Every business executive knows that negotiating with customers, suppliers, financiers, regulators and employees is a constant. Sometimes one is able to conclude satisfactory negotiations, and sometimes not. Generally, there is confidence that the rule of law would allow parties to demand specific performance when other parties fail to meet their obligations. This is only in the worst possible outcome, because we expect our counter-parties to deal fairly with us. In conducting international government level negotiations, there is little assurance that the counter-party nation will abide by their agreements and obligations, and the rule of might sometimes supersedes the rule of law.
Prime Minister Neville Chamberlain returned from Munich in 1938 declaring that he and Adolf Hitler had constructed an agreement that would lead to “peace for our time”. Chamberlain appeased Germany with the Sudetenland region of Czechoslovakia, only to have Hitler invade Poland and plunge Europe into World War the following year. His motive was to avoid a disastrous war, and the Prime Minister was hailed by cheering crowds in London. History has judged his mission an utter failure, and it is now understood that appeasement is a poor strategy when negotiating with an aggressive opponent. There was probably no strategy that could have averted war, and the delay between the Munich Agreement and the invasion of Poland allowed Germany to increase its military strength while Britain mostly squandered its chances to better prepare for war.
During her time as Secretary of State, Hillary Clinton was the most traveled Secretary of State in history but substantive achievement escaped her. In partial fairness, beyond Egyptian and Libyan disasters, she was negotiating with North Korea, which has never honored its international agreements. She also tried negotiating with Iran, which pretends to negotiate in the run up to obtaining America’s 70 year old nuclear weapons technology. Current Secretary of State John Kerry naively decided he could conjure a peace treaty between Israel and the Palestinians. But how can Israel make peace with a “government” that won’t recognize the validity of the State of Israel and whose people celebrate the suicide bombing of innocent civilians?
In making hard decisions, one of the toughest things to learn is when to simply walk away from a negotiation. Sometimes there is no overlap in acceptable outcomes between negotiating parties, and getting to “yes” means different things to each party. Which brings us to the announcement this week of the reestablishing of diplomatic relations with Cuba. As a Cuban American and a refugee from that dictatorship, conditions on the Island are of keen interest.
It always struck me as odd that American policy towards Cuba seemed frozen in time. Whereas the US had implemented a trade embargo against Cuba in 1960, we routinely dealt with repressive dictators around the globe who violated what we see as the civil rights of their citizens, such as in Saudi Arabia and Egypt. Many Americans expected the first foreign policy initiative of the Obama administration in 2009 would be opening diplomatic relations with Cuba. This would have been a popular and bipartisan move domestically in both political and economic terms. More trade is generally perceived to increase the flow of information citizens of repressed countries can readily obtain. Even Cuban dissidents mostly supported the normalization of relations. So why didn’t this happen earlier?
Only the close circle around Presidents Obama and Raul Castro could be able to say for certain, but my suspicion is that the makings of the deal only came into view in recent weeks. For years, America has used economic sanctions to conduct a carrot and stick foreign policy. It has avoided the use of force in multiple countries, but perhaps none more so than in the evolving “democracy” of Myanmar. America and Europe have been instrumental in helping to transition the military dictatorship toward open elections and inclusive government. With the defeat of the Democratic Party in the mid-term elections, Mr. Obama has gotten into the habit of unilateral policy initiatives. He is able to establish diplomatic relations without consulting Congress. Trade is restricted by multiple laws, but the President has put this item on the Congressional agenda. It is unfortunate that he did so without requiring more changes from the Cubans, but this president never mastered the fine art of negotiation.
From the Cuban perspective, the reasons to open diplomatic relations were not apparent even six months ago. The Castros have long used “scarecrows” (underfed kids drafted into the army and sent into Havana) from the outer provinces to impose military command over the streets of inhabited Cuba. There is an 18-year old kid with a sub-machine gun and a radio on virtually every populated corner of Havana…just in case anyone should want to “misbehave”. The reason the regime claims this is necessary is the threat of American invasion… not that the US has considered invading Cuba in over 50 years. Cuba’s current primary benefactor, Venezuela, was providing up to 100,000 barrels of oil/day to Cuba in exchange for the work of Cuban doctors in its remote areas. This deal provided as much as 60% of Cuban energy needs. The collapse of world oil prices amid increased supply and slightly reduced demand has wrought havoc to Venezuela, and they will likely be unable to continue to support the Cuban regime at those levels. Hence, Cuba has a renewed motivation to deal with the US.
Many Cuban Americans have long anticipated normalization of relations and the ending of the trade embargo. While Cuba claims that the embargo has caused suffering to its citizens, many believe that it has been more of an annoyance than a true impediment. Spain, Canada and other Latin American countries have long had open economic ties to Cuba, but per capita income on the island remains at 40% of the world average because of the economic shackles imposed by the repressive regime. Things will only change very gradually because the government still will not operate under the rule of law. International businesses are usually required to partner with the state, and wages for Cuban employees are paid to the state in convertible currencies. The state pockets what it receives and pays the workers in a non-convertible local currency.
On balance, the opening of diplomatic ties is a slightly better than neutral change. The release of even a few of the hundreds of political prisoners is also a plus. The Castro brothers will be gone from the scene in the next few years no matter what anyone does. Opening diplomatic relations should allow for more US input in the transition process towards new leadership. One never knows, but in this case, we are all hopeful.