Tuesday, April 19, 2016

US EXPORTS TO CUBA--SOME RESTRICTIONS STILL REMAIN

U.S. Exports to Cuba Could Increase if Embargo Lifted but Cuban Barriers Remain, ITC Finds

Wednesday, April 20, 2016
Sandler, Travis & Rosenberg Trade Report
U.S. restrictions on trade with and travel to Cuba have largely prevented U.S. suppliers and investors from accessing the Cuban market, and new or expanded U.S. exports to Cuba in several goods and services sectors could occur if U.S. restrictions are lifted, according to an International Trade Commission report issued April 18. However, the report adds, even if U.S. restrictions are lifted, Cuban non-tariff measures, institutional and infrastructural factors and other barriers, including those associated with a non-market, state-controlled economy, still exist and may affect the ability to trade with or invest in Cuba.
Trade Data. Total Cuban imports of goods totaled $9.3 billion in 2014, down from a high of $11.7 billion in 2008, while imports of services totaled $2.5 billion. Cuba’s primary import suppliers are Venezuela, the European Union and China.
Cuba ranked as the seventh-largest U.S. export market prior to 1960 but was just the 125th-largest in 2014. Cuban imports from the U.S., which consist almost entirely of agricultural products, reached a high of $712 million in 2008 but fell to $180 million in 2015, due largely to the global recession, restrictions on credit and the Cuban government’s decision to reduce U.S. food purchases.
U.S. Restrictions. The inability to offer credit, travel to or invest in Cuba, and use funds sourced and administered by the U.S. government are cited as the most problematic U.S. restrictions.
Cuban Restrictions. Cuban non-tariff measures and other factors that may limit U.S. exports to and investment in Cuba if U.S. restrictions are lifted include government control of trade and distribution, legal limits on foreign investment and property ownership, Cuba’s dual currency and exchange rate systems, and politically motivated decision making regarding trade and investment. Other factors, such as customs duties and procedures and the sanitary and phytosanitary measures applied to agricultural imports, do not appear to significantly impact trade.
The Cuban government recently loosened some restrictions on foreign investment and has been actively seeking investment in areas it believes will eventually allow Cuba to substitute its own products for foreign imports, such as agricultural products and light manufacturing. The government estimates that it will need $2 billion to $2.5 billion in foreign investment annually to meet targeted growth rates and reduce its dependence on imports, making it more likely that Cuba’s barriers to investment will ease further in the future.
Effects of Removing Restrictions. Cuba is highly dependent on imports to feed its population and U.S. exports of certain agricultural commodities to Cuba could see significant gains from the removal of U.S. restrictions, particularly those related to credit financing. For manufactured goods, exports would likely increase somewhat after the removal of U.S. restrictions, with prospects for larger increases in the longer term, subject to changes in Cuban policy and economic growth. U.S. exports of services to Cuba would not likely grow substantially in the near term if U.S. restrictions are removed, but in the medium to long terms there is greater potential for U.S. exports of certain services as well as goods to support the provision of these services.
If U.S. restrictions on U.S. exports to Cuba were lifted and Cuba were to respond like a market-based economy, U.S. exports to Cuba of selected agricultural and manufactured products could increase in the medium term by about $1.4 billion. If U.S. restrictions were removed and Cuban import barriers were reduced to the level of the calculated average for developing countries, that figure could increase by an additional $442 million.

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