Necessity of ending the economic, commercial and financial blockade imposed by the United States of America against Cuba. | United Nations Conference on Trade and Development
Necessity of ending the economic, commercial and financial embargo imposed by the United States of America against Cuba Report of the Secretary-General of the United Nations In its resolution 74/7, entitled “Necessity of ending the economic, commercial and financial embargo imposed by the United States of America against Cuba”, the General Assembly requested the Secretary-General to prepare, in consultation with the appropriate organs and agencies of the United Nations system, a report on the implementation of the resolution in the light of the purposes and principles of the Charter of the United Nations and international law and to submit it to the Assembly at its seventy-fifth session. The following is a selection of the replies from Governments and organs and agencies of the United Nations system, contained in the Report of the Secretary-General of the United Nations.
United Nations Conference on Trade and Development
The Nairobi Maafikiano (TD/519/Add.2 and Corr.1), adopted at the fourteenth session of the United Nations Conference on Trade and Development (UNCTAD) in July 2016, “From decision to action: moving towards an inclusive and equitable global economic environment for trade and development”, provided as follows:
“States are strongly urged to refrain from promulgating and applying any unilateral economic, financial or trade measures not in accordance with international law and the Charter of the United Nations that impede the full achievement of economic and social development, particularly in developing countries, and that affect commercial interests. These actions hinder market access, investments and freedom of transit and the well-being of the populations of affected countries. Meaningful trade liberalization will also require addressing non-tariff measures including, inter alia, unilateral measures, where they may act as unnecessary trade barriers.”[1]
Cuba has been under the United States economic embargo since 1962. The current United States policy towards Cuba was laid down in the National Security Presidential Memorandum entitled “Strengthening the Policy of the United States Toward Cuba”, enacted on 16 June 2017.[2] The directive established a major policy direction, which, inter alia, sought to tighten the embargo against Cuba, including through restrictions on transactions with companies controlled by certain government entities and the elimination of individual people-to-people travel.
Subsequently, steps were taken to further strengthen restrictions on Cuba, including by enforcing all provisions of the Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996, known as the Helms-Burton Act.[3] In April 2019, the United States imposed sanctions on companies involved in transporting oil from the Bolivarian Republic of Venezuela to Cuba. In June 2019, the United States restricted non-family travel. In September 2019, the country placed a cap on the amount of remittances and prohibited dollar transactions through third-party financial institutions. In December 2019 and January 2020, flights between the United States and Cuba were restricted to Havana alone.[4] The embargo against Cuba thus remains in force and operational in 2020.
Overall economic trends
Trade plays an essential role in the Cuban economy. As a small island country short on natural resources, capital, technology and domestic demand, Cuba critically needs access to international markets to sell its products and to reach a larger quantity and variety of goods and services, as well as foreign capital, technology and investment, to meet the domestic needs of its population, build a robust productive base and fuel its economy to sustain its growth and development. In 2018, exports of goods and services amounted to 14 per cent of the gross domestic product (GDP) of Cuba, and imports accounted for 11 per cent. Between 2000 and 2018, the country’s per capita income at constant prices (2010) rose from $3,481 to $6,739. In 2018, Cuba was ranked seventy-second in the United Nations Development Programme human development index and qualified as a country with high human development.
The overall economic conditions facing Cuba today, however, do not seem to be favourable for dynamic trade growth in the immediate future. Between 2013 and 2018, the Cuban economy grew at an average rate of only 1.8 per cent, significantly lower than the 5 per cent growth rate deemed necessary for the country to attain a sustainable growth path.[5] While it is estimated that the economy grew at a slower rate of 0.5 per cent in 2019, and is forecasted to grow at the same pace in 2020,[6] some recent estimates suggest that the Cuban economy could contract by 0.7 per cent in 2020.[7] The slowdown may be attributable to some extent to the effect of increased sanctions that impede financial transactions with Cuba and adversely affect tourist arrivals, and by the economic hardship of the Bolivarian Republic of Venezuela, resulting in reduced bilateral support and oil supply. The growth forecast for 2020 would require a massive downward revision given the effect of the coronavirus disease (COVID-19) pandemic on tourism.
