estimation of the economic impacts of u.s. – cuba trade on florida economy in a post u.s. trade...
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ESTIMATION OF THE ECONOMIC IMPACTS OF U.S. – CUBA TRADE ON FLORIDA ECONOMY
IN A POST U.S. TRADE EMBARGO ERA
Tim Lynch, Ph.D., Director&
Necati Aydin, Ph.D. Research Associate
Center for Economic Forecasting and Analysis (CEFA)Florida State University
www.cefa.fsu.edu
Presented at The Future of U.S. – Cuba Economic Relations
The Biltmore Hotel, Coral Gables, Florida,June 10, 2004
CUBAN ECONOMIC HISTORY: BEFORE THE SOCIALIST REGIME
Before 1959 the U.S. was Cuba’s main trading partner. Florida was Cuba’s largest U.S. state trade partner.
40 percent of all cargo being routed through Miami’s customs district was transported to Cuba.
85 percent of Cuba’s exports were transported to the United States.
SUMMARY OF ECONOMIC MESSAGE:
GNP = Consumption + Investment + Gov + Exports (Each works with/on the other)
1 + 1 MUCHO MAS QUE > 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.
THIS LAUNCH CAN BENEFIT CUBA, THE US AND THE CARRIBIAN REGION
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 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.
IMPACT OF FREE TRADE WITH CUBA IN THE FLORIDA ECONOMY
Economic reforms in Cuba since the 1990’s towards a more open market system will generate considerable business opportunities for the Florida economy (assuming these trends return and grow).
Gravity theory suggests that Florida 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 Florida’s shores.
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 A&M 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)
Historic Changes of U.S. Export to Cuba(Millions Dollars)
$1.2 $2.5 $4.6 $5.6 $5.5 $9.5 $3.5 $4.5 $6.9 $7.1
$145.6
$260.8
$0
$50
$100
$150
$200
$250
$300
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Source: USA Trade Online, U.S. Census Bureau, 2003
Allows for U.S. food and medical exports to Cuba under certain conditions.
In its first two year of implementation, the U.S. exports to Cuba rose by a factor of almost 40.
2003 U.S. EXPORT to Cuba by Category
Source: USA Trade Online, U.S. Census Bureau, 2003
$36.7 $38.3
$51.5
$38.8
$85.1
$7.2$3.3
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
Wheat Soybeans Oilseeds, Foodoils
Meats, poultry,etc.
OtherAgircultural
Industrial Misc.
Expo
rt
96% of 2003 U.S.exports to Cuba are food related.
Compared to 2002 exports, those of 2003 rose by 79%.
Top Ten Import Products by Cuba
in 2001 Top Ten Import Products by Cuba in 2001
(Million U.S. Dollar)
$663
$333
$139
$119
$99
$72
$68
$63$61 $54
Petroleum oils, not crude
Crude petroleum oils
Wheat and meslin
Rice
Milk and cream, concentratedor sweetened
Meat & edible offal of poultrymeat
Cars (incl. station wagon)
Automatic data processingmachines;optical reader, etc
Dried vegetables, shelled
Wheat or meslin flour
Source: International Trade Center (ITC) Website, www.intracen.org/menus/countries.htm
Top Ten Export Products by Cuba in 2001
Top Ten Export Products by Cuba in 2001 (Million U.S. Dollar)
$543
$462
$241
$77
$50
$25 $22
$34$33 $26
Cane or beet sugar and chemically puresucrose, in solid formNickel matte,nickel oxide sinters
Cigars, cheroots, cigarillos & cigarettes
Crustaceans
Fruit & vegetable juices, unfermented
Cements, portland, aluminous, slag,supersulfateHuman & animal blood; antisera, vaccines,toxins, micro-organism culturesSemi-finished products of iron or nonalloy steel
Petroleum oils, not crude
Tobacco unmanufactured; tobacco refuse
Source: International Trade Center (ITC) Website, www.intracen.org/menus/countries.htm
EXAMPLES OF NEIGHBORING NATIONAL PERCENTAGE OF EXPORT AND IMPORT
TO GDP (2002)
18.3%16.2%
27.2%
15.6%
5.9%
16.6%
10.2%
17.2%
0%
5%
10%
15%
20%
25%
30%
Mexico DominicanRepublic
Costa Rica Cuba
Exports/ GDP
Imports/ GDP
Source: USA CIA, Fact Book, 2003
Goods
ServicesCapital
Productivity
Profits
Low cost productionStrong economy
Entrepreneurs
OLD ECONOMY WITH RESTRICTED TRADE
People
Goods
Services
Capital
Higher productivityHigher wages
Higher quality of life
Higher profits
Entrepreneurs
More resilient economyHigher efficiency
Higher wealth
People
NEW ECONOMY WITH FREE TRADE
FORECASTED POSSIBLE US-CUBA 10 YEAR GROWTH IN TRADE (2003$)
$2.7
$6.0
$3.5
$7.9
$4.2
$9.5
$0.0
$1.6
$3.2
$4.8
$6.4
$8.0
$9.6
$11.2
Imports Exports
Bill
ion
do
llars
7% GDP growth
10% GDP growth
12% GDP growth
FORECASTED POSSIBLE US-CUBA 20 YEAR GROWTH IN TRADE (2003$)
$7.77
$11.80$13.51
$20.52$19.38
$29.42
$0.0
$2.6
$5.2
$7.8
$10.4
$13.0
$15.6
$18.2
$20.8
$23.4
$26.0
$28.6
$31.2
Imports Exports
Billio
n d
olla
rs
7% GDP growth
10% GDP growth
12% GDP growth
DESCRIPTION OF FSU CUBA RESEARCH USING THE REMI MODEL
REMI, 2000 (REMI, 2000) is a widely accepted and used dynamic integrated input-output and econometric model.
