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U.S. farmers and the Cuban embargo

Key Economic Concepts:

• Barriers to Trade
• Markets
• Role of Government

Description:

This lesson explores trade barriers in general and why some U.S. farmers want one specific trade barrier, the Cuban embargo, completely eliminated.

Lesson Objectives:

Students will:

• Demonstrate an understanding of trade barriers.
• Understand the purpose of enacting trade barriers.
• Explain why some U.S. farmers support lifting the Cuban embargo.
• Analyze the costs and benefits if trade embargoes.

Introduction:

Trade barriers are often put in place to protect domestic industries from foreign competition. Diverse industries such as automobiles, rice, and steel have all had some protection in the form of trade barriers. Embargos, which completely prohibit trade with another country, are imposed for political reasons. Many U.S. citizens are opposed to the Cuban embargo for different reasons.

Resources:

Cuba’s Development and Trade with U.S. Midwestern States: Farm Bureau briefing on trip by U.S. farmers to Cuban
www.uiowa.edu/ifdebook/conferences/cuba/TLCP/Volume%201/Carrasco.pdf ^[4]

A Voice of Agriculture news article" Discusses midwestern U.S. states trade interests with Cuba
http://news.minnesota.publicradio.org/features/2003/10/20_schmitzr_cubatrade ^[2]

Indiana Farm Bureau article: Outlines of Indiana farming and organization.
www.infarmbureau.org/ ^[5]

The Cuba Policy Foundation: Discusses the goals and functions of the Cuba Policy Foundation
www.cubafoundation.org/ ^[6]

Process:

Students learn what trade barriers are and why they are enacted. They also learn why some U.S. farmers see Cuba as another market in which to sell their products.

Trade barriers include embargos, tariffs, quotas and voluntary export restraints. Embargos prohibit any kind of trade with another country. Tariffs are taxes that raise the price of a good when it is brought into another country. Quotas place limits on how much of a good can be brought into a country. Voluntary export restraints also limit the quantity of a good brought into a country, but they are initiated by the country producing the good, not the country receiving the good. A matching exercise allows the students to correctly match the situation to the type of trade barrier. Have the students complete this pop-up activity to review these terms. The questions and answers are listed below.

1. The Japanese government agrees to limit the number of Japanese cars sold in the U.S. [voluntary export restraint]
2. A bottle of French wine with a price tag of $20 costs $25 in the U.S. [tariff]
3. Only 200 lbs. of Belgium chocolate can be sold in the U.S. [quota]
4. After the Montreal Expos win the World Series, the United States bans all trade with Canada. [embargo]

This may be a good time to reinforce the idea that trade barriers are designed to protect some industries but, in fact they may hurt other industries or even consumers. Economists have found that sanctions don't often reach their political objectives and they come with high costs. A good example is the steel tariff imposed by the Bush administration, on foreign-made steel. President Bush imposed the tariffs, ranging from 8 percent to 30 percent, on some kinds of foreign steel in March 2002, in order to help the U.S. steel industry compete with foreign steel producers. Many U.S. manufacturing companies that use steel, including manufacturers of auto parts and appliances, say that the steel tariffs have raised costs for manufacturers and caused thousands of manufacturing losses. Also, people who buy cars or appliances may have to pay higher prices because of the steel tariffs. The U.S. International Trade Commission recently concluded that the tariffs have caused a $30 million net loss to the U.S. economy. In addition, the European Union is considering retaliatory tariffs against the U.S.

Have students review the following website that supports the argument of trade barriers not being in the best interest for a country at times:
- www.cato.org/pubs/pas/pa064.html ^[1]

The following is a brief timeline of the Cuban embargo:

1960 - The Eisenhower administration imposed a partial embargo, excluding food and medicine.

1963 - The Kennedy administration prohibited travel to Cuba and made financial and commercial transactions with Cuba illegal for U.S. citizens

1977 - President Carter drops the ban on travel to Cuba and on U.S. citizens spending dollars in Cuba

1981 - President Reagan reestablishes the travel ban and prohibits U.S. citizens from spending money in Cuba.

