Trade with Cuba

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I have to admit that I have been apprehensive toward the increasing diplomatic warmth emerging between members of Congress and the Cuban government. In particular it struck me as deeply naïve for six Congressional Black Caucus members to enjoy a cordial afternoon with Raul and Fidel Castro seemingly without any concrete political aims. Surely Rep. Barbara Lee and the rest of the Caucus must recognize the utter transparency of Fidel’s remark that “aura of [the Rev. Martin] Luther King is accompanying” the group—all while his political and social dissidents continue to languish in Cuban prisons.

Then yesterday, as expected, the Obama administration lifted many of the economic and travel restrictions that had been enacted to isolate Cuba—allowing Cuban-Americans to travel more frequently to the island, send more money to relatives and freeing American telecommunication businesses to offer services there. Again, I met this announcement with initial skepticism, unsure as to how much easing these restrictions could actually incentivize Cuban reform. Then, towards the end of this WaPo article I have linked, I caught what I consider to be the crux of Obama’s new policy: 

The changes will challenge the nation’s monopoly telecommunications service provider from Venezuela, analysts said.

And there you have it: easing business restrictions with Cuba is meant to sever its economic ties with Hugo and drag Havana from Venezuela’s sphere of influence. Ever since Chavez took power, Venezuela has been supplying the Castro regime economic life support. In 2007, commerce between the countries reached $7 billion dollars, “selling up to 100,000 barrels of oil per day to Cuba, discounted by as much as 40 percent.” Moreover, the current dynamic has effectively transformed Venezuela into a massive money laundering operation—transferring the wealth it receives from supplying the US with 1.5 million barrels of crude oil a day to massive Cuban aid. In other words, American dependence on Venezuelan oil has indirectly financed Cuba’s continued existence.

Up until now, Caracas has encountered little competition for goods and services in the communist country, forging a deep political and economic alliance that has elevated Chavez into a regional power. But the introduction of American telecommunications giants to the Cuban market—combined with the tumbling international demand for oil—could squeeze the Venezuelan economy and create a new consumer class in Cuba reliant on American goods. In other words, liberalized—but not entirely free—trade could loosen Chavez’s influence on the region and increase demand for American goods, producing a climate for the Castro’s that is more conducive to economic and, ideally, political reform.

Despite the opportunities more open Cuban-American trade presents, I think it is essential that Obama does not liberalize commerce with Cuba too quickly. Normalizing relations overnight produces no incentive for Cuban reform and curtails the most effective bargaining chip America possesses: our internationally competitive goods and services. Allowing just a taste of American products to enter Cuban markets, however, could whet the Cuban appetite for market economics, shrink Venezuela’s monopoly over the Cuban market and create real leverage on the US side to offer more trade in exchange for political concessions. 

 

 

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