Transcript Estimation of the Economic Impacts of U.S.

ESTIMATION OF THE ECONOMIC IMPACTS OF
U.S. – CUBA TRADE ON FLORIDA ECONOMY
IN A POST U.S. TRADE EMBARGO ERA
Tim Lynch, Ph.D., Director
&
Necati Aydin, Ph.D. Research Associate
Center for Economic Forecasting and Analysis (CEFA)
Florida State University
www.cefa.fsu.edu
Presented at
The Future of U.S. – Cuba Economic Relations
The Biltmore Hotel, Coral Gables, Florida,June 10, 2004
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.
SUMMARY OF ECONOMIC
MESSAGE:

GNP = Consumption + Investment + Gov
+ Exports (Each works with/on the other)

1

CUBA IS THE “SPRING LOADED” NATION OF
THE CARIBBEAN THAT HAS THE LARGEST
MOST EDUCATED POPULATION OF THE
REGION AND ONLY NEEDS THE
OPORTUNITY TO “LAUNCH” INTO THE 21ST
GLOBAL ECONOMY.
THIS LAUNCH CAN BENEFIT CUBA, THE US
AND THE CARRIBIAN REGION

+
1
MUCHO MAS QUE > DOS
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 return and grow).

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)
Historic Changes of U.S. Export to Cuba
(Millions Dollars)
$300
$250
$200
$150


Allows for U.S. food and medical
exports to Cuba under certain
conditions.
In its first two year of
implementation, the U.S.
exports to Cuba rose by a factor
of almost 40.
$260.8
$145.6
$100
$50
$1.2 $2.5 $4.6 $5.6 $5.5 $9.5 $3.5 $4.5 $6.9 $7.1
$0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Source: USA Trade Online, U.S. Census Bureau, 2003
Export
2003 U.S. EXPORT to Cuba by Category
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
$85.1

96% of 2003
U.S.exports to
Cuba are food
related.

Compared to
2002 exports,
those of 2003
rose by 79%.
$51.5
$36.7
$38.3
$38.8
$7.2
Wheat
Soybeans
Oilseeds, Food Meats, poultry,
Other
oils
etc.
Agircultural
Source: USA Trade Online, U.S. Census Bureau, 2003
Industrial
$3.3
Misc.
Top Ten Import Products by Cuba
in 2001
Top Ten Import Products by Cuba in 2001
(Million U.S. Dollar)
$61
Petroleum oils, not crude
Crude petroleum oils
$54
$63
Wheat and meslin
$68
Rice
$72
$663
$99
Milk and cream, concentrated
or sweetened
Meat & edible offal of poultry
meat
Cars (incl. station wagon)
$119
Automatic data processing
machines;optical reader, etc
Dried vegetables, shelled
$139
Wheat or meslin flour
Source: International Trade Center (ITC) Website, www.intracen.org/menus/countries.htm
Top Ten Export Products by Cuba
in 2001
Top Ten Export Products by Cuba in 2001
(Million U.S. Dollar)
$50
$33
$34
$26 $25 $22
Cane or beet sugar and chemically pure
sucrose, in solid form
Nickel matte,nickel oxide sinters
Cigars, cheroots, cigarillos & cigarettes
$77
Crustaceans
$543
$241
Fruit & vegetable juices, unfermented
Cements, portland, aluminous, slag,
supersulfate
Human & animal blood; antisera, vaccines,
toxins, micro-organism cultures
Semi-finished products of iron or nonalloy steel
Petroleum oils, not crude
Tobacco unmanufactured; tobacco refuse
Source: International Trade Center (ITC) Website,
www.intracen.org/menus/countries.htm
$462
EXAMPLES OF NEIGHBORING NATIONAL
PERCENTAGE OF EXPORT AND IMPORT
TO GDP (2002)
30%
27.2%
Exports/ GDP
25%
20%
Imports/ GDP
18.3%
17.2%
16.2%
16.6%
15.6%
15%
10.2%
10%
5.9%
5%
0%
Mexico
Dominican
Republic
Source: USA CIA, Fact Book, 2003
Costa Rica
Cuba
THE ESTIMATION OF THE
IMPACT OF FREE TRADE WITH
CUBA
OLD ECONOMY WITH RESTRICTED TRADE
People
Productivity
Low cost production
Strong economy
Capital
Entrepreneurs
Profits
Goods
Services
NEW ECONOMY WITH FREE TRADE
People
Capital
Higher productivity
Higher wages
Higher quality of life
More resilient economy
Higher efficiency
Higher wealth
Higher profits
Entrepreneurs
Goods
Services
FORECASTED POSSIBLE US-CUBA 10 YEAR
GROWTH IN TRADE (2003$)
$11.2
$9.5
Billion dollars
$9.6
7% GDP growth
10% GDP growth
12% GDP growth
$8.0
$6.4
$7.9
$6.0
$4.2
$4.8
$3.5
$3.2
$2.7
$1.6
$0.0
Imports
Exports
Billion dollars
FORECASTED POSSIBLE US-CUBA 20
YEAR GROWTH IN TRADE (2003$)
$31.2
$28.6
$26.0
$23.4
$20.8
$18.2
$15.6
$13.0
$10.4
$7.8
$5.2
$2.6
$0.0
$29.42
7% GDP growth
10% GDP growth
12% GDP growth
$20.52
$19.38
$13.51
$11.80
$7.77
Imports
Exports
DESCRIPTION OF FSU CUBA
RESEARCH USING THE REMI MODEL

