This exclusive preferential treatment of trade between Cuba and the United States is the outstanding element of trade policy between the two countries. It is generally recognized as an exception to the most-favored-nation policy under which concessions are made applicable to all countries alike except those that militate against the United States. It is largely as a result of the close commercial relations that Cuba now obtains from the United States a higher proportion of its import requirements than does any other Latin American country and exports to the United States a larger percentage of its products than any except Honduras and Panama.

The second vital factor in Cuban trade policy was the increase in tariff rates beginning in 1927 to protect and encourage domestic industries. Following the sharp decline in the value of sugar exports and the introduction of nationalistic policies in many other countries, Cuba was forced to look to other sources of income and to reduce imports. This it endeavored to accomplish by diversifying production particularly of products formerly imported. Consequently, from 1927 on, tariffs were raised generally on all imported foreign goods that might be produced in the country. The efficacy of these measures with respect to individual products has already been discussed.

Trade with the United States was greatly improved as a result of the trade agreement of September 3, 1934. This was the first agreement negotiated after the enactment of the United States Trade Agreements Act and greatly extended the scope of the preferential treatment between Cuba and the United States. Under this agreement Cuba granted concessions to the United States on more than 400 items, with preferences ranging from 20 to 60 percent. The United States in turn, granted concessions to Cuba on 35 items, increasing the guaranteed preference in some cases to 50 percent. This agreement was modified by additional concessions through supplementary agreements effective December 23, 1939, and January 5,

1942.

Another important step in Cuba's general foreign-trade policy was the establishment of a policy of differential tariff treatment for different countries, based on Cuba's trade balances with such countries. This became effective on March 29, 1935, under the so-called Import Control Law. It effected a far-reaching change in Cuban tariff policy and was designed to encourage exports by granting lower duty rates to those countries that imported heavily from Cuba. A maximum tariff rate, equal to double the minimum rate, became applicable on imports from those countries that according to official statistics purchased from Cuba less than 25 percent as much as Cuba purchased from them. An intermediate rate, plus an overcharge of 25 percent, became applicable on imports from those countries that purchased 25 to 50 percent as much as Cuba purchased from such countries. The minimum tariff rate is applicable only to those countries whose purchases from Cuba exceed 50 percent of Čuba's purchases from them.

This law, however, provides that exceptions may be made and the minimum rates applied to raw materials and articles of prime necessity that cannot be obtained from those countries that observe commercial reciprocity. Several commercial treaties and agreements have been negotiated with other countries. Most-favored-nation treatment has been extended to Spain and France since 1927 and 1929, respec

tively, and to the United Kingdom since 1938. Some agreements with other countries are of a more limited scope, and some have been abrogated.

Cuban foreign trade is also affected by certain nontariff controls, such as special taxes, import and export controls, and exchange controls. Trade control was authorized under a Cuban tariff law of 1927, but the principal measures taken under this law were quota limitations. on the importation of condensed and evaporated milk since May 1937 and on imports of henequen and sisal fiber since 1939. A form of exchange control has also been in effect since June 15, 1939. Cuban exporters of sugar and sirup are required to deliver to the Government 30 percent of the dollars obtained from such exports in return for Cuban silver pesos at par.

EFFECT OF THE WAR

The volume of foreign trade has been fairly well maintained since the outbreak of hostilities in Europe in 1939, primarily because of the relatively small value of Cuba's trade with European countries. The United States share in Cuba's trade and that of other American countries has increased as a result of Cuba's effort to find alternative markets for those lost in Europe and as a result of not being able to obtain needed import supplies from Europe or the Far East.

