Dr. Kassens
ECON 122
4/20/16
The United States and Cuba have had a very rocky relationship ever since the 1960's. The cause of the turmoil between the two countries is rooted in the Cold War. When Fidel Castro first came in to power in 1959, following the Cuban Revolution, the US heavily supported his regime and immediately recognized his regime as the leaders of Cuba. However, by 1960 Castro began to nationalize major private companies and industries (a practice in line with socialism/communism), brutally hiked taxes on US made goods and products, and began expanding relations with the Soviet Union. Eisenhower, who was President at the time, and his administration fired back by cutting diplomatic ties, and eventually trade, thus creating the embargo on Cuban trade. Further worsening US-Cuban relations, was the US's discovery of Soviet missile bases located in Cuba, prompting the infamous nuclear face off between the two countries. Up until very recently, there have been many instances of aggression between the two countries, providing reasoning for the broken diplomatic and trade affairs the countries once had.
A trade embargo can have very serious repercussions when it comes to multiple different economic facets. For example, export sanctions have a lighter impact on the target country than import sanctions. When exports are completely blocked from entering a certain country, especially when the target country is a much less developed country (ie. Cuba), it will not only force that country to trade abroad elsewhere, but also hurt the countries development in the long run. US goods are generally superior to Cuban goods, and with Cuba not being able to import US goods, they might be forced to import a lesser quality or less developed good, thus crippling their economy and development as a country. When there is sanctions placed on blocking imports from a certain country, that country will feel greater effects on their economy than export sanctions. Import sanctions generally implies that the country's goods are not bought abroad by one or many countries. In Cuba's case, the US was not buying any of their exports, so in theory, when the target country is unable to sell their goods, their economy will stagnate, they will see huge losses in jobs, and the country will be much more susceptible to a nationalized economy and totalitarian type government. Net exports in the target country will increase if export sanctions are introduced to the country, because the country would import less due to the country who instated the export sanctions no longer exporting to the target country. Likewise, in a country like Cuba, US imposed economic sanctions would severely cripple their Net Capital Outflow. This is due to the fact that the US is a globally recognized economic leader. Because of the US embargoing Cuba, other countries in the world will quickly lose faith in the idea of economic prosperity in Cuba, and thus cut off funds and any sort of economic investments in the country. Overall, when an embargo is enforced on a country, it tends to have negative trickle down effects on the target country's economy, and can also negatively effect the country whom is imposing the sanctions. In the case of the US-Cuban trade embargo, the Cuban economy and government suffered. Because of Cuba's much smaller and generally nationalized economy and the US's massive globally linked economy, the US saw minimal damage linked with the sanctions they imposed. However, because of Cuba's nationalized and isolated economy, they were able to maintain some economic prosperity due to the fact that around 80% of their population is employed by the government. They imported only necessary goods to maintain the infrastructure of their economy, while internally producing other key commodities. Today, President Obama has fully reconnected all diplomatic relationships with Cuba, and is working on completely reconnecting trade relations under the guidelines of a more democratic government system and an improved free market economy in Cuba. So, as is apparent with the US's embargo on Cuba, the target country will see a negative impact on exports, imports, net exports, NCO, and economic growth.
Renwick, Danielle, Brianna Lee, and James McBride. "U.S.-Cuba Relations." Council on Foreign Relations. Council on Foreign Relations. Web. 20 Apr. 2016.
http://www.cfr.org/cuba/us-cuba-relations/p11113
Radcliffe, Brent. "The Power Of Economic Sanctions | Investopedia."Investopedia. N.p., 18 Oct. 2009. Web. 21 Apr. 2016.
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