Abstract
Cuba sought economic independence from the U.S. and its reliance on sugar exports after its 1959 revolution, but subsequently developed new dependency relationships. In the meantime, Cuba remained inside the General Agreement on Tariffs and Trade (GATT), despite conducting most of its trade outside it. This paper explores the political economy of Cuba’s participation in the GATT and later the World Trade Organization (WTO). Documents show that Cuba sought to use its participation to gain new markets and influence in the developing world. While Cuba has gained little economically from its participation, in recent years it has diversified its exports and trade partners, and its trade interests now align more closely with WTO rules. Economic reforms will be necessary in order for Cuba to benefit.
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Notes
Cuba joined CMEA in 1972, comprising the Soviet Union and allies Poland, East Germany, Hungary, Bulgaria, Romania, Mongolia and later Vietnam (1978). These distant countries were Cuba’s main trading partners from 1960 to 1991.
GATT article 35 allowed an existing CP to exclude any new GATT signatories from MFN treatment on a bilateral basis upon the new country’s accession. Pre-revolutionary Cuba had invoked this rule against several new GATT countries from 1950 to 1955. Disinvoking art. 35 required the country to initiate a separate action in the GATT to reverse the exclusion.
During the Soviet era, Czechoslovakia remained in the GATT. Poland (1967), Romania (1971) and Hungary (1973) joined under special protocols (Kostecki 1978, chapter 2).
Mesa-Lago (1971) discusses Cuba’s industrialization efforts from 1959 to 1963. Marxist economists, ironically, used traditional comparative advantage principles to advise the Cuban government to focus on sugar. Zimbalist (1988) p. 29 notes later efforts by Cuba in the 1980s to diversify into exports of citrus, fish, and some manufactures, but these items found only small international markets, limited mostly to CMEA and small developing country trade partners.
See WTO Dispute Case DS458 (2013–2018). Ukraine, Honduras, the Dominican Republic and Indonesia also filed cases on this issue.
For a comprehensive list of all WTO dispute cases in which Cuba was a complainant or third party, see WTO (2018).
See WTO Dispute Case 176 (1996–1998). Piczak (1999) and Schloemann and Ohlhoff (1999) provide legal analyses of the case.
The original GATT DS system had weak enforcement and Cuba never filed a case. Under the WTO, Cuba could have challenged Helms-Burton, but it would have been futile, due to its lack of retaliatory power against the U.S. Cuban interests were better served when the EU filed the complaint, based on its leverage in bargaining for a U.S. suspension of Helms-Burton provisions.
This also marked the beginning of Cuba’s dual exchange rate system, a continuing source of resource misallocation (Mesa-Lago and Pérez-López 2013, p. 75).
ALBA (Alianza Bolivariana para los Pueblos de Nuestra América) includes Antigua and Barbuda, Bolivia, Cuba, Dominica, Ecuador, Grenada, Nicaragua, St. Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, and Venezuela.
Cuba had also exported military services during the Soviet period, especially during the Angolan and Ethiopian conflicts, with military support from the Soviet Union, but generally without direct Soviet compensation to Cuba (Gleijeses 2006). The Cuba-Venezuela alliance has combined Cuban medical with military and political support (Martin 2017), with payment made through oil shipments to Cuba, estimated by Azicri (2009, p. 100) to be approximately 90,000 barrels per day. Cuba also sent doctors to Brazil, which had financed much of the Mariel port project near Havana, and to Angola (Frank and Boadle 2016).
Anderson (2017) reports that Venezuela’s oil shipments to Cuba had dropped from 90,000 to approximately 50,000 barrels a day by mid-2017. However, Martin (2017) suggests that Venezuelan President Maduro is also dependent on Cuba to maintain civil order, and may continue what payments he can in order to stay in power.
Start and end dates for these periods are debatable, but the regression results do not change much when they are altered slightly. The Soviet period dummy starts in 1960, the first year of Soviet barter of oil for Cuban sugar; 1961 is an alternative start date, when Soviet subsidies began. The end date is 1991, year of the Soviet Union’s collapse. The Gorbachev dummy begins with 1989, the year of his visit to Havana, announcing the change in the terms of trade. He had become increasingly impatient with Cuban economic inefficiencies, and was reforming Soviet foreign diplomatic and economic policy. This development soured his relationship with Castro, who openly rebuked him over his perestroika policy (Bain 2005, pp.780–790). The dummy VenezPerTime begins in 1999, the year of Chavez’s election and declaration of solidarity with Cuba; 2001 is an alternative starting date, the year following the conclusion of the Cuba-Venezuela Cooperation agreement in October 2000.
The quality of official Cuban economic data is the subject on continuing debate (Mesa‐Lago and Pérez‐López 2013, pp. 75–76). The use of U.S. dollar values (the basis of this regression’s data) raises the question of accuracy of the exchange rates used. In addition, barter trade during the Soviet and Venezuelan periods complicates the calculation of value.
Mesa-Lago and Pérez-López (2013) report that the value of Cuban workers in Venezuela has been benchmarked at the current global price of oil exported by Venezuela to Cuba in the barter arrangement and suggest that the implicit pricing of the workers’ services contained a large subsidy. The services of Cuban health care workers dispatched to other countries were compensated at much lower rates.
See Waters 2016 for information on Cuban development of cancer treatments.
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Acknowledgements
The author acknowledges helpful comments from Mahdi Majbouri, an anonymous reviewer, and participants in the International Atlantic Economic Conference in Washington, DC, October 13–16, 2016.
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