, spain,
brazil. those countries in many cases have government-operated entities. cuba buys rice generally from vietnam. food one and two, which are state-run entities. why do they do that? because vietnam gives them one and two and three years to pay for the rice. when they default very few people know about it and they prefer it that way. so it isn't all about what we want to do down there. it's what they want us to do down there and what they can afford to have us do down there. it was amazing after president obama's remarks, the same -- we saw the same after fidel castro stepped down that people were running to see if they can get on a plane and go down there. they have a long way to go but from our perspective, from the united states' perspective, it'sroriç best to move slowly because focusing back on where we were
in 1959, when it comes to cuba don't focus on anything five years back because that's basically what your reality is going to be. your reality is going to be changing yearly. so looking way back to evaluate what may be in the future, i don't think we'll spend a lot of time doing that. more importantly is to look at what cuba is and look at it realistically realistically. 11.2 million people with a small economyv] that has horrible credit. the most important from a business perspective announcement that the president made was direct correspondent banking because right now you do have a triangle. cargo sends something to cuba, cubans will use a bank at another country and send it to
u.s., direct correspondent banking, so that can take a day or two. that money go havana to chicago within several hours. it's more efficient less expensive. but here's the challenge. some years ago that was an idea that the bush administration was considering. council and some of the companies went down to the cubans and said this is something that would certainly be helpful. the cubans said here's our challenge. your government stillnfx change us. we understand that there are the laws and the regulations put into place after 9/11 basically requires any foreign bank that wants to do business with a u.s. bank to open its books to make sure that money laundering, drugs, et cetera terrorism. so the cubans said at that point, how is this beneficial to us to open our books to the
government that wants basically to put us out of business. so this time around it's going to be interesting to see if the cubans look at this differently or if there are some ways around it. but the direct correspondent banking is very important. i will shut up now and go to questions. >> great. thank you, john. we're going to now move to q and a. we have a microphone that we're going to pass around and ask you to wait for that microphone to arrive to you and then when you pose your question if you could produce yourself your name and your affiliation we would appreciate it and others in the room would appreciate it. if you could keep your questions brief, if you want to direct them to a particular panelist, please do so. if you just want it to be a jump ball for the panel that's fine, too. >> john can i just interject because i feel like i want to just make a couple clarifying
points here because john mentioned that those that are working in the embargo might be making aamç mistake. just as that context before you ask a question, moving slowly would be quite painful for the cuban people, but not only that, that doesn't provide business the certainty that we need. quite frankly, if we move slowly as americans, we're just tieing one hand behind our back as we see investors landing in cuba from places in the european union, from brazil from other places across the globe. so moving slowly is actually not quite the answer. then i do want to put some context around at least in our conversations with cuban officials what they're thinking. what they see in terms of the u.s. sanctions is that it's actually crippling their ability not only to get as much u.s. fdi. their estimates are that they need about $2 billion a year. in our conversations with the
trade minister who has been quite forward leaning he's actually indicated that their history is one of having been dependent on one country whether it's the united states whether it's russia and as john mentioned, venezuela. quite frankly they don't want to be dependent on one country which is why they want the sanctions to end. they've estimated it at $2 billion. we've estimated it at $7 billion. i would take issue with the fact that cuba sees venezuela as its most important relationship. quite frankly, cuba sees cuba linking with the globe as its most important relationship. and last, i don't think we should be focusing on what people wore on december 17th but on what people said. the fact that the cuban government engaged with the united states in 18 months of dialogue is the action. when the u.s. business community met with the president in havana in may, he wore a business suit.
>> thank you, devry. questions? right in the front here. >> good morning. doug from omni capital group. john the war mentality that you described which i agree with i just spent ten days in cuba last week i agree with that sense does that live on beyond raw castro and fidel castro, or does that die when they go?+4q >> i think we would all like?÷"g[ it to pass on as quickly as possible, but there are a lot of generations that have been born under it and know only it. so i think that the process will not be swift, and i don't necessarily think we want it to be swift.
