Transcript File

ECONOMIC IMPACTS ON US AND
FLORIDA FROM NORMALIZATION OF
TRADE WITH CUBA
Tim Lynch, Ph.D.
Former Director
Center for Economic Forecasting and Analysis (CEFA)
Florida State University
&
Julie Harrington, Ph.D.
Director, CEFA
www.cefa.fsu.edu
Down Town Tallahassee Rotary Club
May 27 2015
Florida State University Alumni Center, FSU
Presentation web location:
https://www.youtube.com/watch?v=08koEQY2-CQ&feature=youtu.be
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 ports–
dominated by Florida ports.
SUMMARY OF ECONOMIC
FINDINGS & CONCLUSIONS

GNP = Consumption + Investment + Gov
+ Exports (Each works with/on the other)

Cuba is the “spring loaded” nation of the
Caribbean that has the largest most
educated population of the region and only
needs the opportunity to “launch” into the
21st global economy

This launch will benefit Cuba, the US
(especially Florida) and the Caribbean
Central American region
IMPACT OF FREE TRADE WITH
CUBA IN THE U.S. ECONOMY



Cuba is the largest and most economically
viable of the Caribbean nations
Contains a wealth of underutilized natural and
human resources
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.
WHO WILL BUILD ALL OF THIS? ANY
AMERICANS?
IMPACT OF FREE TRADE WITH
CUBA IN THE FLORIDA ECONOMY




More open market Economic reforms
in Cuba since 1990’s = business
opportunities Florida economy
Florida proximate 90 miles and history
= more advantage for FL
Lifting “some” travel sanctions in 2009
to Cuba = DOUBLING in 4 years NonCuban American visitors to Cuba.
2015 easing of travel restrictions =
36% jump US visitors IN ONE year.
Normalizing trade = adds 11 million
extra customers to Florida markets =
Georgia + Alabama
RECENT ECONOMIC IMPACT
STUDIES

Embargo costs the U.S. between $3 and $4
billion in lost exports per year. (United Nations,
2014, also Center for Strategic and International Studies, 1998.)


Lifting US sanctions on agricultural and
medical exports to Cuba alone has resulted
in annual increases in US exports near a $1
billion (some years) from the 50 states and
22 commodity sectors,. (The Economist, March 2012)
Such increase in exports could stimulate an
additional $3.6 billion in total economic
output and 31,262 new jobs in the U.S.
labor market. (Ibid,Rosson, 2001)
CUBA TRADE WITH THE
WORLD – BIG GAP
CUBA’S TOP IMPORTINGEXPORTING TRADE PARTNERS
U.S. EXPORTS TO CUBA
EXPECTED TO IMPROVE WITH 2014 EASING OF
SANCTIONS
Millions US Dollars
$800
$700
$600
$500
$400
$300
$200
$100
$//www.census.gov/foreign-trade/balance/c2390.html
Historic Changes of U.S. Export to Cuba
(Millions Dollars)
$800
$700
$600
$500
MEDICAL
FOOD & AG
$400
$300
$200
$100
TO
TA
L
19
TO
99
TA
L
20
TO
00
TA
L
20
TO
01
TA
L
20
TO
02
TA
L
20
TO
02
TA
L
20
TO
03
TA
L
20
TO
04
TA
L
20
TO
05
TA
L
20
TO
06
TA
L
20
TO
07
TA
L
20
TO
08
TA
L
20
TO
09
TA
L
20
TO
09
TA
L
20
TO
10
TA
L
20
11
$-
Source: USA Trade Online, U.S. Census Bureau, 2012
VALUE OF U.S.-CUBA AGRICULTURAL
EXPORTS BY CATEGORY - 2011
Frozen Turkey
$3,608,354
$4,037,896
Cotton
Decalcium/ + Phosphate
$5,860,475
Frozen Pork
$7,679,964
$7,683,914
Beans
Soybean Oil Cake
$9,866,258
Brewing/Distilling Dregs
$23,127,215
Soybeans
$58,721,892
Frozen Chicken
$92,293,226
Corn
$115,716,868
$-
$20,000,000 $40,000,000 $60,000,000 $80,000,000 $100,000,00 $120,000,00 $140,000,00
0
Source: USA Trade Online, U.S. Census Bureau, 2012, U.S.-Cuba
Trade
0
0
TOP US AGRICULTURAL PRODUCTS
EXPORTED TO CUBA 2011
Frozen Pork
Beans 2%
2%
Decalcium/ + Cotton
Phosphate
1% Frozen Turkey
2%
1%
Soybean Oil Cake
3%
Brewing/Distilling
Dregs
7%
Corn
36%
Soybeans
18%
Frozen Chicken
28%
Source: USA Trade Online, U.S. Census Bureau, 2012
US (NON-CUBAN ORIGIN) VISITORS ARE
GROWING RAPIDLY
US travel to Cuba surges 36% following thaw in diplomatic relations
Cuba has seen 14% rise in tourism worldwide from January to May 2015.
http://www.theguardian.com/world/2015/may/26/us-american-cuba-travel-tourism-increase
160,000
140,000
120,000
Foreign tourists are flocking to visit Cuba
before the Americans move in and ruin it…About
600,000 U.S. travelers are estimated to visit Cuba each year, most of
them Cuban-Americans visiting family… PETER ORSI Associated Press Mar. 23,
2015, 6:50 AM
100,000
80,000
60,000
40,000
20,000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
(est)
2015
(est)
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
DESCRIPTION OF THE REMI MODEL
USED IN THE CEFA CUBA TRADE
ECONOMIC IMPACT RESEARCH

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.
Center for Economic Forecasting and Analysis
(CEFA), FSU
REMI ECONOMIC
MODELING ASSUMPTIONS

Cuba will eventually have an export/GDP and
import/GDP ratios the average of Mexico, the Dominican
Republican, and Costa Rica (12% and 19%
respectively). (Cuba 2012 GDP = $72 Billion)

Second, US-Cuba trade would expand rapidly becoming
a lead trading partner and Cuban trade will grow to be
similar to the level of these nations averaging 75.8% of
exports and 60.7% of imports from the U.S.

