US Trade Embargo of Cuba

Matt Gladfelter
Dr. Kassens
Econ 122
21 April 2016

    The trade embargo of Cuba by the United States began two years after the overthrowing of Fulgencio Batista in 1959.  At first, the United States continued to recognize the newly formed government.  However, as the regime began trading increasingly with the Soviet Union, the US decided to institute a series of bans that led to a full economic embargo. In 1961, a botched attempt to overthrow Fidel Castro, the Bay of Pigs invasion, led to Cuba allowing the Soviet Union to build a missile base on the island.  This results in the Cuban Missile Crisis causing in further tension between the countries.  In the 1990's, the embargo was strengthened significantly with the 1992 Cuba Democracy Act and the 1996 Helms-Burton Act.  The latter ensures that the embargo of Cuba will remain in place until the country "holds free and fair elections and transitions to a democratic government that excludes the Castros".    Due to more than fifty years of trade restrictions, the Cuban government believes this resulted in a lose of $1.126 trillion.
   In late 2014, the US and Cuba announced they would restore full diplomatic diplomacy.  Barack Obama has continued to work towards a stable relationship with Cuba.  New travel and trade regulations have been enacted including use of credit and debit cards in Cuba and allowing US companies to invest in small businesses.  Polls in recent years have shown a majority of both Cubans and Americans support an end to the trade embargo.
   A trade embargo such as the embargo of Cuba by the United States would have a negative impact of both countries economies.  Exports and imports for both countries would decrease as a result.  Cuba, in this case, would most likely have had a higher impact due to the US having a much larger economy in comparison to Cuba. In 2007, even with the US only exporting limited products to Cuba, the US still was the fifth-largest exporter to Cuba, showing how large of an impact the US has on the Cuban economy. Net exports may rise or fall in the result of the embargo.  If the countries' exports to each other are equal, the net exports for both countries will remain the same.  If the countries' exports to each other are not equal, for one of the countries, it will rise, while it will fall for the other. To show this, given two countries Q and P:

NX = X - I for both countries where NX = net exports, X = exports, and I = imports

NXQ = (X - A) - (I - B) for one country, Q, where A =  exports from Q to P and B = imports from P to Q

 NXP = (X - B) - (I - A) for one country, P, where A = imports from P to Q and B = exports from Q to P

If country Q exported more to country P than imported, A > B.  For net exports of country Q, NXQ = (X - I) + (B-A).  Let country Q export more to country P than import from country P. So, A > B. Because of this,  NXQ = (X-I) + a negative value.  Thus, country Q's net exports is reduced as a result of the trade embargo.  The opposite could be proven for country P, which would result in an increase in net exports if A > B. Because NX = NCO, NCO has the same result as NX for both countries.

"U.S-Cuba Relations." Council on Foreign Relations. Council on Foreign Relations, n.d. Web. 20 Apr. 2016. <http://www.cfr.org/cuba/us-cuba-relations/p11113>.