Thursday, April 21, 2016

The US-Cuba Trade Embargo and its Effects

Trade embargoes certainly have a major impact on international trade and numerous related macroeconomic factors. The Council on Foreign Relations (CFR) article definitely highlights that.
The trade embargo between the United States and Cuba originated in 1961 during the Cold War, when the United States and Cuba (a communist ally of the Soviet Union) had opposing economic systems, the former with a free-market capitalist economy, and the latter with a controlled communist economy. National security concerns over the Cuban communist regime's recent rise to power, especially regarding its potential arsenal of Soviet missiles, led to the American John F. Kennedy Administration placing the embargo. Such an economically debilitating sanction was used as an act of war, threatening Cuba's human security (a concept that factors beyond the military, like the economy, are related to security).
The effects of the embargo on various macroeconomic indicators of Cuba's economy have been disastrous, just as the US intended when it placed the embargo. While it has not succeeded in changing Cuba's political structure (one that is still communist, despite the recent liberalization of its economy), Cuba's import value has plummeted by over $1 trillion (USD). Only recent adjustments have allowed Cuba to receive some basic necessities like medicine from the US. Cutting off US-Cuban trade has proven detrimental to Cuba's economic development, especially because the United States is an economic power only about 100 miles away. Being an island nation isolated from such a strong potential trading partner has impoverished Cuba.
While there is pressure to remove the embargo on both sides, there is still great distrust of the Cuban political structure from the American perspective hindering this move.

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