CANADA: SUSPENSION OF TITLE III OF THE LIBERTAD ACT

C O N F I D E N T I A L SECTION 01 OF 03 OTTAWA 001245 SIPDIS SIPDIS E.O. 12958: DECL: 04/26/2016 TAGS: CU ETRD ETTC PREL CA SUBJECT: CANADA: SUSPENSION OF TITLE III OF THE LIBERTAD ACT REF: A. SECSTATE 57782 ¶B. 05 OTTAWA 3518 Classified By: Acting EconMinCouns Curt Stone, reasons 1.4 (b) and (d) ¶1. (C) Summary: Embassy Ottawa recommends that implementation of Title III of the Libertad Act continue to be suspended for Canada on grounds of national interest and prospects for further cooperation on transition to democracy in Cuba. While Canada has a long history of economic engagement with Cuba, it has supported U.S. efforts to address Cuban human rights issues in international fora and has practiced a consistent policy of maintaining ties with dissidents and pressing Cuba on human rights issues. Canada is a useful partner on human rights issues in other countries as well (for example, the new Conservative government under Prime Minister Stephen Harper has taken a firm stand on Hamas and Belarus and has finally criminalized the Tamil Tigers.) Imposing Title III sanctions on Canada would damage a vital bilateral relationship without producing any change in Canada's approach to Cuba. In consideration of the human-rights efforts of the GOC worldwide and in the current spirit of improving ties with Canada, Post therefore recommends that Title III of the Libertad Act continue to be suspended for Canada. End Summary. CANADA-CUBA ECONOMIC TIES -------------- ¶2. (SBU) Canadian imports from Cuba in 2005 were 456 million USD, an increase of less than one percent, consisting largely of cigars, seafood and scrap-metal. Trade analysts in Canada are fond of pointing out that Cuba is "one of the few export markets not dominated by the United States", thanks to the U.S. trade embargo on Cuba. For Canadian exporters, who see in the United States both their largest market and their largest competitor, this situation is appealing despite the continuing difficulties of doing business with a country "constrained by deep structural problems" such as Cuba. In 2005, Canada's exports to Cuba totaled 369 million USD (roughly equal to U.S. exports to Cuba.) They consisted mostly of agricultural products, machinery parts, and sulfur. ¶3. (SBU) This level of exports to Cuba represents an increase of 47% over 2004 levels, much of the increase in the agricultural sector. The Canadian Wheat Board is working with ALIMPORT, Cuba's state importing agency for agricultural products, to increase Canadian wheat exports to Cuba, and the Canadian Agri-Food Trade Service of Agriculture and Agri-Food Canada reports that Canada is currently Cuba's second largest supplier of wheat after France. At ALIMPORT's request, the Canadians are also providing information on Canadian barley and oats for food uses. Agricultural exports to Cuba are closely linked to the tourism trade, since with the exception of basic foodstuffs and commodities for the local population, the government of Cuba imports food products to meet the demands of tourists, and the demand for imported food is expected to increase with the tourism trade. Cuba also lifted a BSE-related ban on Canadian beef exports in 2005, which may account for some of the increase in agricultural exports. ¶4. (SBU) Canadian tourists to Cuba, attracted mainly by low cost, account for roughly a third of Cuba's total tourist trade. Tourism has averaged a roughly 15 percent annual growth in Cuba since 1990, compared with the overall economic growth of roughly 2-3 percent annually. ¶5. (SBU) Canadian machinery exports to Cuba, which also showed an increase from 2004 to 2005, are less likely to continue to increase. The Canadian equipment sector is geared toward contract work, so exports to a country can Qgeared toward contract work, so exports to a country can fluctuate significantly annually, as contracts are filled and are sometimes not renewed. Export Development Canada lists Cuba as a notable example of this trend, where exports grew in 2005 but are expected to fall in 2006. ¶6. (SBU) In March 2006, Scotiabank informed clients that the bank was no longer willing to handle U.S. dollar accounts or carry out international financial transactions for Cuban government agencies, prompting a flurry of media coverage in Canada. Scotiabank's decision to follow U.S. trade laws outside U.S. territory has not yet been shared by other Canadian banks: the spokeswoman for the Canadian Bankers Association said "these would be business decisions made by each bank based on their own legal advice." Scotiabank is planning a major move into the U.S. market, which may have affected their decision to withdraw from business with Cuba. ¶7. (U) Canada is also one of the largest foreign investors in Cuba. In addition to Sherritt, we are aware of one other Canadian entity, Pebercan, which exploits offshore drilling licenses in Cuban waters. Our contacts, however, say that the mere threat of the Title III implementation has acted as OTTAWA 00001245 002 OF 003 an obstacle to investment in Cuba. Because of the high-level of cross-investment between Canada and the United States, most major Canadian enterprises already have some legal exposure to the Libertad Act through their U.S. affiliates. (40 percent of Canadian foreign direct investment overseas is in the United States; and U.S. investors account for 64 percent of foreign direct investment in Canada.) U.S. entry restrictions on key Canadian corporate officials under Title IV of the Libertad Act (for example, a number of Sherritt executives are barred from entry) already create a significant disincentive to Canadian investment in potentially expropriated properties and effectively underscore U.S. opposition to such investments. (Comment: given Canada's location, and the degree of economic, social and cultural integration with the United States, an entry bar to the United States is a major logistical and social headache for a Canadian. End comment). Canadian officials consistently complain about the extraterritorial reach of the Libertad Act, and Canada's Foreign Extraterritorial Measures Act attempts to counteract U.S. laws by enabling a clawback of any losses awarded in U.S. courts, enforceable against American assets in Canada (although this has not yet been enforced.) ¶8. (C) Given Canada's longstanding economic ties to Cuba, a decision to apply Title III is not likely to affect Canadian economic engagement in Cuba beyond what the threat of implementation has already done. Applying Title III would, instead, generate a new irritant at a time when many Canadians are already concerned about extraterritorial application of U.S. legislation