The deceleration of growth is symptomatic of chronic stagnation in domestic production and the erosion of competitiveness, affecting productive sectors in Cuba. As a small island economy with a GDP of $97 billion (2017), Cuba has a small and labour-intensive agricultural sector that generates 4 per cent of GDP but absorbs 18 per cent of the workforce,[8] and a capital-intensive industrial sector that contributes 25 per cent to GDP but employs just 9.6 per cent of workers. In contrast, services are the dominant sector of the economy, contributing 72 per cent to GDP and employment; they have emerged as the main export sector.
Bilateral trade between Cuba and the United States
Bilateral trade between Cuba and the United States is small in view of the size, economic complementarities and geographical proximity of the two economies.[9] In 2018, the United States market remained virtually closed to Cuban products under the embargo. Existing Cuban exports to the United States were below $2 million, less than 0.1 per cent of Cuba’s total exports to the world.
By contrast, Cuba’s imports from the United States were far greater and substantial. In 2018, Cuba’s bilateral imports were valued at $432 million, accounting for 4.3 per cent of its total imports. Those imports consisted mainly of basic food items (87 per cent of the total), such as meat and meat preparations (29 per cent) and cereals and cereal preparations (27 per cent), including edible meat (e.g., poultry), wheat, rice, maize and oilseeds. This reflects the fact that United States commercial agricultural exports have been authorized since 2001, albeit subject to numerous restrictions and licensing requirements. The United States today is one of Cuba’s primary suppliers of food and agricultural products. Commercial exports of medicines and medical products have also been authorized since the early 1990s.[10]
Trade pattern and trends
Partly reflecting the domestic production structure, the overall trade pattern of Cuba is marked by a persistent deficit in merchandise trade ($7.4 billion in 2018)[11] and a persistent surplus in services trade ($8.6 billion). Over the past few years, there has been a decline in the overall trade surplus: it has fallen from $3.9 billion in 2014 to $1.1 billion in 2018.
It is particularly notable that Cuban merchandise exports have steadily and substantially fallen from 2011 to 2016, partly reflecting the weakening of domestic productive capacities and competitiveness. In 2018, the value of Cuban merchandise exports was $2.8 billion, less than half the historic high of $6.4 billion attained in 2011. Consequently, the share of Cuba in the world’s merchandise exports halved, from 0.035 per cent in 2011 to 0.014 per cent in 2018.
The export product basket of Cuba includes basic food, beverages and tobacco, ores and metals, chemical products and other manufactured goods. In 2018, tobacco (19 per cent), sugar (15 per cent), metalliferous ores (13 per cent) and medical and pharmaceutical products (11 per cent) figured prominently among the export products. Despite their diminishing role in the economy, traditional cash crops – sugar and tobacco – remained the country’s main foreign exchange earners. In addition, a biotechnology and pharmaceutical sector that supplies the domestic health-care system has become a significant export industry, while nickel mining has also produced viable export activities.
In 2018, the main export markets of Cuba were the European Union (accounting for 24 per cent of total exports), Canada (17 per cent), the Bolivarian Republic of Venezuela (16 per cent), China (15 per cent) and the Russian Federation (5 per cent). Despite a slight recovery in 2018, the relative importance of the Bolivarian Republic of Venezuela as an export market has declined since 2010. That of the European Union remained stable, even though the group used to absorb a far higher proportion of Cuban exports ‒ over 40 per cent in 2005. In the world markets, Cuban exports faced a weighted average tariff of about 15 per cent.[12]
Estimated at $10 billion in 2018, merchandise imports were four times larger than merchandise exports, as Cuba relies heavily on imports for the supply of essential energy and foodstuffs, as well as capital goods. The main imported items are basic food (21 per cent), including cereals and meat; mineral fuels (10 per cent); manufacturing categories, such as machinery and transport equipment (31 per cent); manufactured goods (16 per cent); and miscellaneous manufactured articles (9 per cent). Cuba reportedly meets 70 to 80 per cent of domestic food needs from imports. As to energy, since 2000 the country has maintained a preferential oil agreement with the Bolivarian Republic of Venezuela, under which Cuba used to receive the amount of oil equivalent to two thirds of its domestic consumption. The provision decreased in early 2019 to one third of consumption.[13] The sanction imposed in April 2019 on several shipping companies transporting the oil between the two countries may have adversely affected the bilateral trade.