i don't think we want a yeltsin-style transition that took place through ussr at the beginning. but no one knows. there's a lot of love and hate. cubans have one of the highest awarenesses of u.s. brands in the world and one of the highest preferences for u.s. brands in the world. for u.s. companies launching into cuba comes with less cost than some other market places. that makes it attractive. and that's because the folks do have and the people of cuba, many of them have access. but we saw what no one expected with fidel. most of the modelling done in the u.s. government was fidel is
speaking speaking, he drops dead or he's in his office and helyk÷ drops dead and people know they don't know, but no one ever expected a succession and then the transition from brother to brother. so i would don't expect that raul dies and it's a switch. it's going to be more of a wave. >> thank you. bill lange? >> good morning. bill lange with caterpillar. first, this is probably about a great program, great timing. particularly the fact that this is two days away from the big anniversary. some of the folks in here may recall that january 16th 1998 17 years ago, that the usa engage coalition officially took the american business community over the line calling for a new policy toward cuba. took out a full-page ad in "the
wall street journal." since then, there's been sort of a624secada-like policy. so let me just say while it moves slow there's a whole different frame of ren rensference when it comes to cuba. here's my question they have state-engaged during that entire 17-year period. the business community as related to industrial goods and consumer goods have not. you have trade missions planned, i know you have rumors talking commerce department going down in april there's the council of americas meeting or the summit of the americas in panama in april, as well. you know what's planned one thing about when the american business gets excited about market. every other business community around the world gets excited by that same market.ñ"sñ'.1cñ
so my question is are we going to6h the vigor or are we going to take the secada-type approach and have a different type of policy.u.ykyky[5x& so jake i guess my question is to you and what do you is planned? >> well, thank you, bill.jañ that was a great commercial for i didn't encourage that at all. so that was all on its own.$ q >> i'll send you a copy. >> thank you. yes, i mean, first of all, interests on the business community -- the broader business community as ebbed and flowed on what they think is possible. you saw a huge blip in interest in 2009 after president obama was elected and the chairman was trying to appeal the travel band. at that point, it was like this room here. a lot of interest, a lot of enthusiasm because there was the potential for something significant to happen.. bm :
we were on the hill a lot. when that came to pass, everyone you know, went into hibernation again. you're seeing the flow right now because of the announcements. so what i think is important is for the regulations to come out for cuba to be re-examined as terrorism for congress to take up this question on the hill. you have that positive going toward that enables businesses to explore. >> and, so, there will be interests. you will see a drum beat of support. we've beenúki talking about colleagues in chamber of
congress with su port moving forward with the addministration on the hill and in cuba, generally. >> can i say something? a couple of times, it's been said this morning, go slow. i'm not sure what that means. that it seems to be ankf>ñ attempt to contrast legislation lifting the embargoicañ on the hill with regulatory activity. the president, the executive branch can go much further much faster than congress is going to go on lifting the embargo. there is zero possibility the embargo is going to be lifted. it's not going to happen. it's not one of these bills is going to come out of a committee. so, to the extent that i don't -- i feel it's almost an implication being made that those of us who favor regulatory action by the president and i
hypothesized a legacy project it. but i think we're getting pushed off into side panels about lifting the embargo on capitol hill right now. >> help me. i'm an optimist. and i believe optimism keeps us going on the right path. why won't a bill come out of committee. >> leave it to the room to$ @w judge whether a bill is going to come out of a republican controlled senate. >> let me follow up on that. i mean my."yq reading of the tea leaves is, as your conclusion, that congress is two views, some& strongly in favor of lifting some strongly opposed toq2n the president, the steps he's already taken. and, if you had to bet, i think you would bet where you've placed your money, which is unlikely that there will be
legislative action on this to either roll back what the president is doing or to advance policy further. my question to you is, in your initial remarks, you suggested that as a legal matter, the president has full, legal discretion toc to take very expansive steps. my question is do you believe that plitolitically, congress would not act if the president next month or at some point in his tenure took steps far beyond what he's already announced? >> i think there's a contradiction within congress. the majority of members of the house and senate don't privately support the embargo. they haven't for some years. so -- but that doesn't mean that they're going to affirmatively
support legislation to lift the embargo. as far as legislative interference with anything president obama may do in terms of cuba i think it's alsoów]áç for presidential candidates. i noticed both christie and paul were slow to react to what the president did. when theyo and christie said essentially nothing. so this tension between america is a forward-looking country, america that promoets trade globallynlno exists in congress and i think that will prevent direct interference with any presidential initiative on congress. but i think the simple reality, including pact funding on
capital hill makes that a long-term project. by no means do i want to dis disparage bills to lift the embargo. i think they're necessary. but, over time, it's going to happen. i don't want to go onto great a length here, but if the the historical prerogatives of kind of bilateral trade with cuba you can then see the embargo as a tidying up operation on capital hill. f9bqwsbr a frontal assault, but akbising reality that the embargo is more holes than cheese at that point, then i think a repeal becomes a much easier thing to accomplish. >> thank you.g'r
question over there and then we're going to move back here. y9 a e. >> well, thank you very much.-d i agree with bill. a really great panel and really great to hear all of your perspectives. >> can you -- yes? >> can you -- >> sorry, sorry, yeah. so my question: is a little bit of a historic perspective. i wonder if anyone has anyp.añ perspective of their comparing it to when the trade with vietnam and the miss steps there or not missteps and whether that informs your perspectives with cuba. or is it just the legislative and other controls in this case. thank you. >> others may have used one perspective on that. when we normalized in vietnam,
there was a fairly protracted negotiation in terms of what trade would be, how expropriation claims would be sorted out. vietnam was not a member of the wto. it's not a complete apples to apples comparison. but i do think vietnam and other instances suggest that there will be a multi-pronged negotiation and agreement of different issues to be sorted out, including, of course, claims. >> to john's point in 1985, this's when we first set up our cargo sales office in vietnam. and then we have 2005, that's when we got that one across the finish line. what we can see is we can certainly draw parallels between what hap