President Obama recently surprised us with the announcement of the abandoning of our half-century trade embargo against Cuba.
Equally shocking was the hint of the possible resumption of commercial relations with this country, including the lifting of travel restrictions on U.S. citizens.
All of this raises a golden opportunity to help enrich both countries through the adoption of free trade.
Even though removal of the embargo requires an act of Congress, the announcement was greeted with more cheers than jeers.
DéTENTE PRESENTS us with a mutually beneficial opportunity: the potential development of full-blown trade between the United States and Cuba, even if encumbered with quotas, tariffs and excise taxes. This can lead to increases in the gross domestic product of each nation. And this must be the principal justification for lifting the embargo.
That's not the explanation offered by Obama – that after 50 years or so of existence it has failed to achieve its objective: the demise of the Castro dictatorship and the restoration of some degree of freedom for Cuban citizens. This is false.
The embargo has been painful to both parties. To the United States, it has been no free lunch; its existence has cost the United States dearly in terms of foregone Cuban trade benefits. Hence, there are economic incentives for the United States to relinquish the embargo. But more importantly, it is plausible to believe that its cumulative 50-year negative effect contributed heavily, if immeasurably, to the Cuban authorities agreeing to a détente.
For many years, Cuba has been under economic life support, first by Russia and then Venezuela. Recently, the latter pulled the plug and Cuba was left helpless. Détente was a way out. The ultimate benefit of this agreement to our country, however, may prove to be worth this 50-year cumulative cost. (Supplanting Venezuela’s role, don’t be surprised if Obama eventually supplies U.S. aid to Cuba.)
THE UNITED STATES should rescind its embargo, and remove as many barriers to trade as are politically possible – i.e., such restrictions as tariffs, quotas and excise taxes.
We are well aware of the benefits of free trade between two people. No rational being would undertake a trade if he was not expected to be as well off after the exchange as before. Analogous benefits accrue in trading between nations.
At the local, domestic level each person may trade his hours of labor for dollars by engaging in activities that he does best, where he is most skilful and productive, and if employed by a firm, where he is most productive to management. His job is to be useful to management, to make his boss look good. In this effort, he will tend to be rewarded in proportion to the value he contributes to the firm’s revenue, and ultimately to its market value. Those not subscribing to these norms will tend to see fewer rewards.
Clearly, these mutual free-exchange benefits are available to trades between individuals and businesses, and between and among businesses, institutions and countries. And when the wage-earner takes his hard-earned dollars to the supermarket and puts on his consumer’s hat, he demands the lowest price for his needs. Like a businessperson, he is an economizer. This helps sustain in business the most productive, most efficient companies and, almost overwhelmingly, we applaud this outcome.
AS PREVIOUSLY noted, benefits from trading extend to international trades as well. Where nations will tend to produce those products they are most proficient at producing. Given the mix among nations of unequal scarce resources; unequal talents and skills among their people; and different cultures, it is almost always beneficial for them to take advantage of their opportunities and engage in foreign trade.
Of greater importance to us, however, is that the presence of these trading opportunities can grow the GDP of both Cuba and the United States.
Opponents of free international trade will bring forth the usual, time-honored objections, which are all virtually captured by the need to protect some local monopoly, or a market guarded by a group of special interests. In addition to businesses and trade associations, labor unions are very vocal in supporting these arguments.
On the other hand, while the Castro brothers remain in control of Cuba, we can expect them to continue to severely control Cuban exports. But any steps, however modest, towards reducing restrictions on Cuban trade should be heartily welcomed.
Progress pointing to greater trade freedom is important for another reason. Growing commercial interaction between the nations cannot help but serve to spread our free-market values and our cherished political freedoms among Cubans. This may help smooth the tortuous path toward Cuba’s freedom.
A more formidable argument against détente is expressed by U.S. Sen. Marco Rubio of Florida, who adamantly maintains that détente must be preceded by the Cuban authorities’ first extending full political freedom and democracy to Cuban citizens. Personal freedom and democracy are noble aims to which few will object. But holding them as necessary conditions for accepting détente is another matter.
TO COMPREHEND his position, we must understand where he comes from. His parents were Cuban refugees who had fled from the horrors of Fidel Castro’s burgeoning dictatorship. Castro had won people support for his Revolutionary War by promising, among other things, political and economic freedom upon the overthrow of the despised dictator Fulgencio Batista. Immediately upon assuming power, however, he renounced these goals by defiantly declaring that Cuba will follow the banner of communism. These Cuban-Americans bear deep Castro-wrought wounds.
While Rubio’s position is easily understood, explanation is not justification for his position. The opportunity we currently face is rare and different. For even if détente fails to make any progress toward free trade, we are no worse off than before the offer was extended. And we still continue to pay for our embargo.
(The writer is a professor emeritus of financial economics at the University of Georgia. He lives in Aiken, S.C.)