2. 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

3. 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.

4. 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 21 ST GLOBAL ECONOMY. THIS LAUNCH CAN BENEFIT CUBA, THE US AND THE CARRIBIAN REGION

5. 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.

6. 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.

7. 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)

8. Historic Changes of U.S. Export to Cuba (Millions Dollars) 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.

9. 2003 U.S. EXPORT to Cuba by Category Source: USA Trade Online, U.S. Census Bureau, 2003 96% of 2003 U.S.exports to Cuba are food related. Compared to 2002 exports, those of 2003 rose by 79%.

10. Top Ten Import Products by Cuba in 2001 Source: International Trade Center (ITC) Website, www.intracen.org/menus/countries.htm

11. Top Ten Export Products by Cuba in 2001 Source: International Trade Center (ITC) Website, www.intracen.org/menus/countries.htm

12. EXAMPLES OF NEIGHBORING NATIONAL PERCENTAGE OF EXPORT AND IMPORT TO GDP (2002) Source: USA CIA, Fact Book, 2003

13. THE ESTIMATION OF THE IMPACT OF FREE TRADE WITH CUBA

14. Goods Services Capital Productivity Profits Low cost production Strong economy Entrepreneurs OLD ECONOMY WITH RESTRICTED TRADE People

15. Goods Services Capital Higher productivity Higher wages Higher quality of life Higher profits Entrepreneurs More resilient economy Higher efficiency Higher wealth People NEW ECONOMY WITH FREE TRADE

16. FORECASTED POSSIBLE US-CUBA 10 YEAR GROWTH IN TRADE (2003$)

17. FORECASTED POSSIBLE US-CUBA 20 YEAR GROWTH IN TRADE (2003$)

18. 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.

19. Estimate of the Total Dynamic Increase in U.S. GDP Through 2024 (20 years) from Shifts of Free Trade with Cuba (2003$)

20. Estimate of the Total Job Increase in the U.S. Through 2024 (over 20 years) from Shifts of Free Trade with Cuba

21. 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.

22. 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.

23. The Output Impact of 5% Increase in Productivity from Free Trade with Cuba on Florida Economy over 10 Years

24. The Output Impact of 5% Increase in Productivity from Free Trade with Cuba on the Florida Economy over 20 Years

25. The Output Impact of 5% Increase in Productivity from Free Trade with Cuba on the Florida Economy over 35 Years

26. The Jobs Impact of 5% Increase in Productivity from Free Trade with Cuba on the Florida Economy over 10 Years

27. The Jobs Impact of 5% Increase in Productivity from Free Trade with Cuba on Florida Economy over 20 Years

28. The Jobs Impact of 5% Increase in Productivity Free Trade with Cuba on Florida Economy over 35 Years

29. 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.

30. 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.

31. Tim Lynch, Ph.D., Director Center for Economic Forecasting and Analysis (CEFA) Florida State University www.cefa.fsu.edu