REMI is the most sophisticated and widely used economic impact assessment tool currently available in the US. REMI is extensively used by US public and private agencies, business and Universities to evaluate the economic impact of pending complex federal, state and local policy actions.
Estimate of the Total Dynamic Increase in U.S. GDP Through 2024 (20 years) from Shifts of Free Trade with Cuba
(2003$)
$102.1
$176.6
$253.4
$75
$95
$115
$135
$155
$175
$195
$215
$235
$255
$275
7% 10% 12%
Growth Scenarios
Imp
ac
t o
n U
.S. G
DP
($
Billio
n)
Estimate of the Total Job Increase in the U.S. Through 2024 (over 20 years) from
Shifts of Free Trade with Cuba
315,269
575,204
845,621
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
7% 10% 12%
Growth Scenarios
Jo
b C
reati
on
THE 35 YEAR DYNAMIC ECONOMIC BENEFITS TO FLORIDA ECONOMY FROM LIFTING THE BAN OF TRAVEL TO CUBA
(2003$)
Source: The Impact on the U.S. Economy of Lifting Restrictions on Travel to Cuba, Center for International Policy Study, July 15, 2002.
THE 35 YEAR JOB IMPACT OF LIFTING TOURIST TRAVEL BAN TO CUBA ON
FLORIDA EMPLOYMENT (2003$)
Source: The Impact on the U.S. Economy of Lifting Restrictions on Travel to Cuba, Center for International Policy Study, July 15, 2002.
The Output Impact of 5% Increase in Productivity from Free Trade with Cuba
on Florida Economy over 10 Years
$99,165,812
$23,758,857$63,433,710
$6,358,357
$84,365,872
$499,277,139
$-
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
$600,000,000
WaterborneTransport
Rail Road FreightTraffic
Agriculture Manufacturing IT-Telecom Tourism
The Output Impact of 5% Increase in Productivity from Free Trade with Cuba on the Florida Economy over 20 Years
$229,447,197
$46,067,814
$164,046,985
$11,638,063
$238,079,581
$1,185,177,050
$-
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
$1,400,000,000
WaterborneTransport
Rail RoadFreight Traffic
Agriculture Manufacturing IT-Telecom Tourism
The Output Impact of 5% Increase in Productivity from Free Trade with Cuba on the Florida Economy over 35 Years
$490,380,361
$83,098,733
$410,127,818
$29,784,712
$585,348,775
$2,518,158,556
$-
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
$3,000,000,000
WaterborneTransport
Rail RoadFreight Traffic
Agriculture Manufacturing IT-Telecom Tourism
The Jobs Impact of 5% Increase in Productivity from Free Trade with Cuba on the Florida Economy over 10 Years
1,284278
1,588
79637
9,671
-
2,000
4,000
6,000
8,000
10,000
12,000
WaterborneTransport
Rail RoadFreight Traffic
Agriculture Manufacturing IT-Telecom Tourism
The Jobs Impact of 5% Increase in Productivity from Free Trade with Cuba on
Florida Economy over 20 Years
2,658468
3,776
1261,467
20,722
-
5,000
10,000
15,000
20,000
25,000
WaterborneTransport
Rail RoadFreight Traffic
Agriculture Manufacturing IT-Telecom Tourism
The Jobs Impact of 5% Increase in Productivity Free Trade with Cuba on
Florida Economy over 35 Years
4,944
698
8,559
2502,920
38,847
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
WaterborneTransport
Rail RoadFreight Traffic
Agriculture Manufacturing IT-Telecom Tourism
SUMMARY OF FINDINGS (For The U.S. Economy)
Normalization of trade between Cuba and the US will result in:
$9 to $14 billion imports and exports over 10 years annually; $20 to $49 billion in 20 years.
$5 to $13 billion annual dynamic increase in U.S. GDP over 20 years.
315 thousand to 846 thousand new jobs in the U.S. economy over 20 years.
SUMMARY OF FINDINGS (For The Florida Economy)
The lifting restrictions on travel to Cuba will result in potential tourism dynamic
increases alone of:
$1.1 to $2.1 billion growth in Florida GDP over 35 years
14,000 to 27,372 new jobs in Florida over 35 years
Other Florida industries will increase relative to export demands.