Services and remittances
Cuba has developed important export capabilities in the services sector. In 2018, the country’s services exports amounted to $10.7 billion, and imports to $2.2 billion, generating a services trade surplus of $8.6 billion, as noted. Key export activities are professional services ‒ largely medical personnel supplying services in the Bolivarian Republic of Venezuela ‒ and booming tourism services.
Tourism has grown significantly since the mid-1990s. Tourist arrivals reached 4.7 million in 2018, but then declined to 4.3 million in 2019, hurting private sector businesses and tourism revenues.[14] In 2018, related travel services generated $3 billion in exports, representing nearly 30 per cent of total services exports. Further development of tourism services has been constrained by United States measures such as the prohibition of people-to-people educational travel. The United States regulations currently restrict travel to Cuba to licensed travellers engaged in certain specified activities.
Remittance flows to Cuba sent by migrants and workers abroad were valued at $4.5 billion in 2018. In 2017, $3.5 billion was estimated to originate from the United States.[15] The amount of total remittance inflows was greater than the country’s total merchandise export receipt and equivalent to 4.3 per cent of its GDP. Remittances have been the major source of external finances and could potentially serve as investment capital for households and private enterprises. The decision of the United States in September 2019 to cap family remittances to $1,000 per quarter, inter alia, is expected to curb remittance flows to the country.
Conclusion
Recent actions taken by the United States have intensified economic sanctions and tightened the embargo against Cuba. The embargo therefore remains in force and continues to hinder the healthy development of commercial relations between the two neighbouring countries. This continues to be a matter of concern for Cuba as trade plays a crucial role in its economy. To date, the embargo has hindered the country’s efforts to use trade as an instrument of sustainable development, including through the further expansion of promising tourism and professional services activities, as well as the productive use of remittances. This is all the more significant in the light of 2030 Agenda for Sustainable Development and the Sustainable Development Goals, which profile international trade as an essential means of implementation.
[1] UNCTAD, TD/519/Add.2 and Corr. 1, 5 September 2016.
[2] Federal Register, Vol. 82, No. 202, 20 October 2017.
[3] White House, “President Donald J. Trump is taking a stand for democracy and human rights in the Western Hemisphere”, 17 April 2019.
[4] Congressional Research Service, “Cuba: US policy overview”, 13 February 2020.
[5] Richard E. Feinberg, “Cuba’s economy after Raúl Castro: a tale of three worlds”, The Brookings Institution, February 2018.
[6] United Nations, World Economic Situation and Prospects 2020.
[7] The Economist Intelligence Unit.
[8] International Labour Organization Department of Statistics.
[9] The source of all data referred to in the text is UNCTADStat unless otherwise specified.
[10] Congressional Research Service, “Cuba: US Policy in the 116th Congress”, 29 March 2019.
[11] As reported in the balance of payments. Balance of payment-based statistics of trade in goods may differ from international merchandise trade statistics reported elsewhere in the text owing to differences in the concepts and definitions.
[12] United Nations Conference on Trade and Development Trade Analysis and Information System database, accessed through the World Integrated Trade Solution.
[13] Congressional Research Service, “Cuba: US policy in the 116th Congress”, 29 March 2019.
[14] Ibid.
[15] United States Department of State, “US relations with Cuba”, 22 November 2019.
Report of the Secretary-General of the United Nations