ECONOMIC BENEFITS OF LIFTING U.S. SANCTIONS ON CUBA

ECONOMIC BENEFITS OF LIFTING U.S. SANCTIONS ON CUBA

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 2631, 2003

CUBAN ECONOMIC HISTORY: BEFORE THE SOCIALIST REGIME Before 1959 the U.S. was Cubas main trading partner. Florida was Cubas largest U.S. state trade partner. 40 percent of all cargo being routed through Miamis customs district was transported to Cuba. 85 percent of Cubas 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 1990s 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 Floridas 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) THE ESTIMATION OF THE IMPACT OF FREE TRADE WITH CUBA OLD ECONOMY WITH RESTRICTED TRADE People Productivity Low cost production Strong economy Capit al

Entrepreneurs Profits Goods Services NEW ECONOMY WITH FREE TRADE Higher productivity Higher wages Higher quality of life People Capital

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 $0.00 Im ports Exports FORECAST POSSIBLE US-CUBA 35 YEAR GROWTH IN TRADE (2003$) 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$)

THE 35 YEAR IMPACT OF FREE TRADE WITH CUBA ON THE U.S. GDP (2003$) THE 35 YEAR ECONOMIC BENEFITS TO FLORIDA ECONOMY FROM LIFTING THE BAN OF TRAVEL TO CUBA (2003$) 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$) 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

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