2. ECONOMIC IMPACTS ON US AND FLORIDA FROM NORMALIZATION OF TRADE WITH CUBA Tim Lynch, Ph.D. Former Director Center for Economic Forecasting and Analysis (CEFA) Florida State University & Julie Harrington, Ph.D. Director, CEFA www.cefa.fsu.edu Down Town Tallahassee Rotary Club May 27 2015 Florida State University Alumni Center, FSU Presentation web location: https://www.youtube.com/watch?v=08koEQY2-CQ&feature=youtu.be

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 ports– dominated by Florida ports.

4. SUMMARY OF ECONOMIC FINDINGS & CONCLUSIONS GNP = Consumption + Investment + Gov + Exports (Each works with/on the other) Cuba is the “spring loaded” nation of the Caribbean that has the largest most educated population of the region and only needs the opportunity to “launch” into the 21 st global economy This launch will benefit Cuba, the US (especially Florida) and the Caribbean Central American 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 Contains a wealth of underutilized natural and human resources 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. WHO WILL BUILD ALL OF THIS? ANY AMERICANS?

6. IMPACT OF FREE TRADE WITH CUBA IN THE FLORIDA ECONOMY More open market Economic reforms in Cuba since 1990’s = business opportunities Florida economy Florida proximate 90 miles and history = more advantage for FL Lifting “some” travel sanctions in 2009 to Cuba = DOUBLING in 4 years Non- Cuban American visitors to Cuba. 2015 easing of travel restrictions = 36% jump US visitors IN ONE year. Normalizing trade = adds 11 million extra customers to Florida markets = Georgia + Alabama

7. RECENT ECONOMIC IMPACT STUDIES Embargo costs the U.S. between $3 and $4 billion in lost exports per year. ( United Nations, 2014, also Center for Strategic and International Studies, 1998.) Lifting US sanctions on agricultural and medical exports to Cuba alone has resulted in annual increases in US exports near a $1 billion (some years) from the 50 states and 22 commodity sectors,. (The Economist, March 2012) Such increase in exports could 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. CUBA TRADE WITH THE WORLD – BIG GAP

9. CUBA’S TOP IMPORTING- EXPORTING TRADE PARTNERS

10. U.S. EXPORTS TO CUBA EXPECTED TO IMPROVE WITH 2014 EASING OF SANCTIONS //www.census.gov/foreign-trade/balance/c2390.html

11. Historic Changes of U.S. Export to Cuba (Millions Dollars) Source: USA Trade Online, U.S. Census Bureau, 2012

12. VALUE OF U.S.-CUBA AGRICULTURAL EXPORTS BY CATEGORY - 2011 Source: USA Trade Online, U.S. Census Bureau, 2012, U.S.-Cuba Trade and Economic Council, Inc.

13. TOP US AGRICULTURAL PRODUCTS EXPORTED TO CUBA 2011 Source: USA Trade Online, U.S. Census Bureau, 2012

14. US (NON-CUBAN ORIGIN) VISITORS ARE GROWING RAPIDLY US travel to Cuba surges 36% following thaw in diplomatic relations Cuba has seen 14% rise in tourism worldwide from January to May 2015. http://www.theguardian.com/world/2015/may/26/us-american-cuba-travel-tourism-increase Foreign tourists are flocking to visit Cuba before the Americans move in and ruin it… About 600,000 U.S. travelers are estimated to visit Cuba each year, most of them Cuban-Americans visiting family… PETER ORSI Associated Press Mar. 23, 2015, 6:50 AMAssociated Press

15. ESTIMATION OF THE IMPACT OF FREE TRADE WITH CUBA

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

17. 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

18. DESCRIPTION OF THE REMI MODEL USED IN THE CEFA CUBA TRADE ECONOMIC IMPACT RESEARCH 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. Center for Economic Forecasting and Analysis (CEFA), FSU

19. REMI ECONOMIC MODELING ASSUMPTIONS Cuba will eventually have an export/GDP and import/GDP ratios the average of Mexico, the Dominican Republican, and Costa Rica (12% and 19% respectively). (Cuba 2012 GDP = $72 Billion) Second, US-Cuba trade would expand rapidly becoming a lead trading partner and Cuban trade will grow to be similar to the level of these nations averaging 75.8% of exports and 60.7% of imports from the U.S. Finally, we estimate Cuba’s annual growth of GDP and US imports to increase by 7%, 10% and 12% respectively for twenty years after normalization.

20. EXAMPLES OF NEIGHBORING NATIONAL PERCENTAGE OF EXPORT AND IMPORT TO GDP Source: USA CIA, Fact Book, 2003

21. COMPORABLE NEIGHBOOR NATION DATA

23. U.S. TO CUBA ACTUAL AND POTENTIAL FORECAST EXPORT Sources: “Economic Normalization with Cuba: A roadmap for U.S. Policy Makers”. Gary Hufbauer and Barbara Kotschwar, Peterson Institute for International Economics. And Estimation of Alternative Economic Scenarios of Future Emergence of Cuba into the Global Economy in a Post U.S. Trade Embargo Era- Economic Impacts on the U.S. Economy”,May 2014, updated, 2012, 2015, Lynch, T and Harrington, J, CEFA 2012 and 2015

24. US GDP Total Dynamic Increase till 2035 (20 years) from Shifts to Free Trade with Cuba

25. US Job Increase till 2032 from Shifts of Free Trade with Cuba

26. THE 35 YEAR DYNAMIC ECONOMIC BENEFITS TO FLORIDA ECONOMY FROM LIFTING THE BAN OF TRAVEL TO CUBA Source: The Impact on the U.S. Economy of Lifting Restrictions on Travel to Cuba, Center for International Policy Study, July 15, 2002.

27. THE 35 YEAR JOB IMPACT OF LIFTING TOURIST TRAVEL BAN TO CUBA ON FLORIDA EMPLOYMENT Source: The Impact on the U.S. Economy of Lifting Restrictions on Travel to Cuba, Center for International Policy Study, July 15, 2002.

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

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

30. SUMMARY OF FINDINGS For The U.S. Economy Normalization of trade between Cuba and the US will result in: $131 to $324 billion of exports over 20 years ; averaging almost $7 billion to $16 billon respectively annually. This stimulus will result in creating between 315,000 to 846,000 new jobs across the U.S. economy over those 20 years.

31. 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.

32. Tim Lynch, Ph.D. (lynch@fsu.edu )lynch@fsu.edu President, Econometrics Consultants, Inc. Former Director Center for Economic Forecasting and Analysis (CEFA) Florida State University www.cefa.fsu.edu

33. Florida State University Center for Economic Forecasting and Analysis (CEFA) Specializes in applying advanced, computer-based economic models and techniques to perform economic analyses and to examine public policy issues across a spectrum of research areas. FSU CEFA also serves as a foundation for training students on the uses and applications of advanced economics and statistical tools. Key Areas of Expertise: Economics Sustainable Energy High Tech Economic Research Environmental/Natural Resources Economic Development Econometrics Economic Impact Analysis http://www.cefa.fsu.edu