Last week, the European Commission formally proposed EU countries support an agreement for cooperation and political dialogue with Cuba and eliminate a 20-year-old common policy position.
“This contractual agreement creates a clear common framework for intensified political dialogue, greater cooperation in a wide range of policy areas and a valuable platform to develop joint actions in regional and international affairs,” EU foreign policy chief Federica Mogherini said.
Mogherini also urged the bloc to “formally repeal” the common position imposed in 1996 by former Spanish President Jose Maria Aznar that greatly limits political and diplomatic relations between Brussels and Havana.
Cuban authorities have long sought the repeal of the policy in order to begin new relations with the EU and replace it with a new framework.
The European Union (EU) and Cuba held seven rounds of talks—two in 2014, four in 2015, and one in March 2016—on a Political Dialogue and Cooperation Agreement (PDCA) covering political, trade, and development issues.
The new cooperation agreement, which has to be officially approved by EU governments, would replace the 1996 Common Position.
In 1996, the EU adopted a Common Position on Cuba, stating that the objective of EU relations with Cuba included encouraging “a process of transition to pluralist democracy and respect for human rights and fundamental freedoms.” The position also stipulated that full EU economic cooperation with Cuba would depend upon improvements in human rights and political freedom.
Trade relations / Foreign Direct Investment (FDI) flows
The EU is Cuba’s main export and second trade partner after Venezuela. Its main export goods are mineral fuels and mineral oils, sugars, beverages and tobacco. In 2015, Cuba exported €540 million to the EU and €465 million in 2014.
As a result of the EU’s Generalised Scheme of Preferences (GSP) reform in January 2014, Cuba lost its trade preferences for exports to the EU. This had an impact on their tobacco exports, mainly, for which the customs duty increased considerably.
The EU exported €1.600 million in 2014 (mainly machinery) to Cuba. The PDCA mainly aims to create a more predictable, transparent environment for economic operators, and to increase the capacity of economic operators to produce and trade, but does not establish a free trade area between the parties, nor does it cover investment protection.
The EU is also the biggest foreign investor in Cuba (mainly tourism, construction, light and agro-industries) and accounts for a third of the arriving tourists.
EU-Cuba development cooperation
Bilateral development cooperation resumed in 2008, and between then and 2014, the EU committed around €90 million in the area of food security; hurricane response and disaster preparedness; environment; climate change and energy; culture and heritage; support to economic and social modernization and management capacities.
Cuba also participates in EU regional programmes for Latin America for student exchange (e.g. ERASMUS Mundus), cooperation on drugs policies, also on environment and climate change.
The EU allocated €50 million from 2014 to 2020 to support the island nation’s development by promoting sustainable agriculture and food security; environment; and support for economic and social modernisation.
An example of an EU-funded programme is the Expertise Exchange Programme (EEP). The EEP has a budget of € 3.5 million and will be implemented until 2017. It has supported over 80 activities involving more than 1200 Cuban public officials and more than 50 experts and/or public servants from Europe and other countries in the areas of Decentralisation, Public Policies, Tax Administration, Foreign Investment and External Trade contributing to the 2030 Cuban Development Strategy and accompanying the process of “updating” the Cuban economy and society.
Bilateral Debt Settlements
EU member states are significant bilateral creditors to Cuba. The Paris Club members recently agreed to forgive $8.5 billion of of Havana’s $11.9 billion in debt, including $4 billion in late payments owed to France. As chair of the Paris Club of creditor nations and Cuba’s biggest creditor, the French government played a key role in resolving a significant portion of Cuba’s debt.
In January, France agreed to convert half of Cuba’s debt arrears into investment projects as part of its restructuring effort. Half of the outstanding arrears owed to France will be converted into a €212 million joint Cuba-French fund.
The U.K.’s Foreign Secretary Philip Hammond met with Cuban government officials in March. The Foreign Secretary’s meetings resulted in a debt restructuring agreement and four memos of understanding between the two governments.
