82nd International Atlantic Economic Conference

October 13 - 16, 2016 | Washington, USA

Cuban trade policy and the World Trade Organization

Sunday, October 16, 2016: 9:00 AM
Kent Jones, Ph.D. , Economics, Babson College, Babson Park, MA
Cuba, a founding country of the General Agreement on Tariffs and Trade (GATT) and a World Trade Organization (WTO) member, was marginalized from these organizations following the installation of a communist regime by Fidel Castro in 1959.  This was due largely to the US embargo on trade and investment with Cuba beginning in 1960, but also because of Cuba’s planned economy, based on centralization, state trading, heavy dependence on aid from the Soviet Union (and later Venezuela) and barter arrangements with most its trading partners.  In the meantime, Cuba at first shunned GATT trade liberalization negotiations, but later joined the Uruguay Round negotiations in 1986, when it saw an opportunity to benefit from participation in a platform for developing country trade  interests and opposition to the US-led Quad.  Since the founding of the WTO, Cuba has continued to follow this political strategy, particularly in the Doha Round, but has rarely taken active part in WTO committee work or dispute settlement.  However, this may change if the US embargo ends and Cuban trade opens up enough to warrant WTO scrutiny.  This paper sets out to identify the unique position of Cuba in the GATT/WTO system, in contrast to other communist governments that have taken part in it.  The analysis predicts that an end to the US embargo, in itself, would only partially change the picture, since the Cuban government still maintains tight control over most of its production, trade and investment, limiting its access to foreign markets.  Yet recent developments indicate that Cuba has been forced to introduce economic reform measures in order to retain access to external credit markets, and they appear to have played a role in the recent opening with the US and visit by President Obama.  Continued WTO membership thus represents a rational strategy for Cuba, since (most favored nation) MFN market access and re-integration into the world economy may become necessary to sustain its economy.  The paper will use GATT and WTO documents, along with available trade and investment data, to trace the pattern of Cuba's isolation and limited participation in the GATT/WTO system.