Normalizing Relations with Cuba: A Step Forward

Original post date: December 23, 2014
Article by: Matt Kelly

In a recent statement, President Obama suggested Congress lift the 54 year long trade embargo on Cuba and announced concrete steps he and the communist nation’s president Raul Castro would take to normalize relations. The controversial statement elicited mixed responses from legislators, news media, and the public. But economic analysis suggests normalization could be a step forward for both countries. More often than not, trade sanctions harm both parties involved, and ultimately fail to topple unfriendly regimes. Opening up trade relations with the Caribbean island could be in the United States’ best interest, especially Florida’s.

The embargo, which has existed in one form or another since October 1960, prohibits trade between Cuba and the United States. Occasional revisions to the law have altered the list of prohibited products. Since 1999 foreign subsidiaries of U.S. companies have also been barred from trading with Cuba. It is extremely difficult for Cuban immigrants to visit family members, since paying airfare taxes to Cuban airports violates the Cuban Assets Control Regulations. Under these regulations, U.S. citizens must obtain a license from the U.S. Treasury Department’s Office of Foreign Assets Control to make any transactions in Cuba, otherwise risking prosecution and fines. The Obama administration relaxed some of these policies in 2009, easing the travel ban and removing limits on remittances to family members in Cuba.

The U.S. Chamber of Commerce estimates the cost of the embargo at $1.2 billion in foregone business annually to the U.S., while Cuba loses only $685 million annually. These figures suggest the U.S. has much to gain from ending the embargo, Florida perhaps most of all. Before its revolution, Cuba was Tampa’s biggest trading partner, and Florida’s other ports could receive a boost if trade were to resume.

Moreover, compared to the overall inefficiency of its socialist economy, the embargo poses only a minor handicap. Cuba’s government has kept its people in abject poverty, depriving them of necessities and consumer products alike. Troubling too is Cubans’ lack of political freedom. The country’s internet is among the most tightly controlled in the world.

However, el bloqueo (as Cuba’s government calls the embargo) does not address Cuba’s political and economic oppression. In fact, a letter from the Cuban Civil Society, a humanitarian activist group that opposes the Castro regime, states that “the isolation of the people of Cuba benefits the most inflexible interests of its government, while any opening serves to inform and empower the Cuban people and helps to further strengthen our civil society.” Soft power could be much more effective if U.S. tourists and products could travel freely to Cuba.

We have yet to see if Raul Castro’s government will fully cooperate, though the recent release of USAID worker Alan Gross, who has had been in prison on the island since December 2009, is encouraging. Regardless, if the U.S. wishes to share the free-market ideals that have made it a success, it might consider practicing free trade in its own backyard.

About DeVoe Moore Center

The DeVoe L. Moore Center is conducts economic research and policy analysis focused on state and local policy issues and is located in the College of Social Sciences and Public Policy at Florida State University in Tallahassee. As an educational institution the DMC provides professional research experience to undergraduate and master’s students through an extensive program of internships and independent study, preparing them for a future in public policy, economic development, public sector accountability and entrepreneurship.
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