The diplomatic ties between the
United States and Cuba have been completely closed off since the 1960s along
with the enactment of the Trade Embargo with Cuba. This was set in place by President
Eisenhower. This was set in motion on October 19th 1960 and has not
been repealed to this day (TIME). When it was first set into place all US
exports were banned from entering Cuba, except pharmaceuticals and certain
foods. This was later expanded by President John F. Kennedy after the Cuban Missile
Crisis spurred by his decision to allow the Bay of Pigs invasion that failed.
With his contribution the trade embargo now covered imports from Cuba into the
United States. Only an act of congress can officially lift the ban on exports
and imports by the trade embargo (TIME).
One of the ten principles of
macroeconomics is that trade can make everyone better off. This is not a guarantee
that it will, but trade between two countries that are so geographically close
would most likely have a positive impact on both parties. In the article it was
estimated that this embargo has contributed a loss of $1.12 trillion from the
Cuban economy (CFR). With a GDP of $80.66 billion this is a huge setback for
the Cuban economy (TE). The removal of this embargo would not mean an addition
of the $1.12trillion that was estimated to be lost, and there is no guarantee this
would help to expand their economy by that much in the future. The idea that
trade makes everyone better off implies that Cuba’s GDP would only increase
after the removal of the embargo, and the US would gain from it as well.
Because the embargo places
restrictions on imports and exports the removal of it would mean an increase in
both, since only a select few products are allowed to be exported to them and
no imports are allowed, form the US not all other countries. The increase in
exports from Cuba would help to increase their net exports, which is exports
minus imports. This is one of the four variables that is concerned with
calculating GDP and as exports increase the Cuban GDP increases. If the embargo
is lifted and there is a large shift of imports, then it can have the opposite
effect; shrinking net exports and therefore GDP.
The US would be the main country
that would affect this new shift in net exports. According to the UN Comtrade
the top imports by the US are mineral fuels, nuclear reactors, and electrical
equipment. While Cuba’s top exports are nickel and sugar. So it does not seem
like Cuba’s top exports are what the US is willing to import a lot of. The US is
a main exporter of nuclear reactors and electrical equipment, while Cuba imports
mostly mineral fuels, nuclear reactors, and electrical equipment. This makes it
seem like Cuba would increase imports from the US rather than increase its own
exports, therefore shrinking net exports and GDP.
Net capital outflow is the outflow
of funds being invested abroad by a country. A positive NCO would mean a
country is it is investing more than the world is investing in them. NCO is
more complicated to predict, but hopefully there should be an increase in the US
investing in Cuban goods and services to help it politically and socially.
There have been some major human rights violations in Cuba and with the boost
in their economy hopefully the average citizen would be happier and have a
greater output increasing economic growth.
References
Renwick D, Lee B, and McBride J. 2016. U.S.-Cuba Relations.
Council on Foreign Relations Backgrounds.
Obtained from: http://www.cfr.org/cuba/us-cuba-relations/p11113
Fabry M. 2015. The U.S. Trade Embargo on Cuba Just Hit 55
Years. Time.
Obtained from: http://time.com/4076438/us-cuba-embargo-1960/
Cuba GDP 1970-2016. Trading Economies.
Obtained from: http://www.tradingeconomics.com/cuba/gdp
No comments:
Post a Comment