Transcript Document

ECONOMIC BENEFITS OF LIFTING
U.S. SANCTIONS ON CUBA FOR THE
U.S. ECONOMY
Prepared by
Tim Lynch, Ph.D., Director
&
Necati Aydin, Research Associate
Center for Economic Forecasting and Analysis (CEFA)
Florida State University
www.cefa.fsu.edu
Presented at
Caribbean Studies Association 28th Annual Conference
Belize City, Belize
May 26–31, 2003
CUBAN ECONOMIC HISTORY:
BEFORE THE SOCIALIST REGIME

Before 1959 the U.S. was Cuba’s main
trading partner. Florida was Cuba’s largest
U.S. state trade partner.

40 percent of all cargo being routed
through Miami’s customs district was
transported to Cuba.

85 percent of Cuba’s exports were
transported to the United States.
IMPACT OF FREE TRADE WITH
CUBA IN THE U.S. ECONOMY



Cuba is the largest and most economically
viable of the Caribbean nations.
Its wealth of underutilized natural and human
resources makes it an ideal economic trading
partner for the U.S.
For example the U.S.-Cuba Business Council
estimated initial Cuban infrastructure needs
of:
 $500 million investment in
telecommunications.
 $500 million in mass transit.
 $575 million in airports.
 $540 million in railroads.
IMPACT OF FREE TRADE WITH
CUBA IN THE FLORIDA ECONOMY

Economic reforms in Cuba since the 1990’s
towards a more open market system will
generate considerable business
opportunities for the Florida economy
(assuming these trends continue).

Gravity theory suggests that Florida has
more advantages than any other state to
benefit from trade liberalization with Cuba.

Lifting sanctions would result in Florida
(and the U.S.) adding approximately 11
million additional customers just 90 miles
from Florida’s shores.
RECENT ECONOMIC IMPACT
STUDIES

Embargo costs the U.S. between $3 and
$4 billion in lost exports per year. (Preeg,
Center for Strategic and International Studies, 1998.)


Lifting sanctions on agricultural exports
to Cuba for the 50 states and 22
commodity sectors, will result in
increases in exports of $1.2 billion per
year. (Rosson and Adcock, Texas A&M University, 2001)
Such increase in exports would stimulate
an additional $3.6 billion in total
economic output and 31,262 new jobs in
the U.S. labor market. (Ibid,Rosson, 2001)
TRADE SANCTIONS REFORM AND
EXPORT ENHANCEMENT ACT OF 2000

Allows for U.S.
food and medical
exports to Cuba
under certain
conditions.
In its first year of
implementation,
the U.S. exports to
Cuba rose by a
factor of 20.
U.S. Export to Cuba (Millions dollar)
160
144.4
140
120
Export

100
80
60
40
20
1.2
2.5
4.6
5.6
5.5
9.5
3.5
4.5
6.9
7.1
0
1992
1994
1996
1998
Years
Source: USA Trade Online, U.S. Census Bureau, 2002
2000
2002
EXAMPLES OF NEIGHBORING NATIONAL
PERCENTAGE OF EXPORT AND IMPORT
TO GDP (2002)
30
20.31
20
Percentage
17.28
18.26
18.46
17.40
15.63
Exports/ GDP
Imports/ GDP
11.00
10
6.92
0
Mexico
Dominican Republic
Costa Rica
Selected Countries
Cuba
THE ESTIMATION OF THE
IMPACT OF FREE TRADE WITH
CUBA
OLD ECONOMY WITH RESTRICTED TRADE
People
Productivity
Low cost production
Strong economy
Capital
Entrepreneurs
Profits
Goods
Services
NEW ECONOMY WITH FREE TRADE
People
Capital
Higher productivity
Higher wages
Higher quality of life
More resilient economy
Higher efficiency
Higher wealth
Higher profits
Entrepreneurs
Goods
Services
FORECAST POSSIBLE US-CUBA 10 YEAR
GROWTH IN TRADE (2003$)
$8.01
$7.61
$7.47
$6.41
$5.76
Billion dollars
$5.66
$4.80
No grow th
7% grow th
10% grow th
$3.20
$2.94
$2.89
$1.60
$0.00
Im ports
Exports
FORECAST POSSIBLE US-CUBA 35 YEAR
GROWTH IN TRADE (2003$)
$180.00
$160.00
$155.06
$152.36
$140.00
Billion Dollars
$120.00
7% grow th
$100.00
$82.53
$81.10
$80.00
12% grow th
$60.00
$40.00
10% grow th
$31.36
$30.81
$20.00
$0.00
Im ports
Exports
DESCRIPTION OF FSU CUBA
RESEARCH USING THE REMI MODEL

REMI, 2000 (REMI, 2000) is a widely
accepted and used dynamic integrated
input-output and econometric model.

REMI is the most sophisticated and widely
used economic impact assessment tool
currently available in the US. REMI is
extensively used by US public and private
agencies, business and Universities to
evaluate the economic impact of pending
complex federal, state and local policy
actions.
THE 10 YEAR IMPACT OF FREE TRADE
WITH CUBA ON THE U.S. GDP
(2003$)
$5.00
The U.S. GDP Growth (Billion)
$4.00
$3.38
$3.00
$2.51
$2.00
$1.29
$1.00
$0.00
0%
7%
Cuba GDP Grow th Rate
10%
THE 35 YEAR IMPACT OF FREE TRADE
WITH CUBA ON THE U.S. GDP
(2003$)
$80.00
The U.S. GDP Growth (Billion)
$68.43
$60.00
$40.00
$36.14
$20.00
$13.84
$0.00
7%
10%
Cuba GDP Grow th Rate
12%
THE 35 YEAR ECONOMIC BENEFITS TO
FLORIDA ECONOMY FROM LIFTING THE
BAN OF TRAVEL TO CUBA
(2003$)
Tourism Revenue Growth (Billion)
$3.00
10% of the U.S. total
15% of the U.S. total
$2.10
$2.00
$1.57
$1.40
$1.05
$1.00
$0.00
Estimation I
Estimation II
Source: The Impact on the U.S. Economy of Lifting Restrictions on Travel to Cuba,
Center for International Policy Study, July 15, 2002.
THE 35 YEAR JOB IMPACT OF LIFTING
TOURIST TRAVEL BAN TO CUBA ON
FLORIDA EMPLOYMENT (2003$)
30000
27372
27000
Employment Growth
24000
20985
21000
18205
10%
18000
15000
15%
14000
12000
9000
6000
3000
0
Estimation I
Estimation II
Source: The Impact on the U.S. Economy of Lifting Restrictions on Travel to Cuba,
Center for International Policy Study, July 15, 2002.
SUMMARY OF FINDINGS
(For The U.S. Economy)
Normalization of trade between Cuba
and the US will result in:
 $5 to $15 billion imports and exports
over 10 years
 $1.3 to $3.4 billion increase in U.S.
GDP over 10 years
 $62 to $307 billion increase in U.S.
imports and exports over 35 years
 $14 to $68 billion dollars increase in
U.S. GDP over 35 years
SUMMARY OF FINDINGS
(For The Florida Economy)
The lifting restrictions on travel to
Cuba will result in potential tourism
increases alone of:
 $1.1 to $2.1 billion growth in Florida
GDP over 35 years
 14,000 to 27,372 new jobs in Florida
over 35 years