Now that relations between the United States and Cuba are making their way to relative normalcy, the U.S. is working on ways to get more Made in America goods to Cuban shores.
U.S. restrictions on trade with Cuba kept American manufactured goods from entering the country for years, but with diplomatic relations between the two restored as of July 2015, the U.S. said lifting those trade restrictions could boost exports to the Caribbean country.
But, maintaining an air of realism, the United States International Trade Commission (USITC) said in a report released Monday, “Even if U.S. restrictions are lifted, Cuban nontariff measures, institutional and infrastructural factors, and other barriers, including those associated with a non-market, state-controlled economy, still exist and may affect the ability of foreign partners to trade with or invest in the country.”
Before subsidized trade between Cuba and the Soviet Union ended when the latter dissolved in 1991, Cuba had what the USITC called a “notable” manufacturing base. Without the subsidies, however, the country faced less favorable market prices for its exports, which naturally led to reduced output.
“Even before the post-Soviet era began, the nationalization of certain manufacturing industries and prohibition of private enterprises in revolutionary Cuba had led to a lack of innovation, which also harmed Cuba’s manufacturing capabilities,” the report noted.
Now Cuba relies largely on imports for most of its manufactured goods.
The country’s imports of manufactured goods grew 93 percent from $4.5 billion in 2005 to $8.7 billion in 2013, then dropped 16 percent to $7.3 billion in 2014. Cuba largely brings in energy and energy-related products, which it is heavily dependent on for its energy supply. Footwear accounted for just 0.91% of total imports Cuba took in, and apparel didn’t even make the list, otherwise it was small enough to fall into “other.”
Cuba’s top five suppliers are Venezuela, the EU, China, Canada and Mexico, as of 2014, and at that time imports of U.S. goods made up less than 1 percent of the total. The U.S. has permitted agricultural exports to Cuba since 2000, and adjustments to certain restrictions allowed for exports of some manufactured products, like medical supplies and telecommunications equipment.
If U.S. trade restrictions are lifted, U.S. exporters could see a set of benefits, including short lead times. The distance from Miami to Havana, Cuba is just 231 miles, or the same as going from Miami to Orlando.
“With southern U.S. ports in such close proximity to Cuba, trade is more cost effective, both for smaller just-in-time shipments and for large and bulky commodities,” USITC noted. “Moreover, as a large, advanced economy with a broad manufacturing base and a diversified distribution network, the United States can produce many of the products that Cuba needs and can also ship most goods at a lower delivered cost than many other countries.”
USITC estimates that apparel and textile exports from the U.S. to Cuba would jump from the $100,000 average over 2010-13, to $7.6 million with no U.S. trade restrictions. And if U.S. trade restrictions were removed and Cuban barriers lowered, that number could climb to $9.4 million.
In the short to medium term, USITC said manufactured goods allowed into Cuba will likely be limited to what the Cuban government deems “necessary for domestic consumption and economic growth.” Cuba’s dependence on food and oil imports could also limit the funds it can free up for purchasing Made in America goods.
In the longer term, however, “As Cuba’s purchasing power increases and Cuban GDP grows, opportunities will likely expand for increased U.S. exports in a wide variety of sectors,” USITC said.