During the first year of the war it was possible to continue much of the trade with European countries; exports to Europe in 1940 amounted to nearly 18 million dollars as compared with about 30 million dollars during previous years. Shipments to the United Kingdom were reduced to about one-half and those to continental European countries were reduced only about one-fourth, with fairly large shipments to Spain, France, and the Scandinavian countries. Imports from Europe also dropped to about one-half, while those from the United States were maintained at near the previous level. During the second year of the war Cuba's exports to continental Europe declined from a level of about 11 million dollars before the war to only 2.5 million in 1941 and was limited almost entirely to Spain and the other unoccupied countries. On the other hand, exports to the United States and other American countries, notably Mexico and Canada, increased sharply from a pre-war level of 126 million to 190 million in 1941, thus more than offsetting the losses in Europe. Part of the increase in value of trade, however, was due to rising prices rather than actual quantity of goods. In general, during the first year, the war affected exports of sugar and cigars more adversely than other products because these constituted a large part of the former trade with Europe. During 1941, however, the entry of the United States into the war and the scarcity of ships greatly increased Cuba's outlet for sugar and molasses in the United States and caused Cuba to look there for the major portion of its rice imports. By the spring of 1942 the restriction of shipping was curtailing the movement of sugar, fruit, vegetables, and meat even to the United States.

DEGREE OF AGRICULTURAL SELF-SUFFICIENCY

Much progress has already been made in the past 15 years in the diversification of Cuba's agriculture and in increasing the degree of

its self-sufficiency. Products other than sugar and tobacco have increased from only 4 percent of the total exports in 1924-26, to about 16 percent in 1940. Similarly, agricultural products declined in importance from constituting about one-third of total imports in 1924-26 to only about one-fourth of the total in 1940.

The most significant development has been in the livestock industry. Production of beef increased sufficiently to permit imports formerly amounting to 40 to 50 million pounds (costing 5 to 6 million dollars annually) to be reduced almost to zero, while exports of chilled beef in 1940 rose to about 12 million pounds and in 1941 to 42.5 million. The hog industry has also increased but not as rapidly. Pork imports, which amounted to 40 to 65 million pounds (costing 7 to 9 million dollars annually), have declined to only 4 million pounds in 1940. With respect to lard the change has been smaller; imports declined only about one-third during this period.

It is

Development of the dairy industry also stands out significantly. Evaporated milk (including condensed) is the most important item, with former imports amounting to nearly 50 million pounds, costing about 5 million dollars. By 1940 condensed milk, butter, and cheese were all on an export basis. Egg imports also declined from about 17 million pounds, costing 3 million dollars, to practically none. estimated that the total value of net imports of these edible livestock products, formerly at a level of 35 to 40 million dollars annually, has declined to a net-import value of only about 3 million dollars in 1940. The following shows the quantity of the principal livestock products imported annually for 1924-26 as compared with 1940:

Imports of the following crops have all declined sharply: Potatoes, corn, beans, oats, and coffee. Two of these coffee and corn-are now on a net-export basis. The total import value of these items has been reduced from about 16 million dollars to net imports of only about 2 million dollars in 1940. Diversification has also taken place in the form of increased production of fruit and vegetables for export. However, two of the most important cereal products, rice and wheat flour, are still largely imported. Climatic conditions are not suited to the production of wheat, and there is usually insufficient rainfall for good yields of rice without irrigation.

Table 67 shows the estimated degree of self-sufficiency obtained by 1937-39 for the most important items of Cuban agriculture. The data on production and consumption in most cases are purely estimates rather than accurate statistics. Production in some cases, notably beef, condensed milk, and butter, has continued to increase since 1937-39 to a point where these products were on a net-export basis by 1940. Peanut-oil production also increased to a point of supplying possibly one-third of the total vegetable-oil requirements by 1940 41.

TABLE 67.-Cuban self-sufficiency in principal agricultural products (estimated),

average 1937-39

1 Production data are estimated except for sugar, tobacco, coffee, and cacao, which are official. 2 Import and export data are from official statistics.

3 Consumption data are estimated on the basis of amounts available for consumption and estimates by Hugo Vivó (19). In the case of sugar, the quantity available for consumption is greater than the estimated Consumption because of larger stocks at the end of the period. In the case of potatoes the quantity shown includes the relatively large requirements for seed.