Finally, we estimate Cuba’s annual growth of GDP and
US imports to increase by 7%, 10% and 12%
respectively for twenty years after normalization.
EXAMPLES OF NEIGHBORING NATIONAL
PERCENTAGE OF EXPORT AND IMPORT
TO GDP
30%
27.2%
Exports/ GDP
25%
20%
Imports/ GDP
18.3%
17.2%
16.2%
16.6%
15.6%
15%
10.2%
10%
5.9%
5%
0%
Mexico
Dominican
Republic
Source: USA CIA, Fact Book, 2003
Costa Rica
Cuba
COMPORABLE NEIGHBOOR
NATION DATA
U.S. TO CUBA ACTUAL AND
POTENTIAL FORECAST EXPORT
$12,000
$10,000
$8,000
ACTUAL TRADE
POTENTIAL TRADE
TRADE US-CUBA FTA
$6,000
CEFA - 7% GROWTH
$4,000
$2,000
$-
Sources: “Economic Normalization with Cuba: A roadmap for U.S. Policy Makers”. Gary Hufbauer and Barbara Kotschwar, Peterso
Institute for International Economics. And
Estimation of Alternative Economic Scenarios of Future Emergence of Cuba into the Global Economy in a Post U.S. Trade Embargo
Era- Economic Impacts on the U.S. Economy” ,May 2014, updated, 2012, 2015, Lynch, T and Harrington, J, CEFA 2012 and 2015
IMPACT ON US GDP (BILLIONS 2012 $)
US GDP Total Dynamic Increase till 2035
(20 years) from Shifts to Free Trade with
Cuba
$350
$324
$300
$250
$226
$200
$150
$131
$100
$50
$0
7%
10%
GROWTH SCENARIOS
12%
US Job Increase till 2032 from Shifts of
Free Trade with Cuba
900,000
845,621
800,000
Job Creation
700,000
575,204
600,000
500,000
400,000
315,269
300,000
200,000
7%
10%
Growth Scenarios
12%
Tourism Revenue Growth (Billion)
THE 35 YEAR DYNAMIC ECONOMIC
BENEFITS TO FLORIDA ECONOMY FROM
LIFTING THE BAN OF TRAVEL TO CUBA
$3
10% of the U.S. total
15% of the U.S. total
$2
$1.4
$2.1
$1.6
$1.0
$1
$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.
Employment Growth
THE 35 YEAR JOB IMPACT OF LIFTING
TOURIST TRAVEL BAN TO CUBA ON
FLORIDA EMPLOYMENT
30,000
27,000
24,000
21,000
18,000
15,000
12,000
9,000
6,000
3,000
0
Source: The Impact on the U.S.
Economy of Lifting Restrictions on
Travel to Cuba,
Center for International
Policy Study, July 15, 2002.
27,372
10%
20,985
15%
18,205
14,000
Estimation I
Estimation II
The Jobs Impact of 5% Increase in
Productivity from Free Trade with Cuba on
Florida Economy over 20 Years
25,000
20,722
20,000
15,000
10,000
5,000
3,776
2,658
468
126
1,467
Waterborne
Transport
Rail Road
Freight Traffic
Agriculture
Manufacturing
IT-Telecom
Tourism
The Output Impact of 5% Increase in
Productivity from Free Trade with Cuba on
the Florida Economy over 20 Years
$1,400,000,000
$1,185,177,050
$1,200,000,000
$1,000,000,000
$800,000,000
$600,000,000
$400,000,000
$238,079,581
$229,447,197
$164,046,985
$200,000,000
$46,067,814
$11,638,063
$Waterborne
Transport
Rail Road
Freight Traffic
Agriculture
Manufacturing
IT-Telecom
Tourism
SUMMARY OF FINDINGS
For The U.S. Economy
Normalization of trade between Cuba
and the US will result in:
 $131 to $324 billion of exports over
20 years ; averaging almost $7 billion
to $16 billon respectively annually.
 This stimulus will result in creating
between 315,000 to 846,000 new
jobs across the U.S. economy over
those 20 years.
SUMMARY OF FINDINGS
For The Florida Economy
The lifting restrictions on travel to Cuba
will result in potential tourism dynamic
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
 Other Florida industries will increase
relative to export demands.
Tim Lynch, Ph.D.
([email protected] )
President, Econometrics
Consultants, Inc.
Former Director
Center for Economic Forecasting and
Analysis (CEFA)
Florida State University
www.cefa.fsu.edu
Florida State University
Center for Economic Forecasting and
Analysis (CEFA)
Specializes in applying advanced, computer-based economic
models and techniques to perform economic analyses and to
examine public policy issues across a spectrum of research
areas. FSU CEFA also serves as a foundation for training students
on the uses and applications of advanced economics and
statistical tools.
Key Areas of Expertise:
• Economics
• Sustainable Energy
• High Tech Economic Research
• Environmental/Natural Resources
• Economic Development
• Econometrics
• Economic Impact Analysis
http://www.cefa.fsu.edu