ESTIMATION OF THE ECONOMIC IMPACTS U.S.

1
ESTIMATION OF THE ECONOMIC IMPACTS U.S. CUBA
TRADE ON FLORIDA ECONOMY IN A POST U.S. TRADE
EMBARGO ERA

• Tim Lynch, Ph.D.
• Professor Emeritus Former Director
• Center for Economic Forecasting and Analysis
  (CEFA)
• Florida State University
• www.cefa.fsu.edu
• Presented at
• Doing Business in Cuba Conference
• Sponsored by
• US-Cuba Trade Association
• Citrus Club
• Orlando Florida
• April 13, 2006

2
CUBAN ECONOMIC HISTORY BEFORE THE SOCIALIST
REGIME

• Before 1959 the U.S. was Cubas main trading
  partner. Florida was Cubas largest U.S. state
  trade partner.
• 40 percent of all cargo being routed through
  Miamis customs district was transported to Cuba.
  
• 85 percent of Cubas exports were transported to
  the United States.

3
SUMMARY OF ECONOMIC MESSAGE

• GNP Consumption Investment Gov
  Exports\Imports (Each works with/on the other)
• 1 1 MUCHO MAS QUE gt DOS
• CUBA IS THE SPRING LOADED NATION OF THE
  CARIBBEAN THAT HAS THE LARGEST MOST EDUCATED
  POPULATION OF THE REGION AND ONLY NEEDS THE
  OPORTUNITY TO LAUNCH INTO THE 21ST GLOBAL
  ECONOMY. WHO PROVIDES THAT LAUNCH THE US OR
  CHINA AND OTHERS?
• THIS LAUNCH CAN BENEFIT CUBA, THE US AND THE
  CARRIBIAN REGION!

4
IMPACT OF FREE TRADE WITH CUBA IN THE U.S. ECONOMY

• Cuba is the largest and most economically viable
  of the Caribbean nations.
• Its wealth of underutilized natural and human
  resources and proximity makes it an ideal
  economic trading partner for the U.S.
• For example the U.S.-Cuba Business Council
  estimated initial Cuban infrastructure needs of
• 500 million investment in telecommunications.
• 500 million in mass transit.
• 575 million in airports.
• 540 million in railroads.

5
IMPACT OF FREE TRADE WITH CUBA IN THE FLORIDA
ECONOMY

• Economic reforms in Cuba since the 1990s towards
  a more open market system will generate
  considerable business opportunities for the US
  and Florida economy (assuming these trends return
  and grow).
• Gravity theory suggests that Florida the US
  land bridge closest to Cuba- has more advantages
  than any other state to benefit from trade
  liberalization with Cuba.
• Lifting sanctions would result in Florida (and
  the U.S.) adding approximately 11 million
  additional customers just 90 miles from Floridas
  shores. A population equal to that of Georgia and
  Alabama.

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RECENT ECONOMIC IMPACT STUDIES

• Embargo costs the U.S. between 3 and 4 billion
  in lost exports per year. (Preeg, Center for
  Strategic and International Studies, 1998.)
• Lifting sanctions on agricultural exports to Cuba
  for the 50 states and 22 commodity sectors, will
  result in increases in exports of 1.2 billion
  per year. (Rosson and Adcock, Texas AM
  University, 2001)
• Such increase in exports would stimulate an
  additional 3.6 billion in total economic output
  and 31,262 new jobs in the U.S. labor market.
  (Ibid,Rosson, 2001)

7
Historic Changes of U.S. Export to Cuba(Millions
Dollars)

• Allows for U.S. food and medical exports to Cuba
  under certain conditions.
• In its first three year of implementation, the
  U.S. exports to Cuba rose by almost 300.

Source USA Trade Online, U.S. Census Bureau, 2004
8
2004 U.S. Exports to Cuba by Category

• 96 of 2004 U.S.exports to Cuba are food related.
  
• Compared to 2002 exports, those exports rose by
  79.

Source USA Trade Online, U.S. Census Bureau, 2003
9

• THE ESTIMATION OF THE US AND FLORIDA IMPACTS OF
  FREE TRADE WITH CUBA

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OLD ECONOMY WITH RESTRICTED TRADE
Goods Services
Productivity
Low cost production Strong economy
Profits
11
NEW ECONOMY WITH FREE TRADE
Goods Services
Higher productivity Higher wages Higher quality
of life
More resilient economy Higher efficiency Higher
wealth
Higher profits
12
EXAMPLES OF NEIGHBORING NATIONAL PERCENTAGE OF
EXPORT AND IMPORT TO GDP (2004)
Source USA CIA, Fact Book, 2004
13
FORECASTED POSSIBLE US-CUBA 10 YEAR GROWTH IN
TRADE (2004)
14
FORECASTED POSSIBLE US-CUBA 20 YEAR GROWTH IN
TRADE (2004)
15
DESCRIPTION OF FSU CUBA RESEARCH USING THE REMI
MODEL

• REMI, 2000 (REMI, 2000) is a widely accepted and
  used dynamic integrated input-output and
  econometric model.
• REMI is the most sophisticated and widely used
  economic impact assessment tool currently
  available in the US. REMI is extensively used by
  US public and private agencies, business and
  Universities to evaluate the economic impact of
  pending complex federal, state and local policy
  actions.

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Estimate of the Total Dynamic Increase in U.S.
GDP Through 2025 (20 years) from Shifts of Free
Trade with Cuba (2004)
17
Estimate of the Total Job Increase in the U.S.
Through 2025 (over 20 years) from Shifts of Free
Trade with Cuba
18
THE 35 YEAR DYNAMIC ECONOMIC BENEFITS TO FLORIDA
ECONOMY FROM LIFTING THE BAN OF TRAVEL TO CUBA
(2003)
Source The Impact on the U.S. Economy of Lifting
Restrictions on Travel to Cuba, Center for
International Policy Study, July 15, 2002.
19
THE 35 YEAR JOB IMPACT OF LIFTING TOURIST TRAVEL
BAN TO CUBA ON FLORIDA EMPLOYMENT (2004)
Source The Impact on the U.S. Economy of Lifting
Restrictions on Travel to Cuba, Center for
International Policy Study, July 15, 2002.
20
SUMMARY OF FINDINGS (For The U.S. Economy)

• Normalization of trade between Cuba and the US
  will result in
• 101 to 253 billion GDP increase over 20 years.
• 5 to 13 billion annual dynamic increase in U.S.
  GDP over 20 years.
• 315,000 to 846,000 new jobs in the U.S. economy
  over 20 years.

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SUMMARY OF FINDINGS (For The Florida Economy)

• The lifting restrictions on travel to Cuba will
  result in potential tourism dynamic increases
  alone of
• 1.3 to 2.5 billion growth in Florida GDP over
  30 years
• 14,000 to 27,500 new jobs in Florida over 30
  years
• Other Florida industries will increase relative
  to export demands.

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• Tim Lynch, Ph.D., Director
• Center for Economic Forecasting and Analysis
  (CEFA)
• Florida State University
• www.cefa.fsu.edu