This paper investigates welfare effects of embargoes based on the following research question: How does the embargo of the United States affect economic and social development in the Republic of Cuba?
Firstly, a general introduction and historic outline about the development of the US embargo imposed on the centrally planned island Cuba will be provided, especially focussing on the post-Soviet Union era. Secondly, a research gap has been investigated by compiling international scholars and their findings. However, recent developments are not yet addressed adequately in academic research papers, namely the re-establishment of diplomatic ties between the USA and Cuba. Further, based on Ricardo’s model of comparative advantages, the existence of a twofold discussion about trade diversity in Cuba has been identified. Thirdly, two hypotheses are raised: The embargo imposed on Cuba has more positive than negative effects on trade diversification (H1) and the embargo imposed on Cuba has negative social welfare effects (H2).
In order to answer the initial research question, two conceptual models are developed about trade and welfare effects of embargoes. The latter compares GDP and GDP per capita data as measurements for selected welfare indicators for Cuba and its neighbouring countries, whereas the former compiles the country’s trade partners and trade balance. The following discussion suggests a lifting of the embargo including political concerns on both sides, negative impacts on people and economy as well as the influence of the stakeholders. Finally, future political recommendations for welfare improvements in Cuba are suggested.
Table of Content
1.0 Introduction
2.0 Literature Review
2.1 Streams of literature
2.2 General academic discussion
2.3 Deficiencies of the findings – Ricardo and political ideologies
2.4 Twofold discussion about trade diversity at times of the embargo
2.4.1 Positive effects on trade diversity
2.4.2 Negative effects on trade diversity
2.5 Evaluation of the literature
3.0 Conceptual Model
4.0 Methodology
5.0 Findings
5.1 Country comparison about welfare indicators
5.2 Total trade flows and balance
5.3 Cuba’s main trade partners
6.0 Analysis and Discussion
7.0 Conclusion
8.0 References
9.0 Appendix
9.1 Appendix 1: Overview of US unilateral economic sanctions against Cuba
9.2 Appendix 2: CUC and CUP exchange rate development
9.3 Appendix 3: Positive and negative effects on trade diversity
9.4 Appendix 4: Evaluation from literature review
Research Objectives and Themes
This paper examines the welfare effects of the long-standing United States embargo against Cuba, specifically investigating how it impacts the nation's economic and social development, particularly in the post-Soviet era.
- Historical development and analysis of the US-Cuba embargo
- Evaluation of trade diversification under sanctions using Ricardo’s comparative advantage model
- Comparative analysis of Cuban GDP and welfare indicators against regional neighbors
- Impact of the dual currency system and internal political constraints on the Cuban economy
- Assessment of current diplomatic developments and future policy recommendations
Excerpt from the Book
1.0 Introduction
On December 18th 2014, historic news regarding the initial attempted to re-establish diplomatic ties between current US President Barack Obama and Cuban President Raúl Castro Ruz, President of the solely ruling Cuban Communist Party, surfaced. (CIA, 2015; Corrales, 2014) Therefore, this paper fills the existing research gap by considering recent developments.
Historically, the economic and political relationship between the USA and Cuba has been very close. Prior to the embargo, mutual exchange of goods and services was common practise, and the United States was considered Cuba’s largest investor and trading partner. (Golliard, 2013)
However, the United States broke diplomatic relations with Cuba and imposed an embargo in response to Cuba’s newly established socialist ideology and subsequent expropriation of US property in the aftermath of the Cuban Revolution of 1959. US President John F. Kennedy justified the imposition of the full trade and travel embargo in 1962 as a “means to advance national security concerns“. (Eckstein, 2009, p.119) The embargo is effective for over half a century and has frequently been eased and tightened by succeeding US presidents. (Borer and Bowen, 2007)
In consequence, Cuba has since been isolated from most of its trading partners and international actors (e.g. the IMF). (IMF, 2015; Mesa-Lago and Vidal-Alejandro, 2010; Van Bergeijk, 1995) Although it remains one of the founding members of GATT and WTO, after 1959 Cuba rarely attended WTO meetings or participated in trade negotiations. (Borer and Bowen, 2007)
Summary of Chapters
1.0 Introduction: This chapter introduces the context of the US embargo on Cuba and highlights the recent shift in diplomatic relations, identifying a research gap addressed in the paper.
2.0 Literature Review: This section compiles scholarly views on the economic impacts of the embargo, the challenges of Cuba's dual currency system, and the theoretical debate regarding trade diversification.
3.0 Conceptual Model: This chapter defines the theoretical framework, utilizing David Ricardo’s comparative advantage model to analyze trade effects and GDP as a measure for welfare.
4.0 Methodology: The author explains the data gathering limitations due to state-controlled information in Cuba and justifies the use of comparative regional data and network effect models.
5.0 Findings: This section presents empirical data on welfare indicators, trade flows, and main trade partners of Cuba in comparison to neighboring Latin American and Caribbean countries.
6.0 Analysis and Discussion: The findings are synthesized to confirm that while the embargo has failed to force political change, it has resulted in significant negative social and economic consequences for the Cuban population.
7.0 Conclusion: The paper summarizes that the embargo is largely detrimental, recommends structural reforms for future integration, and emphasizes the need for a shift in US-Cuba diplomatic policy.
Keywords
Cuba, USA, embargo, welfare effects, unilateral sanctions, Ricardo, comparative advantages, trade diversity, GDP, socialist economy, dual currency, international trade, economic development, foreign policy
Frequently Asked Questions
What is the primary objective of this research?
The research aims to investigate the welfare effects of the US embargo on Cuba and determine how these sanctions have influenced the country's economic and social development.
What are the central themes discussed in the paper?
The paper covers the history of the embargo, the impact on trade diversification, comparisons of welfare indicators with regional neighbors, and the consequences of the Cuban dual currency system.
What theoretical foundation is used?
The study relies on David Ricardo’s model of comparative advantage and network effect models to analyze the implications of restricted trade and unilateral sanctions.
What does the findings section reveal?
The findings indicate that Cuba faces high dependency on a limited number of trade partners and that the embargo contributes to economic volatility and hardship for the most vulnerable citizens.
What is the main conclusion regarding the embargo?
The author concludes that the embargo has been largely unsuccessful as a political tool and has generated more negative than positive effects for both the Cuban economy and its social welfare.
Which key terms describe this research?
The work is characterized by terms such as unilateral sanctions, welfare effects, trade diversity, comparative advantage, and Cuba's socialist economic model.
How does the dual currency system affect the Cuban economy according to the paper?
The system creates severe market distortions, adds costs for businesses, and contributes to social inequality by splitting society between those with access to hard currency (CUC) and those earning weaker local currency (CUP).
Why does the author suggest that the embargo has failed?
The author argues that despite the intense, long-term pressure of the embargo, it has not achieved the intended political change, while simultaneously inflicting significant humanitarian and economic costs on the Cuban people.
- Quote paper
- Elena Kühnapfel (Author), 2015, Welfare Effects of Embargoes of the USA. Economic Affects and Social Development in the Republic of Cuba, Munich, GRIN Verlag, https://www.grin.com/document/296313
