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Expert urges U.S.-Cuba trade and investment deals

Xinhua, January 30, 2015 Adjust font size:

The United States should strike trade and investment deals with Cuba as the two countries are moving toward the normalization of relations, a leading U.S. trade expert said Thursday.

"I think the U.S. strategic goal should be trade and investment agreements with Cuba," said Gary Clyde Hufbauer at a panel discussion about next steps in U.S.-Cuba economic relations.

"Very tough and very prolonged sanctions do not guarantee political change," Hufbauer said when noting the key lessons learned from U.S. embargo against Cuba for over 50 years. "But with carefully designed carrots, we may slowly nudge Cuba ... step-by-step toward a market economy."

While Cuba is "not nearly ready for" a free trade agreement, the United States could have a bilateral trade agreement and a bilateral investment treaty with Cuba, said Hufbauer, who co-authored a book on the normalization of economic ties between the United States and Cuba.

The Obama administration earlier this month decided to loosen restrictions on travel, trade and financial transactions with Cuba, following the announcement of commitment by the two governments to restoring diplomatic ties in December.

Experts say the restoration of diplomatic relations could open a lot of business opportunities, but it will take a long time for the United States and Cuba to restore economic ties to something close to normal.

On the one hand, U.S. Congress is unlikely to lift economic embargo against Cuba soon, with many Republicans still opposed to any change in current policy. On the other hand, Cuba is not ready to open its market to the outside world.

"We predict the winds of change may blow slowly," said Barbara Kotschwar, a colleague of Hufbauer who co-authored the book.

"More U.S. companies can now sell to Cuba, but the ban on financing remains in place," Kotschwar said, adding that U.S. officials should begin economic negotiations with Cuba.

U.S. companies are eager to do business in Cuba. MasterCard last week became the first major U.S. credit card company to say it would start handling U.S. card transactions in Cuba.

Analysts say it's very hard to predict what future economic relations will look like between the two countries, as U.S.-Cuba normalization may hit a number of roadblocks. But lifting the economic embargo would be significant economically for both countries.

Economists at the Peterson Institute for International Economics estimated that U.S. exports of goods to Cuba could eventually reach 4.3 billion U.S. dollars annually, and Cuban exports of goods to the United States could reach 5.8 billion dollars annually, if the embargo had been lifted.

The stock of direct investment from all foreign countries in Cuba might eventually reach 17 billion dollars, up from less than 1 billion dollars today, they added. Endi