A New Chapter of U.S.–Cuban Trade Relations

Who doesn’t enjoy relaxing on an idyllic Caribbean beach, being taxied around in retro cars, and taking a break island style? Cuba could be the next big Caribbean island destination if the U.S. continues to soften its decades-long trade embargo with Cuba.

Far beyond talk of vacations, however, the opening of U.S.–Cuban relations could significantly improve human rights in Cuba and the economies of both countries—creating new jobs, boosting U.S. exports, and reducing the need for agricultural subsidies.

The U.S. first imposed an import/export embargo on Cuba after oil disputes in 1962. The embargo has remained in effect for over five decades. In upholding the embargo, the U.S. hoped to coerce Fidel Castro to improve humanitarian conditions in Cuba. However, Fidel used the embargo as a scapegoat for these same poor conditions, fueling anti-American sentiment among the Cuban populace as human rights deteriorated.

At this point, softening the embargo has the potential to measurably improve human rights in Cuba. Under President Raúl Castro, the country is already showing signs of progress: for instance, citizens have been allowed to create private sector businesses to fill voids left unaddressed by government services. Bans have been lifted on many goods, including computers and telecommunications equipment, and a $1 billion Free Trade Zone was recently built outside of Havana. Cuba’s newly-reinstated private sector now employs 450,000 people, or 4 percent of the country’s workforce. The Mariel Free Trade Zone has the potential to be a significant source of new employment. However, its success is somewhat contingent upon the softening of the embargo because ships that dock in Cuba are not allowed to enter the U.S. for six months. Should Raúl Castro and the U.S. come to an agreement, Cuba’s already-improving economy and socioeconomic landscape could see tremendous benefit from the flow of additional capital.

Lifting the embargo could also benefit a relatively small but tangible share of the U.S. economy. A recent American University study conservatively estimated the immediate economic impact to the U.S. of an eliminated embargo with Cuba to be an incremental $1.9 billion annually, including the creation of 6,000 new U.S. jobs in food exports and tourism.

Despite indications of progress in Cuba and the potential humanitarian and economic benefits of lifting the embargo, there remains some resistance in the U.S., ostensibly under the pretext of human rights concerns. However, research suggests a substantial share of the funding for embargo-perpetuating propaganda originates from business owners who may be more concerned about protecting their economic interests from competition with Cuba than they are about actually promoting human rights.

Respected foreign policy experts increasingly point to the inefficacy of sanctions producing any real political change in Cuba. Instead, they highlight how opening trade relations in places like China and Vietnam has improved living standards for average citizens. Perhaps opening trade with Cuba will do far more for human rights than has fifty years of diplomatic ‘cold shoulder treatment.’

In establishing a trade relationship with President Raúl Castro, the United States could fuel a new era of improved living conditions in Cuba. Lifting the outdated embargo would repair tarnished relations between these neighboring countries, promoting economic growth in both and social advancement in Cuba.

This post is part of an ongoing series of data-driven commentary on current events. It was originally published in the Zion’s Bank Economic Outlook Newsletter and the Deseret News.