such as the Patriot Act. CUBAN HUMAN RIGHTS ISSUES IN THE UN -------------- ¶9. (C) Canada is generally helpful and cooperative with regard to Cuban-sponsored UN human-rights resolutions, working quietly and behind the scenes and frequently complementing USG efforts. ¶10. (C) Canada has been an active participant in supporting the transition from the Commission on Human Rights to the new Human Rights Council and is working to influence its composition by, among other points, committing to support only candidates with a genuine commitment to human rights. It has also presented itself as a candidate on the Council. A POLICY OF POLITICAL ENGAGEMENT -------------- ¶11. (C) Canada maintains a policy of principled engagement with both the Cuban government and the dissident community, which it believes allows it the opportunity to have a positive impact on human rights and democracy in Cuba. The Government of Canada is mindful of future opportunities to influence the post-Castro Cuban transition to a democratic system and focuses on maintaining access to the full range of people in the political process. There are a number of recent examples of Canada's engagement and intervention on behalf of human rights and the advance of democratization in Cuba: -- In October 2004 the Cuban Foreign Minister Roque visited Canada. Canadian FM Pettigrew used the opportunity to raise the issue of human rights and the incarceration of dissidents directly with the FM, sending the message that incarcerated dissidents in ill health should be released immediately. Pettigrew openly criticized Cuba's human rights record in the press during the visit. -- The Canadian Ambassador in Havana has met with her counterpart frequently over the past several months to question the Castro government's allowance of "actos de repudio", in which vigilante groups enforce political and Qrepudio", in which vigilante groups enforce political and social policy through intimidation. She elicited the response from the Foreign Minister that the government of Cuba should allow persons to report these acts to the police without reprisals. -- On some occasions when groups of dissidents meet or march in Cuba the Canadian Embassy sends observers to their activities as a quiet show of support. The Embassy's first and third secretaries meet frequently with the dissident group "Damas de Blanco," and the Ambassador and DCM meet when possible with prominent dissidents such as Nelson Molinet Espino and Oswaldo Paya. There is a constant dialogue with these dissidents on the part of the Embassy. -- In a unique program organized by the Canadian Embassy, Professor Stephen Toupe of McGill University gave a speech in Cuba recently in which he repudiated the Cuban government policy of separating social and cultural rights from political and civil rights, and arguing for the benefits of free trade. The speech, sponsored by the Trudeau Foundation, was well attended and has been made available by the Canadian OTTAWA 00001245 003 OF 003 government in Cuba. -- The Canadian government has been active in developing small projects in Cuba in which the recipients of grants may generate income they can keep. -- In cooperation with the Swiss, Canada is supporting a project which provides a place in downtown Havana where Cuban NGOs can use the internet and meet to coordinate their activities. The project also allows them to access the internet from their homes. As with many of its projects, Canada has been using its status with the Cuban government to push the envelope on programs such as this and thus far has not been stopped by the Cuban government. -- In what is now an established institution, the Canadian government supports annual Terry Fox runs across Cuba which last year involved 2.6 million people. The theme of these runs is cancer awareness, but through this medium Canada is able to convey the values of the Terry Fox foundation -- open and willful community involvement, freedom of expression, and unrestricted fundraising. For the first time in 2005 the organization was allowed to raise money and manage it freely in bank accounts. ¶12. (C) The new Conservative government has taken an even stronger stance on human rights and democratization than its Liberal predecessor, taking strong, principled stances on Belarus, Hamas, and the Tamil Tigers in its first 60 days in office. It has made it clear that it will not compromise for the sake of international consensus and in several cases, notably denying landing rights for the Belarusian Prime Minister's plane as it traveled to Cuba, has taken positions that were even in front of the United States. The new government has made it clear that it would like to work closely with the United States to advance democratization around the globe, and while Cuba has not yet been an area of direct focus by PM Harper, it undoubtedly will be. RECOMMENDATION: CONTINUE TO SUSPEND TITLE III IMPLEMENTATION -------------- -------------- ¶13. (C) Embassy Ottawa recommends that implementation of Section III of the Libertad Act continue to be suspended for Canada on grounds of national interest and further cooperation on transition to democracy in Cuba. In addition to the overall value of our close cooperation with Canada, a NATO ally, in key regions of the world (e.g. military support in Afghanistan) and in Latin American democratic institutions and processes such as the OAS and Summit of the Americas, Canada has given us effective support on Cuban human rights issues. The new Conservative-minority government is working hard to repair bilateral relations with the United States, which had been strained by anti-American rhetoric under the Liberals. At the recent Security and Prosperity Partnership (SPP) leaders meeting in Cancun, President Bush highlighted the valuable work of Canadian Forces in Afghanistan and thanked Canada for its assistance. Mission Canada is also working to remove bilateral irritants with Canada (such as the continuing softwood lumber trade issue),and now would be the wrong time to add an irritant to the relationship: the new Conservative government is striving to cooperate with the United States while proving to Canadians that close cooperation with the big neighbor to the south does not damage Canadian sovereignty or world power. Both because of Canada's good work on human rights in Cuba, and in consideration for the delicate state of U.S.-Canadian relations under a friendly minority government, Embassy Canada strongly recommends that the President continue to QCanada strongly recommends that the President continue to suspend Title III implementation. Visit Canada's Classified Web Site at http://www.state.sgov.gov/p/wha/ottawa WILKINS