July | August 2017






Cuba, Iran and the Pacific Rim—What it Means to States

By Justin Fisk, CSG Washington, D.C., Office
During much of the past year, the White House has been engaged in an ambitious foreign policy agenda that includes restoring diplomatic relations with Cuba, finalizing a nuclear deal with Iran and negotiating a free-trade agreement with 11 countries along the Pacific Rim.
In December 2014, President Obama announced he would re-establish diplomatic ties with Raul Castro’s Cuba. Six months later, Obama announced that the U.S. had reached an unprecedented multilateral agreement that would prevent Iran from obtaining nuclear weapons. In the next few months, the Obama administration is expected to finalize one of the largest free-trade agreements ever concluded.
Following is a roundup of the administration’s recent foreign policy activities in each of these areas and what it means for states.
Last December, President Obama announced efforts to re-establish diplomatic ties with Cuba. States that heavily export to Cuba—such as Louisiana, Mississippi, Florida and Virginia—benefited due to an easing of export restrictions. Other states are experiencing more air travel to Cuba. According to the Cuban tourism ministry, a record 1 million travelers visited Cuba in the first quarter of this year, which is a 14 percent increase from the same period last year. At a flag-raising ceremony at the U.S. Embassy in Havana earlier this month, Secretary of State John Kerry said American travel to Cuba had increased 35 percent since January, reported The Wall Street Journal in an Aug. 17 story.
In July, the U.S. and Cuba reached a deal to restore diplomatic relations, which began with each country reopening their respective embassies. Secretary of State John Kerry visited Cuba in August to raise the American flag over the U.S. Embassy in Havana for the first time in 54 years. Despite the restoration of diplomatic ties and the expansion of tourism and trade, only Congress can definitively end the U.S. embargo and ease travel restrictions completely.
President Obama is currently using executive authority to grant exceptions to the congressionally imposed travel and trade embargoes, such as expanding commercial sales between the two countries and allowing American travelers in Cuba to use credit and debit cards. Lawmakers from both parties have introduced legislation in recent months that would end the embargo or ease travel restrictions. In fact, the Senate Appropriations Committee became the first Congressional committee to pass legislation that would help normalize relations by easing travel restrictions; however, Congress has stalled on 2016 fiscal year appropriations, preventing the legislation from becoming law.
According to the Pew Research Center, 73 percent of Americans approve of re-establishing diplomatic relations with Cuba and ending the U.S. trade embargo. Still, it remains unclear if Congress will repeal the embargo once it returns from August recess.
In July, the U.S. and Iran along with Russia, China, the United Kingdom, France and Germany concluded a nuclear deal that aims to prevent Iran from developing nuclear weapons. Under the deal, Iran must cut its stockpile of low- and medium-enriched uranium by 96 percent over the course of 15 years while permitting the International Atomic Energy Agency to investigate any sites deemed suspicious, including military facilities.
In addition, the Joint Comprehensive Plan of Action on Iran’s nuclear program obligates the White House to take actions against state or local governments that prevent “full implementation of the sanctions lifting.”
It is unclear what this means for states with divestment laws against Iran on the books. According to Reuters, nearly half of American states have legislation prohibiting companies from operating in certain sectors of Iran’s economy. From the California Public Divest from Iran Act to Protecting Florida’s Investment Act, state laws may be deemed illegal under the new Iran deal.
Legislators in Georgia, Florida and Michigan have stated that they do not intend to change their divestment laws against Iran. Lawmakers in Connecticut and Illinois have said that that their state legislators would need to pass new legislation to change their divestment laws.
At the federal level, many lawmakers have expressed their displeasure over the Iran deal, and it remains to be seen whether Congress will ratify the agreement. However, the president can execute most of the Iran deal, including most of the sanctions relief, without Congressional approval. This means state governments’ disinvestment laws will likely be a matter of contention in the coming months.
The Pacific Rim
The U.S. is nearing the completion of a 12-country, free-trade agreement called the Trans-Pacific Partnership, also known as the TPP, which would reduce tariffs for 40 percent of global GDP. With Congress passing trade promotion authority earlier this summer, President Obama only needs a simple majority of the Republican-controlled Congress to approve the trade deal. The president hopes to conclude and present the finalized agreement to Congress in the next few months.
The U.S. currently exports more than $725 billion worth of goods to TPP countries. The U.S. exports mostly high-end products such as transportation equipment, computer and electronic products, chemicals, and non-electrical machinery.
Texas is currently the largest exporter to TPP countries, which includes Japan, Mexico, Canada, New Zealand, and Chile. . In 2014, Texas companies exported more than $155 billion to the region. Most of the products were computer and electronic products, petroleum and coal products, chemicals, and transportation equipment. The next largest state exporters include California, Michigan, Illinois and Ohio.
With a dwindling number of legislative days left in session, Congress certainly has an ambitious foreign policy agenda ahead of them. Though it may be unclear whether Congress will reaffirm the president’s overtures to Cuba, ratify America’s agreement with Iran or pass the trade legislation, its decisions will help define Obama’s legacy in foreign policy.
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