2003 - Congress eased restrictions on travel to Cuba.

Student questions:

What political or historical events do you think influenced the Cuban embargo? [1960 - Castro came to power in 1959; 1963 - this was after the Cuban missile crisis of 1962; 1981 - Reagan wanted a tougher anti-communist stance; 2002 - After 40 years, many think the embargo has not worked and is hurting certain U.S. industries and may actually be helping Castro.]

Students read a news article on a Minnesota farmer: http://news.minnesota.publicradio.org/features/2003/10/20_schmitzr_cubatrade/ ^[2] and answer the following questions.

1. What percentage of Cuba'a agricultural products came from the U.S. in 2002? [20 percent]
2. How much, in dollars, have U.S. farmers and agribusiness made from the trade with Cuba since 2001? [half a billion dollars]
3. Why did the Bush administration restrict travel to Cuba and cancel an upcoming trade fair with Cuba? [In Spring 2003, the Castro government imprisoned more than 70 political dissidents and executed 3 Cubans trying to escape the country. The Bush Administration restricted travel as a result]

Students then read an article about the Indiana Farm Bureau at www.infarmbureau.org/NewsRelease.aspx?id=2134&terms=cuba ^[3]

1. Why is the Indiana Farm Bureau working to repeal the trade and travel sanctions against Cuba? [Cuba pledged to buy $15 million in agricultural products from Indiana-based businesses if the trade and travel restrictions against the country are repealed]
2. How many states have exported food items to Cuba in the last two years? [35]
3. What are some of the U.S. agricultural goods that have been bought by Cuba in recent years?
   [bulk grains, paper and wood]

Conclusion:

Based on the readings above, why do you think that many farmers and the Indiana Farm Bureau now favor for repealing the Cuban Embargo? [To increase the market and sell more farm products.] Why do you think some politicians, such as Indiana Senator Evan Bayh, support repealing the embargo? [Probably to win votes from Indiana farmers; also to acknowledgement that the embargo has been in place over 40 years and has not brought about the desired change in Cuba desired, which is the overthrow of Fidel Castro.]

Assessment Activity:

Compared to other trade barriers, embargos are enacted more for political than for economic reasons. Instead of protecting domestic industries, embargos may be designed to punish another country through economic means. Judging the success of the Cuban embargo depends on knowing what its intended result was. If, as many believe, the embargo was intended to drive Fidel Castro from power, it has certainly not worked. If it was intended to keep the United States and Cuba apart , then most would find it has been successful. If the embargo is eliminated, most would expect increased trade between the U.S. and Cuba. As suggested by the news articles, agricultural producers would probably be the main beneficiaries if the embargo were repealed; other potential gainers include people in the energy and travel industries.

Hypothesize about what will happen to the prices of agricultural products in Cuba and the United States. Be sure to include reasons why.

Extension Activity:

For more agricultural information on the impact of the Cuban embargo, see the Farm Bureau briefing given above.

For additional information and recent public opinion polls on the Cuban embargo, see www.cubafoundation.org/ ^[6] . This is a website for the Cuba Policy Foundation, a non-profit organization dedicated to the study of the benefits of expanding trade and people-to-people contact with Cuba.

Links Used:

1. ^{^} "www.cato.org/pubs/pas/pa064.html" - (www.cato.org)
2. ^{^ ^} "http://news.minnesota.publicradio.org/features/2003/10/20_schmitzr_cubatrade" - (news.minnesota.publicradio.org)
3. ^{^} "www.infarmbureau.org/NewsRelease.aspx?id=2134&terms=cuba" - (www.infarmbureau.org)
4. ^{^} "www.uiowa.edu/ifdebook/conferences/cuba/TLCP/Volume%201/Carrasco.pdf" - (www.uiowa.edu)
5. ^{^} "www.infarmbureau.org/" - (www.infarmbureau.org)
6. ^{^ ^} "www.cubafoundation.org/" - (www.cubafoundation.org)

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