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Containing Castro By: William R. Hawkins
FrontPageMagazine.com | Friday, July 23, 2004

In his strategy to foster a Cuba free from Fidel Castro, one of the world's last Stalinist rulers, President Bush has directed several actions to deny resources and legitimacy to the communist regime. A key objective is to halt the flow of hard currency, used prop up Mr. Castro's dictatorship and fund its covert operations elsewhere in Latin America.

The new limits on the hard currency of tourists and family remittances to Cuba have received much media attention, but this flow is small compared to other sources. Operations are being stepped up against "mule" networks and others who illegally carry money to Cuba, mostly drug money laundered by the regime for a hefty slice of the take.

There also is a Cuban Asset Targeting Group to neutralize Cuban government front companies in the United States and to identify new ways hard currency moves in and out of Cuba.

On July 13, the Senate Judiciary Committee held a hearing on Section 211 of the Omnibus Appropriations Act of 1998 that deals with one of these ways. Section 211 forbids the recognition of claims to U.S. trademarks from property confiscated by the Cuban government. Like other communist revolutionaries, when Mr. Castro seized power he engaged in the wholesale expropriation of private property in Cuba, whether owned by Cubans or by foreigners. The Castro regime also tried to grab intangible property, such as trademarks, that the confiscation victims owned in the U.S. and other countries.

The Senate hearing was triggered by the need to revise Section 211 on technical grounds to comply with a World Trade Organization ruling that objected to the U.S. law because it only pertained to Cuba. Congress needs to amend Section 211 so it applies to all persons, regardless of nationality, a sensible expansion. S. 2373 in the Senate and its companion in the House, H.R. 4225, will do so. Both bills have substantial bipartisan support. Indeed, two prominent Democrats, Sen. Bill Nelson of Florida and Bruce Lehman, a Clinton administration assistant commerce secretary and patents and trademarks commissioner, testified in behalf of preserving Section 211 while bringing it into compliance with the WTO.

One example of how Mr. Castro has used confiscated trade marks to earn hard currency is provided by "Havana Club" rum, a top-of-the-line brand whose label is the legitimate property of Bacardi-Martini Ltd. The Bacardi label was legendary in the rum trade for generations prior to Mr. Castro's rise, having been founded in 1862. The family-owned business fled Cuba after its assets were seized and rebuilt itself into the world's fourth-largest spirits company.

Mr. Castro has made an agreement with French liquor conglomerate Pernod Ricard to produce and market the Havana Club brand around the world. The Cuban-French venture has been exploiting the label outside the U.S. and trying to obtain title to the U.S. trademark so it can be sold in the American market. According to a report in Forbes, Pernod Ricard splits the $40 million in profits from the stolen brand directly with Mr. Castro. In 1993, Mr. Castro granted Pernod Ricard a monopoly on the island's rum. Last year, nearly 2 million cases were sold under the pirated Havana Club label, generating $170 million in hard currency for Cuba.

To protect and expand this lucrative partnership, the European Union challenged Section 211 on behalf of its French connection.

It would seem an open and shut case of trademark piracy used to fund a rogue regime hostile to the United States. Yet, there was one witness at the Senate hearing arguing for the repeal of Section 211, William Reinsch, president of the National Foreign Trade Council. The aim of the NFTC is to remove all economic sanctions based on moral or geopolitical grounds. Its member firms are consumed only with the pursuit of profit.

No regime is so odious that the NFTC doesn't want to do business with it. The NFTC has been particularly eager to open Cuba for trade in defiance of Bush administration strategy.

Mr. Reinsch's argument was that Section 211 provides a "pretext for the Castro regime to retaliate against trademarks currently registered in Cuba by U.S. companies." In other words, the best way to deter Mr. Castro from committing new crimes out of spite is to forgive him for crimes already committed.

This line of argument was easier rebutted by Mr. Lehman who drew the vital distinction — which Mr. Reinsch ignored, between Cuba's "right to register or enforce trademarks that it legitimately owns, as distinguished from those it has acquired through confiscation."

Nancie Marzulla, president of the nonprofit group Defenders of Property Rights, clearly stated the principle involved, "The United States currently occupies a unique position in the global economy. A decision on the part of our government to honor only those trademarks which have been legitimately acquired, not confiscated by oppressive regimes, sends a clear message to the world that the United States cares deeply about the fundamental right to private property."

Despite its heavy schedule, Congress should act to preserve Section 211 this year as another element in U.S. strategy to deny the resources needed by the Castro regime to extend its tyranny, perhaps even beyond the grave of its aging dictator.

William Hawkins is a consultant on international economics and national security issues.

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