REMI, 2000 (REMI, 2000) is a widely
accepted and used dynamic integrated
input-output and econometric model.

REMI is the most sophisticated and widely
used economic impact assessment tool
currently available in the US. REMI is
extensively used by US public and private
agencies, business and Universities to
evaluate the economic impact of pending
complex federal, state and local policy
actions.
Estimate of the Total Dynamic Increase
in U.S. GDP Through 2024 (20 years)
from Shifts of Free Trade with Cuba
(2003$)
$275
$253.4
Impact on U.S. GDP ($ Billion)
$255
$235
$215
$195
$176.6
$175
$155
$135
$115
$102.1
$95
$75
7%
10%
Growth Scenarios
12%
Estimate of the Total Job Increase in the
U.S. Through 2024 (over 20 years) from
Shifts of Free Trade with Cuba
900,000
845,621
800,000
Job Creation
700,000
575,204
600,000
500,000
400,000
315,269
300,000
200,000
7%
10%
Growth Scenarios
12%
THE 35 YEAR DYNAMIC ECONOMIC
BENEFITS TO FLORIDA ECONOMY FROM
LIFTING THE BAN OF TRAVEL TO CUBA
Tourism Revenue Growth (Billion)
(2003$)
$3
10% of the U.S. total
15% of the U.S. total
$2
$1.4
$2.1
$1.6
$1.0
$1
$0
Estimation I
Estimation II
Source: The Impact on the U.S. Economy of Lifting Restrictions on Travel to Cuba,
Center for International Policy Study, July 15, 2002.
Employment Growth
THE 35 YEAR JOB IMPACT OF LIFTING
TOURIST TRAVEL BAN TO CUBA ON
FLORIDA EMPLOYMENT (2003$)
30,000
27,000
24,000
21,000
18,000
15,000
12,000
9,000
6,000
3,000
0
27,372
10%
20,985
15%
18,205
14,000
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 Output Impact of 5% Increase in
Productivity from Free Trade with Cuba
on Florida Economy over 10 Years
$600,000,000
$499,277,139
$500,000,000
$400,000,000
$300,000,000
$200,000,000
$100,000,000
$99,165,812
$84,365,872
$63,433,710
$23,758,857
$6,358,357
$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
The Output Impact of 5% Increase in
Productivity from Free Trade with Cuba
on the Florida Economy over 35 Years
$3,000,000,000
$2,518,158,556
$2,500,000,000
$2,000,000,000
$1,500,000,000
$1,000,000,000
$585,348,775
$490,380,361
$410,127,818
$500,000,000
$83,098,733
$29,784,712
$Waterborne
Transport
Rail Road
Freight Traffic
Agriculture
Manufacturing
IT-Telecom
Tourism
The Jobs Impact of 5% Increase in
Productivity from Free Trade with Cuba
on the Florida Economy over 10 Years
12,000
9,671
10,000
8,000
6,000
4,000
2,000
1,588
1,284
278
79
637
Waterborne
Transport
Rail Road
Freight Traffic
Agriculture
Manufacturing
IT-Telecom
Tourism
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 Jobs Impact of 5% Increase in
Productivity Free Trade with Cuba on
Florida Economy over 35 Years
45,000
38,847
40,000
35,000
30,000
25,000
20,000
15,000
8,559
10,000
4,944
5,000
2,920
698
250
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:
 $9 to $14 billion imports and exports
over 10 years annually; $20 to $49
billion in 20 years.
 $5 to $13 billion annual dynamic
increase in U.S. GDP over 20 years.
 315 thousand to 846 thousand new
jobs in the U.S. economy over 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.,
Director
Center for Economic Forecasting and
Analysis (CEFA)
 Florida State University
 www.cefa.fsu.edu