4 Less than 12 million pounds.

5 Tobacco exports are unstemmed leaf equivalent and include leaf used in the manufacture of products for export.

6 The exports, and hence the degree of self-sufficiency, of beef, milk, butter, and vegetable oils have all increased materially since 1937-39.

7 Including evaporated, powdered, etc.

8 Excluding imports of malt, amounting to about 16 million pounds annually.

• Largely small quantities of millet.

As a whole, Cuba is now on a surplus basis in meat productie nexports of beef (1940-41) more than offset the quantity of pork products imported. Dairy-product and egg production also attained self-sufficiency by 1940, when exports of condensed milk, cheese, and butter exceeded imports. Vegetable and fruit production as a whole has long been on an export basis-bananas, pineapples, grapefruit, and winter vegetables have heavy export surpluses. Corn and coffee have also been exported during recent years.

The most important deficit agricultural items are rice, wheat flour, lard, and vegetable oils, which, together, accounted for three-fourths of all Cuba's agricultural imports. Domestic production of rice and flour is less than 10 percent of the requirements. The fat and oil deficiency is also large. Production of butter, lard, and peanut oil has increased, but the total combined deficiency of all fats and oils still amounted to an estimated 100 million pounds in 1940 (largely lard and vegetable oils), while domestic production supplied only about 36 percent of requirements. Other items of deficiency are

beans and potatoes, of which domestic production supplied about 60 and 66 percent, respectively, of the requirements, and onions and garlic, most of which are imported.

AGRICULTURAL POLICY AND GOVERNMENT MEASURES

Cuba in fact had no clear-cut agricultural policy until recent years. Economic and political considerations determined trade and, in turn, production. During the preceding century Cuba's colonial agriculture, as in most undeveloped countries, was directed first to the production of cattle on an extensive ranch scale. Subsequently, coffee rose to great importance, particularly in the central and western part of the island where very little is now grown. This, in turn, was replaced by sugar, which grew to such importance until after the World War that it has dominated the entire economy of the country even to this day. Only after the sharp rise of nationalistic policies in other countries and the sharp decline in the world market for sugarwas Cuba forced to seek diversification.

The first real step toward diversification was the upward revision of tariffs in 1927 to discourage imports and to protect domestic production. It may now be said that diversification constitutes the central point in Cuban agricultural policy, and the reasons advanced for it are:

(1) To develop production to increase the national income and replace that lost from the decline in exports of sugar;

(2) To provide employment during the long dead season between sugar harvests and for people formerly employed in the sugar industry but now unemployed;

(3) To conserve foreign exchange by making it unnecessary to import as
large a proportion of the country's consumption requirements;

(4) To reduce the hazards incident to reliance on one-crop agriculture;
(5) To improve the standard of living by increased production of products
for home use and for the domestic market; and

(6) To increase the production of raw materials for the domestic manufac-
turing industry.

Another more recent and less well-established point in Cuba's agricultural policy is the desire to rehabilitate laborers, unemployed and partially employed, on small tracts of land where they should be able to grow a major portion of their food requirements. Along with the policy of agricultural diversification and rehabilitation there should be mentioned at least two other matters of general national policy that have a bearing on agriculture. These are the announced policy to improve wages and to develop manufacturing enterprises in Cuba. Minimum-wage legislation has been in force for a number of years and covers all kinds of work. This has served to increase consumer income but has also acted to increase the cost of production in some cases.

Government measures taken to implement the policy of agricultural diversification in addition to the higher tariffs since 1927 for the most part are administered through the Ministry of Agriculture or through semigovernmental agencies especially created for that purpose. Most important of the regulatory measures, in addition to the usual type of inspection service on meat, milk, and export vegetables, are the control of prices and in some cases control of production and trade. Price control is a relatively recent measure. Examples are the fixing of minimum prices to producers in order to encourage production, as