“Insanity: Doing the same thing over and over again and expecting different results” – Albert Einstein
A recent report out of Senator Lugar’s office is calling for a change in policy towards Cuba. “We must recognize the ineffectiveness of our current policy and deal with the Cuban regime in a way that enhances U.S. interests,” wrote Sen. Richard Lugar, R-Ind., in a report dated last Monday. Lugar is under attack from fellow Republicans and is being labeled as a RINO (Republican in name only). While Sen. Lugar is indeed a moderate Republican he is actually promoting a policy that should be embraced by Fiscal Conservatives and those in favor of free markets. Why is it considered blasphemous for Conservatives to question the audacity of maintaining the embargo? The embargo can only be described as a failure and maintaining it in its current incantation falls squarely within Einstein’s definition of insanity.
As our economy continues on its downward slide it is the perfect time for us to search for previous untapped markets. Before 2000 there was a complete and total ban on trade with Cuba for U.S. businesses. However, since Pres. Clinton passed a law allowing for the sale of humanitarian aid to the island nation the trade between U.S. and Cuba has gone from virtually nothing to $440 million a year. This is a paltry sum compared to the trade that could be taking place. Cuba is a nation of almost 12 million people. This should be viewed as 12 million future trade partners. While Cubs is clearly an impoverished country there is a great deal of future trade that can take place between the nations. Of particular note is the trade that would increase between many of the Southeastern US states and Cuba. For a quick microcosm of the loss in trade the country is facing we will focus in on Cuba’s second closest neighbor.
According the Alabama Department of Agriculture and Industries, the state of Alabama has exported between $100 to $120 million worth of agricultural goods to Cuba each of the past 4 years. Current legislation allows for the sale of humanitarian and agricultural goods to Cuba. However, under the current restrictions Cuban importers must pay up front before the cargo can be shipped from the U.S. to Cuba. The U.S. International Trade Commission estimates that the embargo costs the U.S. $1.2 billion annually in lost export revenue. According to a 2005 Texas A&M study, the state of Alabama currently accounts for almost 1/3 of total trade between the U.S. and Cuba and it is reasonable to assume that Alabama farmers are currently facing a trade shortfall of over $300 million a year due to the embargo. Removing the embargo would significantly increase the trade revenue of the state. The main items that Alabama currently sends to Cuba are poultry, timber, utility poles, lumber, soybeans, eggs, and catfish.
Cuba currently accounts for over 25% of the total revenue of Alabama exports. The port of Mobile is only 600 nautical miles from Cuba and would see a significant increase in traffic should the embargo be rescinded. A 2007 Auburn University study found that a removal of the embargo would also “result in an increased demand for Alabama business services. Service industries that will enjoy increased demand include engineering, construction, shipping, transport, banking, finance, insurance, consulting, and higher education.” Also of note is the fact that Raul Castro is now allowing an increase in the privatization of farms. This has resulted in a desperate need for farm equipment in Cuba as individual farm owners are not allowed to buy their own equipment instead of being forced to rely upon the Central Government for their tools.
It is an inherent contradiction that we will conduct in trade with Red China and Vietnam while the Europeans fill the needs of Cuban trade. While the US is forcing itself out of the game the Euros are more than happy to take our place. We have bought ourselves into indebtedness with the Chinese. Here is a chance for the US to dramatically increase its exports. It’s clear that our policy towards Cuba has been a 50 year failure. The Castro regime has survived 10 U.S. Presidents while the U.S. has missed out on billions in trade revenue. Why are we stubbornly holding on to a failed policy at the expense of north of a billion dollars in trade a year?
It should go without being said that there is a dramatic need for the Cuban regime to make strides in the humanitarian treatment of its citizens. However, the current embargo has been ineffective in forcing this change. Opening the markets between the US and Cuba could be the proper catalyst.